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Regulators, Legislators and Marketplace Ethics

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        The SEC defines insider trading as buying or selling a security in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security. Insider trading is not isolated to Wall Street and has increasingly become an issue on Capitol Hill and in regulatory agencies, like the Federal Reserve. A 2004 study examining common stock returns generated from 1993-1998 on equity held by US Senators found that a portfolio mimicking the purchases of Senators outperformed the market by 85 basis points each month. On the other hand, portfolios mimicking equity sales by Senators underperformed the market by 12 basis points each month. The study noted that these results “suggest Senators knew appropriate times to both buy and sell their common stock.” Congress is privy to nonpublic information obtained via briefings from regulatory agencies, other Congress people and trade associates. They have access to this informat