Noted law professor Stephen Bainbridge has written a new paper (available for download here) entitled "The Stop Trading on Congressional Knowledge Act" in which he takes a hard look at an issue that I have discussed here recently, as well: whether members of Congress can be held liable for trading on the basis of material nonpublic information. Bainbridge concludes that "members of Congress are effectively immune from insider trading liability under the current federal securities laws," yet there is no public policy or constitution-based rationale for this outcome. He writes that

In sum, the point hardly requires belaboring. There is no plausible justification for allowing members of Congress or other governmental actors to use material nonpublic information they learn as a result of their position for personal stock trading gains. To the contrary, the policy arguments all come down on the side of banning such trading.

Bainbridge then takes a look at the STOCK Act legislation proposed by Congressmen Brian and Slaughter in the 109th, 110th, and now the 111th Congresses. As discussed here, this common sense legislation would make insider trading by Congress and others illegal. Bainbridge concludes that some version of the STOCK Act should be passed, writing that

The STOCK Act would fix the doctrinal obstacles to prosecuting members of Congress who commit insider trading. If passed, it also might finally give the SEC political cover to actually bring such cases. Although the present Act still needs work, it is long over due.