Wouldn't this be a pretty cut-and-dry case of insider trading (or do regulators have an exemption to insider trading rules like members of congress have?)?
> have been bills introduced to ban members of Congress from insider trading but, amazingly, they keep getting shot down in committee
This is incorrect. The STOCK Act banned insider trading by members of Congress in 2012 [1]. Disclosure requirements for staffers were amended in 2013 [2], but prohibitions on Congressmen remain in force [3].
> but prohibitions on Congressmen remain in force [i.e. 2020 congressional insider trading]
Is it really "in force" when, despite much ado, no charges were brought in the linked scandal [1][2]? I don't really have a horse in this race, I just took issue with the particular example you referenced.
> when, despite much ado, no charges were brought in the linked scandal
A Senator’s phone was subpoenaed by the FBI. That’s substantial. (The allegation was Burr had insider information on broad market movements. Absent direct evidence he misappropriated privileged information, that’s a tough charge to bring. Had he bought e.g. Moderna shares, prosecutors may have had a case.)
The whole thing, moreover, came to light because of the STOCK Act. There are now calls for bans on individual stock trading by Congressmen as a result of the evidence from these scandals.
I’m not defending the status quo. But it’s definitely improving and not a free for all.
> "I was naive at Microsoft and didn't realize that our success would lead to government attention," Gates said, referring to Microsoft's antitrust challenges from more than 20 years ago. "And so I made some mistakes — you know, just saying, 'Hey, I never go to Washington, D.C.' And now I don't think, you know, that naivete is there."
> For a couple of embarrassing years in the mid-'90s, Microsoft's primary lobbying presence in D.C. was "Jack and his Jeep." As the software giant's sole in-house lobbyist, Jack Krumholtz, then 33, had to battle endless traffic jams to get from Microsoft's suburban sales office to Capitol Hill. "Early on I spent most of the day in my Jeep Grand Cherokee on my cellphone," Krumholtz says. "I hit an all-time low on the day I was parked on a Capitol Hill side street reading through my mail with the laptop on the steering wheel."
> No longer. After the Justice Department filed its antitrust suit in 1998, Microsoft--a company famous for its disdain of government--undertook the largest government affairs makeover in corporate history. The company now boasts one of the most dominating, multifaceted, and sophisticated influence machines around, one that spends tens of millions a year. It's no great surprise that one of the country's wealthiest companies can bankroll a beefed-up lobbying operation when it faces a crisis. But what few people realize is that Microsoft has reached the very highest ranks of lobbying so quickly. Says David Hart, a lobbying expert at Harvard's Kennedy School of Government: "Microsoft has joined the top tier"--with such longtime heavyweights as Philip Morris, Lockheed Martin, and AT&T.
I thought there was a bill that's on the table. Yea, UnusualWhales is an awesome account, just wild what kind of parties happen in the club we're not in.
I've noticed most people seem to be under the impression that Microsoft suffered some big loss from the antitrust case, and use it as evidence that Apple or Google will soon be taken down a peg too. Looking back they just built the lobbying arm they were missing and then the problem pretty much went away. Sure, there were some browser choice pre-load things in Europe and Korea but those things never came to the US and came well after the benefit had already been achieved in the browser war.
> An investment of $15,000 or less in an individual stock, or of $50,000 or less in an industry-specific mutual fund, isn’t deemed a conflict of interest under federal regulations.
> An FTC spokesman said the agency officials had followed the law.
While I don't really want to see regulators owning any amount of individual stocks in companies they're directly regulating, the $15,000 individual stock limit limits the impact quite a bit. Even if someone did own $15,000 of an individual stock, the personal financial gain/loss of even major regulatory actions isn't a huge amount.
Also keep in mind that you can't buy basically any large cap mutual fund without owning significant amounts of Facebook, Google, Amazon, Apple, and other large companies.
at Bloomberg, even thought I didn't work on any financial product (I worked on their law product), I wasn't allowed to own any derivatives per my contract.
Isn’t the correct comparison other ethics rules around conflicts of interest/gifting/etc for government officials? Upside on $15k through each merger transaction seems way out of line.
Even a hundred dollars is enough to make people feel an irrational protective attachment to the company. Shit, even buying a company's product has been known to make people treat that company like part of their tribe. Insult Apple in another thread if you want to see a demonstration of this. Or insult the Harley Davidson company at a biker bar.
Making rules that avoid triggering irrational behavior is rather hopeless by definition though. For all we know a regulator once dated someone who worked at a company and the bad breakup makes them spiteful against the whole organization.
The solution there has to be oversight to identify when a regulator is misbehaving.
Though I'm fine with limiting their ownership to zero for purely rational reasons. A few thousand bucks worth of loss/gain might still sway small borderline decisions.
I don't seriously propose that regulators looking at Apple should be forbidden from owning Apple devices; that's too impractical even though it would otherwise be a good idea. For practical reasons I'd give a pass to indirect investment through mutual funds/etc too. But forbidden them from buying any amount of AAPL directly? I think that's very reasonable.
> forbidden them from buying any amount of AAPL directly?
Once the investigation starts, absolutely. But forcing a regulator to sell their $10k stake in Apple prior to investigating them creates its own weird incentives.
yes I was referring to stock ownership too, and only rational behavior. A phone probably won't change measurably in value from a regulatory decision, but $15k of stock certainly could.
> Even a hundred dollars is enough to make people feel an irrational protective attachment to the company.
But anyone with stock investments at this scale is already seeing their portfolio swing a couple hundred dollars on the regular. Regulators also have far more to lose in their career (paying potentially millions over the multi-year course of their tenure) by making the wrong decision than they would by swinging their portfolio a couple hundred bucks on a given day.
We can't realistically demand that all public regulators abstain from investing in, for example, an S&P 500 index fund that holds several percent of Apple stock. If the job came with a requirement that the job holder couldn't invest standard index funds, anyone who knows anything about investing and financial planning would avoid the job at all costs.
There has to be a compromise. You can't demand absolute zero financial interest in things like index funds over the mere chance that someone might make an irrational career-harming move to swing their portfolio a couple hundred bucks.
Germans love to complain about Germany, but if someone else does it...
This is pretty typical behavior, actually. I grew up Mormon, Mormons complain about people making polygamy jokes about them but also make polygamy jokes themselves. It's an in-group vs out-group thing: we can make those jokes.
They're trailing, hard, because they dumped a bunch of time/effort/money into hydrodgen and also didn't want to self-compete with their hybrids. Don't go around saying this too loud though. There's lots of fanboys around these parts and they tend to consider discussion of this topic unwelcome.
Buying things that you're going to display as part of your personal image sounds like a much more relationship intensive activity than buying stock imo
> Nearly one in four top FTC officials owned or traded individual stocks of tech companies
While I agree a broad based fund will have allocations of these stocks and should be okay for them to own, but what are they doing owning individual stocks?
Micro managing their portfolios? I can also imagine a lot of them getting in on IPOs or later offerings before becoming FTC officials and not clearing those stocks out of their portfolio. But $15k...isn't a lot.
$15k is ~1 months salary for a senior bureaucrat (GS scale) in DC metro. How many months income does it take to corrupt somebody? $15k into each FAANG is $75k, double the national median income. It all adds up a sizable potential conflict.
This is roughly the same debate as Congress, just on a smaller scale. What is the balance between reasonable individual financial management and ensuring conflicts don't exist?
> $15k is ~1 months salary for a senior bureaucrat (GS scale) in DC metro.
That isn't income, profit, or gains, but just the actual amount of stock they can hold/trade at some time. Let's say they had inside information, $15k doesn't allow for much leverage to take advantage of that information.
> How many months income does it take to corrupt somebody?
Probably a heck of a lot more than you could earn on trading just $15k of stock.
Yeah, I suppose the real question is how active is their trading? And are systems in place to catch them if they do appear to trade on insider info?
This is one of those situations where the possibility/impression of special access to gains is probably worse than any actual gains being made. And it's certainly a much smaller scale than what we saw with Congress ($10s of millions in some cases).
Yep, the strategy is called direct indexing and tax-loss harvesting is the reason to do it. Gotta be careful doing it - fees can quickly eat up any upside. Some of the robo-investing platforms offer this strategy, though I haven’t looked deeply into it.
Sometimes I feel like I live on a different planet to the people on HN. I don't own $15k of ANY single stock. In fact I don't have significant savings outside of retirement savings (which I deliberately don't manage) of that magnitude. If I had $15k of any given stock, I'd have an extreme personal interest in the performance of that stock
IDK, maybe it's that I don't work in tech and I'm too young or too old or whatever (37, 2 kids) but it just seems crazy to me to think that for some people $15k in any SINGLE stock isn't a meaningful amount of money.
The point is: would you be willing to risk massive fines and jail time for making unethical decisions to try to turn your $15k into $30k if you did? Probably not.
But if you could move your entire life savings into a stock the incentive for shady stuff increases significantly.
> the point is they're perfectly allowed to hold $15k in these stocks
They're not allowed to insider trade on it, or corruptly modify their regulatory duties on account of it, irrespective of whether is $1 or ten thousand.
The risk is doing something illegal or unethical to increase the value of their holdings. The larger their holdings, the larger the incentive to do that illegal or unethical thing.
There are people on HN working for the big tech companies who are being granted that $15k worth of stock every month. ($180k/year) At the more senior levels and/or with some stock appreciation, it's not unheard-of for >50% of compensation to be in the form of RSUs.
Obviously they should sell-on-vest and diversify into index funds, but a lot of them choose to buy and hold some individual stocks that they're bullish on as well.
You've certainly got a point, but if a regulator has the ability to indirectly swing the valuation 10%, they stand to gain at most $1.5k which should be in the realm of a week's pay. It's an interest to be sure, but it would be hard to use it to finance a Lamborghini habit.
The amount of money, relatively, is negligible. On the other hand, in the human psyche it can create significant bias.
Specially, for example, humans have an aversion to loss. It's true for small amounts. Certainly, for larger amounts it's just as bad. That is, few people regardless of resources would reach into their pocket and toss $15K into a fire pit. We're simply not wired for that.
And that wiring is going to influence the decision made. The amount is a minor factor.
Is that limit on the cost basis of the position or would the conflicted regulator have to sell off some stock if their position exceeded the $15k threshold?
If they held $15,000 in Facebook, Google, Amazon, Apple, MS, Nvidia, AMD, Intel, Qualcomm, TSMC, that's $150,000, and often these companies are doing extensive intermixed deals with each other with exclusivity agreements and other similar stuff.
To further this, if you have 200k of VTI/VTSAX or of a non vanguard alternative, that's $15,000 of Apple stock alone. It's about 6% of VTI currently which will hold true of any broad based market fund.
If you own a tech sector fund like VGT, Apple makes up 22% of the fund. So having 200k of VGT is going to be just shy of $50,000 worth of apple stock.
Do they specify that that 15k is in the underlying equity itself? If not, it is incredibly easy to use options to leverage the hell out of that $14,999.
Even if someone did own $15,000 of an individual stock, the personal financial gain/loss of even major regulatory actions isn't a huge amount
In whose mind? Most people would fight to defend 50$ like they are defending their life, especially rich ones from my experience. Add to that the spouse asking questions and that 15k is worth a million.
Isn't everyone investing in FAANG etc. at this point? Like if you have a retirement fund you own these stocks almost guaranteed. Probably beyond the 50K industry specific limits mentioned elsewhere in here too
If that's all it was this wouldn't be a story. This is specifically talking about individual stocks.
> Nearly one in four top FTC officials owned or traded individual stocks of tech companies such as Amazon.com Inc., Meta Platforms Inc.’s Facebook, Alphabet Inc.’s Google, Microsoft Corp. and Oracle Corp.
I can just about see a case for letting FTC officials hold industry-specific funds long, along the same lines as giving employees stock grants; in some sense you might want the regulators to want the broader industry to be successful. Even this is questionable though; are we currently erring in having regulators be too business-hostile? Unclear.
But allowing regulators to trade individual stocks that they regulate is unacceptable, at any dollar value. There is just no way to avoid conflicts of interest. If this rule means you can’t hire good people, the salary needs to increase.
You can possibly be serious about that remark. This is the definition of conflict of interest. they are much less likely to make decisions that would make their own investments go down. this is why regulator are supposed to put their money in a blind trust.
Also, what makes you think their oversight would not be invested like them and not have the same conflict of interest as them?
WSJ should publish this database, i.e., the data and disclose the software used. This is not a database of leaked information. It is all publicly available.
Instead, WSJ tells readers all about how they constructed it, like some sort of teaser. This reminds me of computer science papers that describe software the authors wrote but refuse to release. How can the reader be certain the software did not contain errors that affected the results.
There are some who believe researchers who publish findings about some object of study for the benefit of the public, e.g., an academic community or a newspaper readership, are "obligated" to supply the resources they used to other researchers so others can replicate or conduct further studies.
When I worked at a law firm, all of my market trades of individual stocks had to go through clearance, regardless of size, even though I never had access to privileged information. Never had a trade anywhere near $15,000 in value but everything still had to go through clearance first. I was never denied a trade but one of my co-workers had a couple of his trades delayed a few weeks.
Seems to me someone who is supposed to be regulating a given activity should a) not be participating in the activity and b) should be compensated for the opportunity cost of not participating.
That limit seems pointless at achieving its goal of minimising conflicting interests.
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[ 4.0 ms ] story [ 33.4 ms ] threadThis is incorrect. The STOCK Act banned insider trading by members of Congress in 2012 [1]. Disclosure requirements for staffers were amended in 2013 [2], but prohibitions on Congressmen remain in force [3].
[1] https://en.wikipedia.org/wiki/STOCK_Act
[2] https://en.wikipedia.org/wiki/STOCK_Act#Amendment
[3] https://en.wikipedia.org/wiki/2020_congressional_insider_tra...
Is it really "in force" when, despite much ado, no charges were brought in the linked scandal [1][2]? I don't really have a horse in this race, I just took issue with the particular example you referenced.
[1] https://www.nytimes.com/2020/05/26/us/politics/senators-stoc...
[2] https://www.cnbc.com/2021/01/19/doj-will-not-charge-sen-rich...
A Senator’s phone was subpoenaed by the FBI. That’s substantial. (The allegation was Burr had insider information on broad market movements. Absent direct evidence he misappropriated privileged information, that’s a tough charge to bring. Had he bought e.g. Moderna shares, prosecutors may have had a case.)
The whole thing, moreover, came to light because of the STOCK Act. There are now calls for bans on individual stock trading by Congressmen as a result of the evidence from these scandals.
I’m not defending the status quo. But it’s definitely improving and not a free for all.
What did Bill Gates learn after the Microsoft antitrust case? Don't snub Washington:
https://www.cnbc.com/2020/10/14/bill-gates-i-was-naive-at-mi...
> "I was naive at Microsoft and didn't realize that our success would lead to government attention," Gates said, referring to Microsoft's antitrust challenges from more than 20 years ago. "And so I made some mistakes — you know, just saying, 'Hey, I never go to Washington, D.C.' And now I don't think, you know, that naivete is there."
https://money.cnn.com/magazines/fortune/fortune_archive/2002...
> For a couple of embarrassing years in the mid-'90s, Microsoft's primary lobbying presence in D.C. was "Jack and his Jeep." As the software giant's sole in-house lobbyist, Jack Krumholtz, then 33, had to battle endless traffic jams to get from Microsoft's suburban sales office to Capitol Hill. "Early on I spent most of the day in my Jeep Grand Cherokee on my cellphone," Krumholtz says. "I hit an all-time low on the day I was parked on a Capitol Hill side street reading through my mail with the laptop on the steering wheel."
> No longer. After the Justice Department filed its antitrust suit in 1998, Microsoft--a company famous for its disdain of government--undertook the largest government affairs makeover in corporate history. The company now boasts one of the most dominating, multifaceted, and sophisticated influence machines around, one that spends tens of millions a year. It's no great surprise that one of the country's wealthiest companies can bankroll a beefed-up lobbying operation when it faces a crisis. But what few people realize is that Microsoft has reached the very highest ranks of lobbying so quickly. Says David Hart, a lobbying expert at Harvard's Kennedy School of Government: "Microsoft has joined the top tier"--with such longtime heavyweights as Philip Morris, Lockheed Martin, and AT&T.
Yea but there is a decent amount of awareness around it. Regulators, not so much.
It's a club.. and we're not in it.
https://www.nytimes.com/2022/09/30/us/politics/stock-trading...
https://www.wsj.com/articles/the-regulators-of-facebook-goog...
> An FTC spokesman said the agency officials had followed the law.
While I don't really want to see regulators owning any amount of individual stocks in companies they're directly regulating, the $15,000 individual stock limit limits the impact quite a bit. Even if someone did own $15,000 of an individual stock, the personal financial gain/loss of even major regulatory actions isn't a huge amount.
Also keep in mind that you can't buy basically any large cap mutual fund without owning significant amounts of Facebook, Google, Amazon, Apple, and other large companies.
The solution there has to be oversight to identify when a regulator is misbehaving.
Though I'm fine with limiting their ownership to zero for purely rational reasons. A few thousand bucks worth of loss/gain might still sway small borderline decisions.
Once the investigation starts, absolutely. But forcing a regulator to sell their $10k stake in Apple prior to investigating them creates its own weird incentives.
But anyone with stock investments at this scale is already seeing their portfolio swing a couple hundred dollars on the regular. Regulators also have far more to lose in their career (paying potentially millions over the multi-year course of their tenure) by making the wrong decision than they would by swinging their portfolio a couple hundred bucks on a given day.
We can't realistically demand that all public regulators abstain from investing in, for example, an S&P 500 index fund that holds several percent of Apple stock. If the job came with a requirement that the job holder couldn't invest standard index funds, anyone who knows anything about investing and financial planning would avoid the job at all costs.
There has to be a compromise. You can't demand absolute zero financial interest in things like index funds over the mere chance that someone might make an irrational career-harming move to swing their portfolio a couple hundred bucks.
This is pretty typical behavior, actually. I grew up Mormon, Mormons complain about people making polygamy jokes about them but also make polygamy jokes themselves. It's an in-group vs out-group thing: we can make those jokes.
Mentioning Toyota's EV situation on HN is a little more relatable for this crowd.
While I agree a broad based fund will have allocations of these stocks and should be okay for them to own, but what are they doing owning individual stocks?
This is roughly the same debate as Congress, just on a smaller scale. What is the balance between reasonable individual financial management and ensuring conflicts don't exist?
That isn't income, profit, or gains, but just the actual amount of stock they can hold/trade at some time. Let's say they had inside information, $15k doesn't allow for much leverage to take advantage of that information.
> How many months income does it take to corrupt somebody?
Probably a heck of a lot more than you could earn on trading just $15k of stock.
This is one of those situations where the possibility/impression of special access to gains is probably worse than any actual gains being made. And it's certainly a much smaller scale than what we saw with Congress ($10s of millions in some cases).
Many advisors invest based on an index (or modified index) but hold shares in clients' accounts directly.
IDK, maybe it's that I don't work in tech and I'm too young or too old or whatever (37, 2 kids) but it just seems crazy to me to think that for some people $15k in any SINGLE stock isn't a meaningful amount of money.
But if you could move your entire life savings into a stock the incentive for shady stuff increases significantly.
They're not allowed to insider trade on it, or corruptly modify their regulatory duties on account of it, irrespective of whether is $1 or ten thousand.
Obviously they should sell-on-vest and diversify into index funds, but a lot of them choose to buy and hold some individual stocks that they're bullish on as well.
Specially, for example, humans have an aversion to loss. It's true for small amounts. Certainly, for larger amounts it's just as bad. That is, few people regardless of resources would reach into their pocket and toss $15K into a fire pit. We're simply not wired for that.
And that wiring is going to influence the decision made. The amount is a minor factor.
So let's take the DOJ, since they have easy to find vacancies.
https://www.justice.gov/legal-careers/vacancies?position=1&t...
They are mostly GS-15, which is 150-175k pay per year. They do fine on benefits, etc.
15k in stock is not a ton for them.
Certainly not something you'd mess up a job or career over.
If you own a tech sector fund like VGT, Apple makes up 22% of the fund. So having 200k of VGT is going to be just shy of $50,000 worth of apple stock.
In whose mind? Most people would fight to defend 50$ like they are defending their life, especially rich ones from my experience. Add to that the spouse asking questions and that 15k is worth a million.
> Nearly one in four top FTC officials owned or traded individual stocks of tech companies such as Amazon.com Inc., Meta Platforms Inc.’s Facebook, Alphabet Inc.’s Google, Microsoft Corp. and Oracle Corp.
But allowing regulators to trade individual stocks that they regulate is unacceptable, at any dollar value. There is just no way to avoid conflicts of interest. If this rule means you can’t hire good people, the salary needs to increase.
Also, what makes you think their oversight would not be invested like them and not have the same conflict of interest as them?
The fewer opportunities for conflict of interest, the better the outcomes in the general case.
WSJ should publish this database, i.e., the data and disclose the software used. This is not a database of leaked information. It is all publicly available.
Instead, WSJ tells readers all about how they constructed it, like some sort of teaser. This reminds me of computer science papers that describe software the authors wrote but refuse to release. How can the reader be certain the software did not contain errors that affected the results.
There are some who believe researchers who publish findings about some object of study for the benefit of the public, e.g., an academic community or a newspaper readership, are "obligated" to supply the resources they used to other researchers so others can replicate or conduct further studies.
That limit seems pointless at achieving its goal of minimising conflicting interests.