The law requiring lawmakers to disclose their stock trades spurred an unintended consequence: a cottage industry with funds modeled on lawmakers' investments. These funds are beating the market.iframe src="https://www.npr.
These funds are all legal. But the products underscore that the problem that the law was designed to fix — to eliminate the impression that lawmakers are profiting from information they learn in their official capacities — is still an issue., a financial startup that offers investors tools to track market activity, noticed his posts flagging notable stock trades by members of Congress were going viral on social media.
"When you're a trader or an investor, you're looking for some sort of edge, and people believe this is a sort of edge," he said.. One is called NANC, named after former House Speaker Nancy Pelosi, and it tracks how Democrats invest. The other, called KRUZ, tracks how Republicans invest. The data on their performance shows they do have an edge.
Kedric Payne, a lawyer with the Campaign Legal Center, said the growth of this industry in the last few years is an unintended consequence of the STOCK Act. The law was designed to tamp down on trading by lawmakers, but"instead, you have investors profiting off the trades, which also incentivizes the members of Congress to continue to make the trades because they, in fact, profit when other people invest," he said.
Members of Congress have information that most investors don't have, and they write laws that could impact the companies they are invested in. Public attention on lawmakers' stock activity heightened in 2020. Sen. Richard Burr, R-N.C., was investigated then by the Justice Department and the Securities and Exchange Commission. He chaired the Senate Intelligence Committee. He sold off a majority of his equity holdings in February 2020 — after a classified briefing on the COVID-19 outbreak but before the public knew about the threat to the economy.
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