It stands for Stop Trading on Congressional Knowledge Act, but it applies beyond Congress to include the Executive and Judicial Branches (including the president), and as a practical matter it provides that the same rules that would prohibit insider trading by a corporate employee apply to government officials with respect to government information.
Anyway, here’s news:
President Trump broke with tradition by posting near-constant policy decisions and market-moving news on his social-media platform.
Now his media company wants traders and investors to pay for instant access to his Truth Social posts, the latest example of the first family mixing its business interests and White House affairs.
Trump Media & Technology Group said Thursday it plans to launch a data feed that gives real-time access to posts from the highest-ranking accounts on its Truth Social platform.
The president’s Truth Social account has the biggest following, with 12.9 million users.
In other words, people can pay to get Trump’s posts in advance, and since those posts are likely to move the market, they can front run. And the money largely goes to… Trump:
Trump owns about 41% of the company’s shares through his revocable trust, according to FactSet.
As far as I’m concerned, if Trump had walked up to a trader and offered to sell advance information on his public pronouncements, it would be the same thing. This is just filtered through a through more layers. So is that illegal?
Well, if Trump’s public pronouncements are his own personal property, he can sell information about them or do whatever he likes with them. (Except if they’re about tender offers). But in this case, his public pronouncements are only material information about securities because they are potentially about government policy – actions that have been taken, will be taken, and so forth. And that is not Trump’s personal property; that’s information about actions taken by the president, or will be taken by the president, or contemplated by the president, or information in the president’s possession due to his governmental role. It’s “material, nonpublic information derived from such person’s position as an executive branch employee,” and Trump is not allowed to trade on it, or tip others in exchange for personal profit.
I mean, I realize Trump likes to treat government property as his own, but it isn’t, and his interests are not the same as the public’s.
In fact, this scenario goes to the heart of one of the fundamental rationales for prohibiting insider trading, and the one just about everyone agrees with (there are a lot of disagreements about insider trading policy). Selling this feed gives Trump an incentive to post more market moving information than he otherwise would. I.e., if Trump never posts market moving information, there’s no point in paying for the feed. The feed is worth more the more he posts material nonpublic information about government policy. That gives him an incentive as president to change or disclose government policy based on what will move markets in a manner that feed subscribers can profit from, rather than based on a calculation of what is best for the American people.
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