Although almost universally held to be a conflict between private interests and oaths of office, the practice of U.S. politicians trading stocks is quite widespread. The STOCK Act, passed back in 2012, is the chief piece of legislation regulating congressional trading. However, it is both violated on a regular basis and lacks a mechanism to introduce meaningful repercussions.
Members of the House of Representatives and the United States Senate have access to information that the public is not privy to. On top of that, they regulate the very industries in which they invest.
Unsurprisingly, these advantages manifest as above-average returns. In recent years, many traders have taken to copying the trades made by legislators in an effort to secure those outsized gains for themselves.
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There is no shortage of suspicious trades — every once in a while, a company will announce a new product or some market-moving news will come to light — only for a disclosure released a couple of weeks later to reveal that a U.S. politician invested in the company just before the move to the upside.
Finbold has singled out two highly suspicious trades made by politicians in 2024 — we leave it to our readers to determine which is the most egregious.
Tina Smith and Tactile Systems (NASDAQ: TCMD)
On November 12, Tina Smith, the junior United States Senator from Minnesota, invested between $50,001 and $100,000 in Tactile Systems (NASDAQ: TCMD). At the time, TCMD stock was trading at $15.75 — by press time, the price of a Tactile Systems share had risen to $17.13.
While the 9.52% return that Smith secured from her investment in TCMD stock isn’t as notable as some of the gains her congressional colleagues have locked in, there are a few additional factors at play that make this a suspicious trade. The trade was executed by Smith’s husband, Archie — himself an investor who largely focuses on healthcare companies.
Tactile Systems, a low-profile, small-cap company with a market share of just $411 million, derives a significant portion of its revenue from government contracts — and the company happens to hail from Minnesota, the state that Tina Smith represents in Congress. In addition, the congresswoman serves on the Senate Committee on Health.
Nancy Pelosi’s Visa (NYSE: V) sale
Nancy Pelosi is one of the most renowned (or notorious) stock traders in Congress. The former speaker of the house tends to invest in tech companies — over the course of 2024, she has invested millions in Nvidia (NASDAQ: NVDA) and Broadcom (NASDAQ: AVGO).
On the other hand, not all of the representative’s trades pan out — most notably, Pelosi sold Tesla (NASDAQ: TSLA) too early, locking in significant losses. However, in early July of 2024, the congresswoman sold 2,000 Visa (NYSE: V) shares, worth between $500,001 and $1,000,000.
That wouldn’t be suspicious on its own — except that just two months later, Visa faced an antitrust investigation from the Department of Justice (DOJ). While it’s impossible to know whether or not (and to what extent) Pelosi had an informational edge, the timing of her trade certainly seems impeccable.
Interestingly enough, the price of a Visa share has increased by 22.08% over the course of 2024 — while the DOJ case caused prices to dip, the pullback proved to be temporary.
Once all is said and done, it’s important to remember that even possessing insider knowledge doesn’t appear to be a guarantee of success — while it does provide a clear advantage, even lawmakers are caught off guard every once in a while. As for which trade was more suspicious — we leave that up to our readers.
Featured image via Shutterstock
