[jey]

That's extremely amusing, since the probability of a enforcement action conditional on an investigation being started is much higher than the prior probability of an enforcement action. And if an enforcement action occurs, the price is only going to go down. So this is practically an institutionalized version of the insider trading the article is talking about!

[letstryagain]

The fair way to handle this is to disallow any buying OR selling of related stocks until the public announcement of the results of the investigation.

[jpwright]

But then you have conflict of interest if you're asking SEC employees to investigate companies they hold stock in. The incentive would be to not investigate or impose milder penalties.

[001sky]

No, put the stocks in a blind trust.

[aspensmonster]

How about... just not holding any stocks?

[smutticus]

I would argue that the people regulating the stock market should not be allowed to own stocks or any other sector investment, like an ETF focused on the health care industry. THey should still be allowed to own index based investment vehicles like an SP500 ETF.

[IgorPartola]

Hmm. Given that in order to retire in the US you must invest in the stock market that would be a big requirement. Don't get me wrong, I am all for solving this problem, but simply not allowing the SEC employees to participate in the market would be a pretty good way to ruin their retirement.

An alternative would be to instead provide pensions. I don't really see how that happening given the "no handouts at any cost" attitude of the majority party in the House.

[judk]

Index fund or blind trust, problem solved.

[robzyb]

That doesn't solve the problem. Employees will still have a conflict of interest because they will still want their stock's value to remain.

[Oculus]

Could you expand on this point? I'm under the assumption that employees wouldn't know the portfolio of the blind trust, hence the blind.

[rdl]

This would make joining SEC a very expensive career move for a lot of people, especially if they only planned to be there for a year or two, and were heavily into former employers or other specific stocks based on their experience in the stock market.

[SkyMarshal]

They have to assign their holdings to a 3rd party financial manager/fund/401k/IRA/etc and recuse themselves from any active management of their own portfolio. Not sure if this is an industry-wide requirement, but I had to do this when I worked for a small bond fund some years ago. Zero trading my own account allowed, and required to disclose all personal holdings and activity to the compliance officer who reported to General Counsel.

[einhverfr]

A better way would be to publically list all investigations for which SEC employees have been required to sell shares.

But then that might pose due process issues for the companies.

Maybe all SEC employees should be required to have stocks in blind trusts while working there?