It should come as a shock to most Americans, but members of Congress, their staff and many employees of the executive branch may conduct legal “insider trading” on the stock market, that would otherwise be illegal for you and I.

The Securities and Exchange Commission (SEC) does not have the authority to hold employees of Congress or the Executive Branch liable for using non-public information gained from official proceedings for insider trading. Under current law, “insider trading” is defined as the buying or selling of securities or commodities based on non-public information in violation of confidentiality -- either to the issuing company or the source of information. Most federal officials and employees do not owe a duty of confidentiality to the federal government and thus are not liable for insider trading.

There is some evidence that insider trading by government officials may already be a problem. As part of his plea agreement on corruption charges, Tony Rudy, former staffer to then-Rep. Tom DeLay (R-Texas), acknowledged making 500 stock trades from his Capitol Hill computer in 1999 and 2000, profiting handsomely from the day trading. In another incident, stock prices for companies with asbestos-related liabilities rose dramatically in 2005 just before former Senate Majority Leader Bill Frist (R-Tenn.) proposed a $140 billion public bailout for asbestos liability claims, raising suspicion that the information had been leaked to lobbyists or “political intelligence” consultants beforehand.

What are “political intelligence consultants”? They are lobbyists or stock traders who hang around the halls of Congress eagerly seeking information on the stock and commodities markets from congressional staffers, who may have learned of insider information in the course of congressional oversight proceedings. This non-public information can then quickly be turned into a gold mine of stock trading.

Reps. Brian Baird (D-Wash.), Louise McIntosh Slaughter (D-NY) and Tim Walz (D-Minn.) have introduced common sense legislation to apply the same insider trading restrictions we face on members and staff of Congress and the federal government. The “Stop Trading on Congressional Knowledge Act” (H.R. 682) would prohibit congressional and executive branch officials and employees from using non-public information for personal gain. It would also prohibit private individuals and firms that attempt to mine this information from using it for insider trading. The legislation would also require members of Congress and their staff to disclose stock transactions of $1,000 or more within 90 days, and require “political intelligence consultants” to register under LDA and disclose their financial activities.

This legislation is long overdue. And it has become all the more critical today as the Congress and the federal government assume an even greater oversight role of Wall Street.