Hearing of Senate Committee on the Judiciary on "Illegal Insider Trading: How Widespread is the Problem and is There Adequate Criminal Enforcement?"

Hearing of Senate Committee on the Judiciary on "Illegal Insider Trading: How Widespread is the Problem and is There Adequate Criminal Enforcement?"

Prepared Statement of Senator Chuck Grassley of Iowa

Chairman Specter, thank you for holding this oversight hearing on illegal insider trading. I share the Chairman's concerns about whether the laws on the books are tough enough to prevent and punish criminal conduct, as well as whether criminal enforcement in this area is adequate. Further, I have serious concerns as to whether current enforcement by the Securities and Exchange Commission (SEC) is adequate to protect against increasingly complex institutional trading. The current market oversight regime needs to be reviewed to ensure that individuals and organizations are not able to game the system. The Senate Judiciary Committee needs to exercise its oversight responsibilities to ensure that the laws are being enforced to deter corporate fraud and manipulation against our capital markets. So, I'm pleased that we are looking into these practices today.

In addition to today's hearing, Chairman Specter and I, in my capacity as Chairman of the Committee on Finance, have been investigating allegations from current and former SEC employees regarding, among other things, the adequacy of SEC enforcement against insider trading. While our joint investigation remains ongoing, today's hearing presents another opportunity to discuss SEC enforcement and to ensure that those who attempt to game the system for illegal gain are brought to justice.

There have been a number of recent reports suggesting increased trading activities in the days and weeks before major corporate mergers and buyouts become public. Are these trading activities legitimate? Some conclude that this high level of activity suggests illegal insider trading. The Judiciary Committee should look into whether that indeed is the case.

Moreover, are the Department of Justice and the SEC working together effectively to protect investors and the public from fraudulent activity? Are they taking the initiative to root out corporate fraud, and are they being as tough as they can when they settle their lawsuits? Some have suggested that there are impediments, both legal and institutional, that have hampered the government from enforcing the law and being as effective as they should be. Also, we need to ensure that our enforcement agencies have all the tools and resources they need to keep our capital markets clean. There is no question that the Department of Justice and the SEC need to be aggressive when they investigate alleged wrongdoing. If they need additional tools and resources to do that, we need to look at crafting legislation to help them do their job.

So I'm looking forward to reviewing the testimony of the witnesses, and I thank Chairman Specter for his interest in this important topic and for holding this hearing today.

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