A Watered Down Insider Trade Bill Heads to the President’s Desk
Thomas J. Spulak, Claudia A. Hrvatin
In the February 17th edition of Washington Insight, we reported that the House and Senate had passed separate versions of legislation intended to prohibit Members of Congress and their staff from using non-public information obtained as a result of their position or during the performance of their duties for personal financial benefit. The President had called for congressional action in this regard during the State of the Union after several news accounts aired on the issue.
On March 22nd, the Senate agreed to the House version of the legislation, called the Stop Trading on Congressional Knowledge Act of 2012 or STOCK Act, and it now awaits the President’s signature. The legislation reaffirms the application of insider trading laws to government officials, requires the reporting of certain trading transactions, prohibits officials from participating in initial public offerings, and sets forth stiff penalties for violations of the Act.
Of particular importance, the Senate version of the STOCK Act sought to require the registration and reporting of “political intelligence consultants” - individuals seeking information for use in analyzing securities or commodities markets, or in informing investment decisions. The House struck that provision; all that remains in the current legislation is a requirement that a study be conducted by the Comptroller General of the United States and the Congressional Research Service on the practices and impact of the political information industry.
In addition, it is important to note that the STOCK Act applies to the Executive and Judicial branches as well as the Legislative Branch--including the President and Vice President. The President’s original plea was not so broad, but it is likely that the expansion of its applicability strengthened the STOCK Act’s appeal.
The compromise that is before the President is viewed by some as falling short of what is needed to curb the excesses of the financial intelligence industry. Nevertheless, Congress has taken this first step to address its standing with the American public.