Stop Trading on Congressional Knowledge (STOCK) Act.

Congressman need a bill to stop them from insider trading, whereas we’d go straight to jail.
For ex., congressman x on defense committee gets out of meeting in which major defense appropriation decision made-he calls his stockbroker and maxes out on the stock of company in question long before made public, reported in press.
The bill would amend the 1934 Securities Exchange Act and the Commodity Exchange Act to make it illegal for congressmen and their staffs to trade based on information picked up through knowledge of pending or prospective legislation. It has been referred to the committees on Financial Services, Agriculture, Judiciary, and Administration.
The Stop Trading on Congressional Knowledge (STOCK) Act would prohibit Members of Congress, employees of Congress, and all federal employees from using “any nonpublic information derived from the individual’s position as a Member of Congress or employee of Congress, or gained from performance of the individual’s duties, for personal benefit.” The STOCK Act would also require greater oversight of the growing “political intelligence” industry, and would amend the Ethics in Government Act of 1978 by requiring every Member of Congress to publicly file and disclose any financial transaction of stocks, bond, commodities futures, and other securities within 30 days on their websites.

The US House of Representatives Ethics Manual states that its members should “never use any information coming to him confidentially in the performance of governmental duties as a means for making private profit,” and the Senate Ethics Manual states that its Conflict of Interest Rule 37(1) provides for “a broad prohibition against members, officers or employees deriving financial benefit, directly or indirectly, from the use of their official position[s].” No arrests or prosecutions, however, have ever been made against members of Congress for insider trading based on nonpublic congressional knowledge.

While Members of Congress are not exempt from federal securities laws (including insider trading prohibitions), it remains unclear whether a member of Congress has a fiduciary duty to the United States (misappropriating information gained through an employment relationship is illegal, but case law conflicts as to whether members of Congress actually constitute “employees” of the federal government), whether the information on which the Member trades is “material” (Is there “a substantial likelihood” that a reasonable investor “would consider it important” in making an investment decision?), and whether the information on which the member traded is “nonpublic.”

The STOCK Act was originally introduced in the 109th session of the House of Representatives on Mar. 28, 2006 by Brian Baird (D-WA) and Louise Slaughter (D-NY) where it died in committee. It was reintroduced in the 110th (May 16, 2007) and 111th (Jan. 26, 2009) House sessions where it also died in committee.

On Mar. 17, 2011, Tim Walz (D-MN) introduced the STOCK Act into the 112th House session where it gained one co-sponsor and was referred to various committees. Eight more co-sponsors joined by Nov. 4, 2011.

On Nov. 13, 2011, 60 Minutes reported that several members of Congress allegedly used insider information for personal gain. The STOCK Act received 84 additional House co-sponsors in the five days following the report, and Scott Brown (R-MA) filed the STOCK Act in the Senate on Nov. 15, 2011. Kirsten Gillibrand (D-NY) also filed a variation of the STOCK Act in the Senate on Nov. 17, 2011.

On Dec. 6, 2011, House Financial Services Chairman Spencer Bachus (R-AL) scheduled a markup of the STOCK Act for Dec. 14, 2011. House Majority Leader Eric Cantor (R-VA) indefinitely postponed the markup session on Dec. 7, 2011, stating that “a large group of bipartisan members of the committee felt the legislation was flawed and being recklessly moved solely in response to media pressure. Members of both sides of the aisle wanted more time to gather information and develop appropriate alternatives.” Congressman Walter Jones (R-NC) described Cantor’s move as “absolutely unacceptable” and “petty,” while Congresswoman Louise Slaughter (D-NY) stated that “last week we passed a bill worth hundreds of billions of dollars with less than a two day layover and no one knew what was in it. This bill has been around for six years.”

On Dec. 13, 2011, the Senate Homeland Security and Governmental Affairs Committee advanced the STOCK Act by a vote of 7-2. Senators Tom Coburn (R-OK) and Ron Johnson (R-WI) dissented, calling the bill “unnecessary and rife with potential unintended consequences.” Senator John McCain (R-AZ) also opposed the bill, but was absent from the vote.

On Jan. 24, 2012, in his State of the Union Address, President Obama said “Send me a bill that bans insider trading by members of Congress, and I will sign it tomorrow.” Immediately after the speech, Senate Majority Leader Harry Reid (D-NV) told reporters, “I think people should have enough sense not to do it [insider trading] without legislation, but I will support legislation.” On Jan. 26, 2012, Senator Reid scheduled a cloture vote [a vote to end debate on a pending bill and move to a final passage vote] for Jan. 30, 2012 on a new version of the STOCK Act proposed by Senator Joseph Lieberman (I-CT). Cloture passed in the Senate by a vote of 93-2 with Senators Richard Burr (R-NC) and Tom Coburn (R-OK) dissenting.

Advertisements