Bans Congressional Insider Trading
Sen. Kirsten Gillibrand announced final passage of the STOCK Act, bipartisan legislation to make insider trading in Congress clearly and expressly illegal.
“I strongly believe that we have to make clear that nobody here is above the law and that members of Congress need to play by the exact same set of rules as every other American. It is simply the right thing to do,” Gillibrand said. “This strong bill with teeth is a good step forward to begin restoring our trust with the American people.”
The STOCK Act, if enacted, would bar a member of Congress, their staff and all federal employees from engaging in insider trading or otherwise using non-public information gained through their work for their own personal benefit. The legislation also clarifies that this provision constitutes a sufficient basis for the Securities and Exchange Commission (SEC) to investigate and prosecute members of Congress engaging in insider trading, including the “tipping” of non-public information.
By incorporating feedback from witnesses at a Dec. 1, 2011 committee hearing, the legislation directly corrects the ambiguity in existing laws to ensure that members of Congress, their families and their staffs are fully covered by insider trading laws. The legislation is carefully crafted to not alter existing insider trading law, but to simply ensure that members of Congress, their families, their staff and federal employees are fully covered by it.
The bill will also establish a clear, fiduciary responsibility to the American people, removing any doubt to whether the SEC and the Commodities Futures Trading Commission are empowered to investigate and prosecute cases involving trading of securities. The legislation also directs the Congressional Ethics Committees to write rules to enforce this provision.
As a result, the legislation would empower the Ethics Committees, as well as the SEC, to enforce rules against insider trading by members of Congress and Congressional staff, but would not require the 67 vote threshold required to directly amend Senate rules in mid-session.
For added transparency, the legislation further enhances disclosure requirements by requiring that members of Congress report stock and other major financial transactions within 30 days, dramatically less than the current annual reporting requirement, and reduced from the 90 days proposed in the original draft of the legislation. Under the legislation, these reports and other financial disclosures must be posted online.
A report in the Washington Post hailed the STOCK Act as the “most substantial debate on congressional ethics in nearly five years.” In his State of the Union address, President Obama called on Congress to pass this bill, which was originally introduced in the House of Representatives by Rep. Louise Slaughter.
Gillibrand preferred the version of the STOCK Act first passed by the Senate that included a provision she wrote that would require “political intelligence consultants”-individuals contacting legislative and executive branch employees to acquire market intelligence regarding a proposed rule, regulation or legislation- to register as lobbyists, and would make them subject to the same reporting requirements and other restrictions imposed on lobbyists.
She vowed to work with Sen. Charles Grassley of Iowa and Slaughter to pass legislation to add these reforms to the law.
The STOCK Act is supported by at least seven government reform groups including Campaign Legal Center, Citizens for Responsibility and Ethics in Washington, Common Cause, Democracy 21, Public Citizen, Sunlight Foundation and U.S. PIRG.