What is the Stop Trading on Congressional Knowledge (STOCK) Act?
General Reference (not clearly pro or con)
Brian Baird, PhD, US Representative (D-WA) and primary sponsor of the Stop Trading on Congressional Knowledge (STOCK) Act (H.R. 682) that he and cosponsors of the bill Louise M. Slaughter, MS, US Representative (D-NY), and Tim Walz, MS, US Representative (D-MN), introduced in Congress on Jan. 26, 2009, provided the following in his Jan. 27, 2009 press release "Brian Introduces Legislation to Prohibit Insider Trading on Capitol Hill" available on www.house.gov:
"Congresswoman Louise Slaughter (D-NY-28) and Congressman Brian Baird (D-WA-03) have introduced common sense legislation that will stop insider trading on Capitol Hill. When passed, the Stop Trading on Congressional Knowledge Act (STOCK Act) will prohibit Members of Congress and their staff from using nonpublic information they are able to obtain through their official positions to enrich their personal portfolios...
Currently Members of Congress and their staff do not owe a duty of confidentiality to Congress, and therefore are not liable for insider trading. Because of this, the temptation exists for Members and government employees to use government information only they have access to when making investment decisions...
Political intelligence firms have created a multi-million dollar industry to traffic this information. Since they first showed up in the 1970s, these firms have operated in secret, and largely without government controls. They provide investors with inside information about impending legislative action that can be used to inform investment decisions...
To address these issues, the STOCK Act will:
Prohibit Members or employees of Congress from buying or selling stocks, bonds, or commodities futures based on nonpublic information they obtain because of their status;
Prohibit Executive Branch employees from buying or selling stocks, bonds or commodities futures based on nonpublic information they obtain because of their status;
Prohibit those outside Congress from buying or selling stocks, bonds, or commodities futures based on nonpublic information obtained from within Congress or the Executive Branch;
Prohibit Members and employees from disclosing any non-public information about any pending or prospective legislative action obtained from a member or employee of Congress for investment purposes;
Require Members of Congress and employees to report the purchase, sale or exchange of any stock, bond, or commodities future transaction in excess of $1,000 within 90 days. Members and employees who choose to place their stock in holdings in blind trusts or mutual funds would be exempt from the reporting requirement;
Require firms that specialize in “political intelligence” and obtain their information directly from Congress to register with the House and Senate, and to disclose much like lobbying firms are now required to do. Political intelligence firms first appeared in the 1970s, but the industry remains relatively unknown because the firms are currently not required to disclose their clients or their earnings."
Michael Teitelbaum, MA, a reporter at the Congressional Quarterly (CQ), wrote the following in the Jan. 27, 2009 CQ Today Online News article "A Crackdown on Info Trading" about the STOCK Act (H.R. 682) introduced in Congress on Jan. 26, 2009:
"Being a lawmaker does have its privileges. But trading on insider information won’t be one of them under legislation introduced today.
House Rules Committee Chairwoman Louise M. Slaughter , D-N.Y., and Brian Baird , D-Wash., are sponsoring what they call the Stop Trading on Congressional Knowledge Act that would prohibit Members of Congress and their staffers from using nonpublic information obtained through their official positions to benefit themselves financially.
In a statement, the two said the legislation (HR 682) is more important now, given the amount of money Congress has authorized to help right the economy under the financial services bailout program...
The two lawmakers did not cite any instances of insider trading by members, but they did mention a 2004 study showing that investment returns for senators was 25 percent higher than it was for typical investors. Slaughter and Baird also noted that so-called political intelligence firms have created 'a multi-million industry' from trafficking in nonpublic information from Congress and various government agencies.
The legislation would also strengthen personal financial disclosure rules for lawmakers, forcing them to report any stock transaction of $1,000 or more within 90 days."
The Congressional Research Service (CRS) wrote the following summary of the STOCK Act (H.R. 682) introduced in Congress on Jan. 26, 2009, available on thomas.loc.gov (accessed Apr. 10, 2009):
"Stop Trading on Congressional Knowledge Act - Amends the Securities Exchange Act of 1934 and the Commodities Exchange Act to direct both the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) to prohibit purchase or sale of either securities or commodities for future delivery by a person in possession of material nonpublic information regarding pending or prospective legislative action if the information was obtained: (1) knowingly from a Member or employee of Congress; (2) by reason of being a Member or employee of Congress; and (3) other federal employees.
Amends the Code of Official Conduct of the Rules of the House of Representatives to prohibit designated House personnel from disclosing material nonpublic information relating to any pending or prospective legislative action relating to either securities of a publicly-traded company or a commodity if such personnel has reason to believe that the information will be used to buy or sell the securities or commodity based on such information.
Amends the Ethics in Government Act of 1978 to require formal disclosure of certain securities and commodities futures transactions to either the Clerk of the House of Representatives or the Secretary of the Senate.
Amends the Lobbying Disclosure Act of 1995 to subject to its registration, reporting, and disclosure requirements, as well as requirements for identification of clients and covered legislative and executive officials, all political intelligence activities, contacts, firms, and consultants. Requires the Comptroller General to include political intelligence activities, contacts, firms, and consultants in its annual compliance audits and reports.
Jessica Holzer, Staff Writer for The Hill, wrote in a May 17, 2007 article titled "Insider-trading Ban May Extend to Members" about the STOCK Act (H.R. 2341) introduced in Congress on May 16, 2007:
"The legislation also would bar investors from trading in securities based on tips flowing from Congress or the executive branch if they know the information is nonpublic, potentially dealing a blow to the growing political intelligence industry.
...the bill effectively would extend insider-trading laws that apply to corporate America to the federal government, imposing fines or even criminal penalties for trading in 'nonpublic material information' flowing from the legislative or executive branches.
In addition to clamping down on leaks of lucrative information, the bill would require members and employees of Congress to disclose any trade in a stock, bond or commodities future greater than $1,000 within 90 days. Political intelligence firms would have to disclose their clients to the House and Senate just as lobbying firms do.
The bill empowers the Securities and Exchange Commission to extend its prohibitions against insider trading to the legislative and executive branches."
