Stop Trading on Congressional Knowledge Act
Congress has cleared and the President has signed the most important congressional ethics legislation of the past five years, the Stop Trading on Congressional Knowledge (STOCK) Act. The House and Senate overwhelmingly approved slightly different bills, and the Senate agreed to the House version on March 22, 2012. The President signed the bill into law on April 4.
The legislation would ensure members of Congress and their staffs are held to the same insider-trading laws as the rest of America. It would require disclosure of strock trades by members of Congress, top staff, and top Executive Branch officials within 30 days of the trade. The disclosure forms would be required to be available online for easy public access.
Homeland Security and Governmental Affairs Committee Chairman Joe Lieberman, ID-Conn., Ranking Member Susan Collins, R-Maine, Senator Kristen Gillibrand, D-N.Y., and Senator Scott Brown, R-Mass., co-sponsored the STOCK Act, S. 2038, to eliminate any ambiguities in the law that governs insider trading.
“With Congressional approval ratings at historic lows, the STOCK Act offers us a chance to restore trust in Congress and to show those who gave us the honor of representing them that the only business that concerns us is the people’s business,” Lieberman said. “This bill represents Congress at its best. A problem was identified that cut directly into the public’s faith in this institution, and we dealt with it quickly and on a bipartisan basis in both Houses.”
Collins said: "At a time when public confidence in Congress is so low, we must act to remove any doubt that the law and rules against insider trading apply to Members of Congress. The STOCK Act will help assure the public that we understand that elective office is a place for public service, not private gain."
Gillibrand said: “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. This strong bill with teeth is a good step forward to begin restoring our trust with the American people.”
Brown said: “I believe those who make the laws should live under the same laws as everyone else. With passage of the STOCK Act, members of Congress and their staffs can no longer use inside government information to make money in the stock market. Insider trading is wrong, whether it happens on Wall Street or on Capitol Hill. The passage of this legislation is an important step toward restoring trust in our government."
Gillibrand and Brown each introduced versions of the STOCK Act last year, which the Committee improved upon and reported out December 14, 2011.
The STOCK Act clarifies an ambiguity in int he 1934 Securities and Exchange Act by prohibiting members of Congress and their staffs from trading information they obtain by virtue of their positions that is not available to the general public. The bill also requires members of Congress, top staff, and top Executive Branch employees to disclosure any securities trade over $1,000 within 30 days of the trade. Disclsoure forms would have to be available electronically. Members of Congress also would have to disclose their mortgages annually.
The STOCK Act would also:
- Require a Government Accountability Office study of so-called “political intelligence” to determine who practices it and what type of information is being sold to their clients.
- Deny Congressional benefits to Members or former Members who commit public corruption crimes.
The Committee held a hearing December 1 on the subject of insider trading among members of Congress which revealed ambiguities in the law and raised questions about its strength and clarity.
The new bill explicitly states that Members of Congress and their staffs have a “duty of trust and confidence” to Congress, the U.S. Government, and the American people – a duty they violate by trading on non-public information.
Insider trading is not expressly prohibited by statute for anyone including members of Congress. Instead, the Securities and Exchange Commission and the Justice Department investigate and prosecute insider trading cases based on general anti-fraud provisions contained in the Securities Exchange Act of 1934.