WASHINGTON – Homeland Security and Governmental Affairs Committee Chairman Joe Lieberman, ID-Conn., Monday opened debate on legislation clarifying that members of Congress and their staff are barred from using information they obtain as part of their jobs to profit from securities trades.
The Stop Trading On Congressional Knowledge (STOCK) Act, S. 2038, would also tighten reporting requirements for stock trades; require disclosure forms be made available on the internet; and ask the Senate Ethics Committee to establish guidelines for members of Congress reaffirming that they may not profit from non-public information they receive by virtue of their jobs and not readily available to the public.
The text of Lieberman’s opening statement follows:
“Mr. President, in his farewell address to the nation, President Washington said that “virtue or morality is a necessary spring of popular government” and that we cannot “look with indifference” at anything that shakes that foundation.
“A book by Peter Schweizer and a “60 Minutes” piece alleged some members of Congress and their staffs have used information gained on their jobs to enrich themselves with timely investments in the stock market. Those allegations have, in George Washington’s words, shaken that foundation of trust we must have with the American people – even more than it has already been shaken.
“So Mr. President I rise today to support the Stop Trading on Congressional Knowledge Act 2012 – or STOCK Act – that puts into law language and reporting requirements that will make clear to the American people that we understand that being a member of Congress means that we have a responsibility to the public – a public trust.
“This bill was reported as an original bill out of the Committee on Homeland Security and Governmental Affairs on December 13 by a vote of 7 to 2.
“In advancing this bill, Senator Collins and I worked closely with Senators Kirsten Gillibrand and Scott Brown, who each sponsored versions of the STOCK Act, and Senator Levin, who has worked closely with us on the substitute amendment that is being filed today.
“I want to thank them all for their contributions to this piece of legislation. And I want to thank Leader Reid for making sure that this important legislation is one of the first items we take up in Congress this year.
"Mr. President, some have charged that Congress has exempted itself from insider trading laws. That is just not true.
“In fact, the term “insider trading” is not defined in statute. All the investigations and prosecutions of insider trading over the years by the Securities and Exchange Commission and the Department of Justice have been carried out pursuant to the broad anti-fraud provisions of the Securities Exchange Act of 1934, which makes it unlawful, in section 10b, to “use or employ, in connection with the purchase or sale of any security – any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest for the protection of investors.”
“The specific rules making insider trading illegal are found in a large body of SEC regulatory activities pursuant to section 10b and court decisions interpreting those activities.
“When our Homeland Security and Governmental Affairs Committee held a hearing on this topic in December, the SEC said in written testimony submitted for the record that it believes currently there is authority in the law now to investigate and prosecute a Congressional insider trading cases, declaring that – and I quote – “trading by Congressional Members or their staffs is not exempt from the federal securities laws, including the insider trading prohibitions.”
“But other witnesses at that hearing, Georgetown University Law Professor Donald Langevoort and Columbia Law School Professor John Coffee told us that while the SEC might be right, there was ambiguity in the law and they couldn’t be sure how a court would rule if there was a challenge to the SEC’s authority to bring an insider trading case against a member of Congress.
“That is because, as the Professors explained, a person may be found to have violated the insider trading laws only if he or she breaks a fiduciary duty, a duty of trust and confidence owed to somebody – to the shareholders of the company, or to the source of the nonpublic information, for example.
"It is possible that a judge might decide that Members of Congress owe no duty to anyone with respect to the nonpublic information they receive while carrying out their duties.
“Now, if a judge, I would not see it that way. It seems self-evident that public office is a public trust, and that Members of Congress have a duty to the institution of Congress, to the government as whole, and to the American people to not use information gained during their time in Congress – and unavailable to the public –to make investments for personal profit.
"But the fact is that there are some very smart legal experts who are concerned that a judge would not see it that way.
“The STOCK Act clarifies this ambiguity in the Security Exchange Act of 1934 by explicitly stating that Members of Congress and our staffs have a duty of trust to the institution of Congress, to the U.S. Government, and to the American people – a duty that Members of Congress violate if they trade on non-public information they gain by virtue of their position.
“The bill also requires the Ethics Committees of both houses of Congress to issue guidance to clarify that Members and staff may not use non-public information derived from their position in Congress to make a private profit.
“Besides these changes, the STOCK Act requires members of Congress and their staffs to file public reports on their purchases or sale of stocks, bonds, commodities futures or other financial transactions exceeding $1,000 within 30 days of the transaction. Currently these trades are reported once a year. More timely reporting will allow the SEC and the public to assess whether there is anything suspicious about the timing of the trade. That type of early transparency will be a deterrent to illegal behavior.
“The bill also contains important language, offered in Committee by Senators Mark Begich and Jon Tester, that will require that financial disclosure forms filed by Members and staff be filed electronically and – perhaps even more significantly – be available online for public review.
“There really is no sensible reason to make someone physically come into the House or Senate to see a copy of one of these financial disclosure forms, which are public records. Under the adage that sunshine is the best disinfectant, this requirement for electronic disclosure should also serve as a powerful deterrent to improper financial dealings.
“Finally, our bill asks the Government Accountability Office (GAO) to study and report back to Congress on so-called “political intelligence consultants.”
“As we marked up the bill, our Committee members concluded we did not have enough information to adequately define who does, or doesn’t, qualify as a “political intelligence consultant.”
“Our bill therefore asks GAO to undertake a comprehensive review of this issue, in order to provide Congress a better foundation from which to take any future legislative action.
“In closing, Mr. President, as we begin this second session of the 112th Congress, with so much distrust of our federal government, passing the STOCK Act could have a positive effect on how Washington is perceived. We can show the American people we are not hopelessly gridlocked – that we can come together from both sides of the aisle in both houses of Congress and at both ends of Pennsylvania Avenue to pass common sense legislation that has broad public support.
“The STOCK Act was passed out of the Homeland Security and Governmental Affairs Committee on a bipartisan basis. It has the support of both Democratic and Republican leaders in the House. And President Obama has promised to sign it as soon as it hits his desk.
“With Congressional approval ratings at historic lows, we have a chance to take a small step to restore the American people’s faith in their elected representatives. Let’s prove to those who gave us the honor of representing them here in Washington that the only business that concerns us here is the people’s business.
“Quoting again from our first President – this time from his inaugural address where he set the ideals for the new government he would lead.
“The foundations of our national policy will be laid in the pure and immutable principals of private morality . . . and the preeminence of free government [will] be exemplified by all the attributes which can win the affections of its citizens and command the respect of the world.”
“Enacting this proposal into law would say that we understand and accept Washington’s wisdom.
“I yield the floor.”