New York, NY – Last week, in a rather secretive move, the Senate and House passed a bill that effectively guts one of the more important aspects of the STOCK Act passed last year – and that is requiring the timely electronic filing of securities holdings by government officials in an effort to shed light on potential insider trading.
Background on the STOCK Act
The STOCK Act, which was passed last year, clearly prohibited members of Congress and the Executive branch from profiting as a result of insider information they learned while in their government positions. However, the law also required that already public disclosures of senior congressional and executive branch officials’ investments be put online in order to highlight potential insider trading by government officials and their staffers.
However, shortly after the bill was passed, concerns arose from a group of government employees that these disclosure requirements would put create possible national security risks. These concerns led to a delay in the implementation of these requirements, and prompted Congress to request a study to investigate those concerns.
Last month, a report released by the National Academy of Public Administration, recommended that Congress scale back the disclosure requirements for these employees, arguing that foreign countries and others could use the information to pressure government officials in ways that would compromise national security and law-enforcement efforts.
Last Week’s Surprising Developments
However, to many onlookers’ surprise, the House on Friday passed a bill that would exempt congressional aides and executive branch staffers from the requirement that they post financial disclosures online. The requirement would still apply to the president, vice president, lawmakers and congressional candidates, and positions that require Senate confirmation. The Senate passed the legislation, by unanimous consent, on Thursday night.
This move prompted rather heated responses from some groups in Washington DC. Lisa Rosenberg of the Sunlight Foundation wrote, “Not only does the change undermine the intent of the original bill to ensure government insiders are not profiting from nonpublic information (if anyone thinks high-level congressional staffers don’t have as much or more insider information than their bosses, they should spend some time on Capitol Hill), but it sets an extraordinarily dangerous precedent suggesting that any risks stem not from information being public but from public information being online.”
“Boy, that’s a problem,” Craig Holman, government affairs lobbyist for Public Citizen, said in an interview. “Because congressional staff really was the heart of what I consider a lot of congressional insider trading and also the sources for the political intelligence consultants who are roaming the halls.”
Consequences for Political Intelligence
Earlier this month, the Government Accounting Office delivered its 34 page report to Congress outlining the difficulties it had in quantifying the nature and scope of the political intelligence industry. They also addressed the issues that Congress would have to tackle if it wanted to mandate some form of registration regime for the players in the space.
As we wrote in a blog on April 8th, Senators Charles Grassley (R., Iowa) and Rep. Louise Slaughter (D., N.Y.) felt that the report’s lack of insight was evidence that more disclosure of political intelligence firms’ activities was required. The two lawmakers said they hope to introduce legislation shortly that would require political-intelligence firms to make more information public about their activities, including the possibility that these firms register much like lobbyists are required to do.
However, we wonder how much support such a bill will receive. Ultimately, it will come down do whether many in Congress will have the stomach to force transparency on Political Intelligence firms when they themselves decided to forgo timely online disclosure of their and their staffers’ own investment activities? While we think the likelihood of this happening is small, it would not be altogether surprising, as stranger things have happened – particularly in Washington DC.