Delay for Insider Trading Disclosure Possible


New York, NY – Despite the requirement in the STOCK Act that employees of the legislative and executive branches of the US government disclose any financial transactions greater than $1,000, several developments last week could delay, or even eliminate these requirements – at least for employees of the executive branch.

New Bill to Delay Disclosure

The STOCK Act, passed into law in April of this year, explicitly banned insider trading by employees of the legislative and executive branches of the US government, and required that these employees disclose any securities trades in excess of $1,000 by August 31st.  These transactions are to be posted online.  The rationale for the disclosure was that the public would be able to tell if government employees were financially benefitting from inside information they obtained from their jobs.

However, in July former high-ranking justice and national security officials wrote to Congress asking that senior executive branch employees with security clearances be exempted from the disclosure requirements of the law due to concerns that enemies of the US could exploit this information and create potential security vulnerabilities.

While both the Senate and House refused to eliminate these disclosure requirements, they did submit and pass a bill (S 3510) that would delay disclosures for certain government employees until September 30th of this year rather than August 31st.  In addition, this new bill clarifies that spouses and dependent children of legislative and executive branch employees be required to make the same financial disclosures as their spouses.  Click here for more details about this recent issue.


ACLU Files Lawsuit to Stop Disclosure

In a related matter, last week the ACLU and other groups filed a lawsuit in U.S. District Court in Greenbelt, MD saying that the STOCK Act’s requirement that 28,000 federal workers disclose financial transactions greater than $1,000 is an unconstitutional invasion of privacy and subjects those workers to a real fear of identity theft.  The lawsuit does not address the requirements for legislative branch employees.

It is important to note that the federal employees in question are already required to make financial disclosures to the Office of Government Ethics.  The big difference between their current disclosures and those required by the STOCK Act, is the new disclosures would be posted on the Internet for anyone to access, whereas current disclosures are more difficult to get access to.  The attorney for the plaintiffs in this new lawsuit argues that this widespread dissemination of federal employees financial data becomes an unreasonable invasion of privacy.

The ACLU also argues that it is not clear the law is even necessary for executive branch employees.  The STOCK Act was originally written in response to news reports that some members of Congress profited from stock trading which resulted from inside knowledge of how Congress would act.  However, the ACLU contends that there are no similar reports of such problems with executive branch employees.  In addition, executive branch workers were already subject to criminal penalties that did not exist for members of Congress.

The ACLU, the Senior Executives Association, the American Foreign Service Association, the Assembly of Scientists, and the National Association of Immigration Judges are seeking an injunction to keep the executive branch disclosure requirements of the STOCK Act from being implemented.

Based on the new bill and the recently filed lawsuit, it is clear that the STOCK Act’s requirement that executive branch employees disclose any trading activity in excess of $1,000 will either be delayed, or eliminated altogether.  However, these developments will not affect Congress, their staffs, their spouses or dependent children from having to start making these disclosures as of August 31st.

One question this all raises is whether the continued push-back seen from Washington to implement public disclosure of their trading activity will detract from the confidence the Congress was trying to reestablish by passing the STOCK Act in the first place.



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