STOCK Act Passes to Prevent Insider Trading on Political Intelligence
On February 9th, the House of Representatives passed a bill that prevents members of Congress from trading on Wall Street using non-public information obtained as a result of their involvement in congress. The practice of trading on non-public information by members of Congress was common and even though it appears unfair to other investors, it was technically not illegal.
The Senate and House voted overwhelmingly in favor (96 to 3 and 417 to 2 respectively) of the STOCK Act or Stop Trading on Congressional Knowledge Act.
Some key provisions in the bill include:
- Prohibits Members of Congress, employees of Congress, and all federal employees from using any nonpublic information derived from the individual’s position as a Member of Congress or employee of Congress, or gained from performance of the individual’s duties, for personal benefit.
- Requires formal disclosure of certain securities and commodities futures transactions (by members of Congress) to either the Clerk of the House of Representatives or the Secretary of the Senate.
- Prohibits a Member, officer, or employee of the Senate from disclosing material nonpublic information relating to any pending or prospective legislative action relating to any publicly-traded company or to any commodity if such person acts with intent to assist another person, directly or indirectly, to use the information to buy or sell the securities of that publicly traded company based on such information.
- Significant increases in disclosure requirements of relationships with political intelligence activities, contacts, firms, and consultants.
The Bill has moved quickly through Congress since 60 Minutes ran a segment on the issue in November 2011.