Congratulations, STOCK Act. You'll Be a Law!
It's official. On Thursday, March 22, 2012, the U.S. Senate passed by near unanimous vote a bill to Stop Trading On Congressional Knowledge. A bill that (in theory at least) will put an end to members trading stocks with the use of inside information, known to them from their work as representatives -- but unknown to most of the people they were elected to represent.
Six years in the making, the bill died three times in committee, got sidelined in the House in 2011, and was assaulted by a horde of mutant amendments in the Senate in early 2012. But it survived. After winning with landslide votes in both the Senate and House in February, the STOCK Act was adopted by a 96-3 vote in the Senate yesterday, and now heads to President Barack Obama's desk for signing.
The lowdown on the STOCK Act
What does the STOCK Act do? Basically, it boils down to three big things:
First and foremost, the act explicitly states that members have a duty to the United States and its citizens, and to the institution of Congress itself, to keep confidential any material information they come into possession of in the course of performing their duties. That sounds like a "well, duh!" statement to most of us, but legal scholars have been debating for years whether such a duty actually exists in law.
Now we know it does, because the law says it does. As a result, the entire history of SEC regulation of insider trading can now be applied in full to members of Congress.
Second, the act forbids public officials, including members of Congress, from using their government office to obtain preferential access to hot IPOs.
Third, to help voters ensure that Congress is doing what it's now legally obliged to do (and not do the things it's now legally forbidden from doing), the act requires members of Congress (and senior members of the executive branch) to disclose their trading activity within 30 days after placing a trade. That's different than the current disclosure requirement, which had trades and disclosures being separated by as much as 17 calendar months. Further improving the system currently in place, these disclosures will need to be made electronically, in standardized form, and will be open to the public for review.
Bill text here.
With all the partisanship, gridlock and general nonsense happening on the hill, I'm glad to see so much nonpartisan support for such a good bill. While I don't think it should be needed (as the govt. role should not be in the sectors at all), I'm glad it got done.