Thursday, February 02, 2012

President Would Sign Legislation Banning Insider Trading by Members of Congress

The Obama Administration strongly supports Senate passage of S. 2038, which clarifies that Members of Congress and staff may not engage in insider trading. In a Statement of Policy, the Administration said the legislation would help limit the corrosive influence of money in politics and ensure that the Congress is playing by the same set of rules as everyone else, an important component of the President’s Blueprint for an America Built to Last.

The Stop Trading on Congressional Knowledge (STOCK) Act, HR 2038, clarifies that Members and employees of Congress are subject to the prohibitions arising under Section 10(b) of the Securities Exchange Act and Rule 10b-5, including the prohibition on insider trading. In particular, it makes clear that Members and employees of Congress owe a duty arising from their position of trust and confidence not to use nonpublic information obtained by virtue of their position for personal benefit. It also requires reporting of various transactions, including purchases and sales of stock, within 30 days. The full Senate voted to proceed to debate on the bill by a 93-2 vote on January 30.

In addition, S. 2038 requires the Comptroller General in consultation with the Congressional Research Service to prepare a report for submission to the Congress on the role of political intelligence in the financial markets. This report would address, among other things, the effects of the sale of political intelligence on the financial markets, related legal and ethical considerations, and the merits of imposing disclosure requirements on those who engage in political intelligence activities.

The Statement of Policy notes that the President said in his State of the Union message that it is critical that the Congress take steps to restore the American people’s trust in Washington. Members of Congress should not be able to trade stocks based on nonpublic information gleaned on Capitol Hill. The Administration believes this bipartisan legislation is an important first step to prevent Members of Congress from profiting from their positions and calls for swift passage.