The Senate’s passage Thursday of the so-called STOCK Act to require lawmakers to disclose investment transactions could rope thousands of federal employees into a new obligation to make public their own stock market moves to help prevent illegal insider training.
Many lawmakers and government transparency advocates are pleased.
Language by Sen. Richard Shelby, R-Ala., attached to the Stop Trading on Congressional Knowledge Act before the heavily amended bill was approved 96-3, was justified on the principle of “what is good for the goose . . . should be good for the gander,” Shelby said.
“Currently, less than 1 percent of the executive branch workforce is required to file financial disclosure statements,” he said. “My parity amendment will not expand that universe; it will only require them to meet the same reporting standards that will apply to the legislature.”
Shelby added that members of the executive branch “arguably have even greater access to confidential information” than those in Congress.
The STOCK Act, a version of which has been moving through the House, seeks to clarify an ambiguity in the 1934 Securities and Exchange Act by prohibiting members of Congress and their staffs from trading on information they obtain in their work that is not available to the general public, according to a statement from Sen. Joe Lieberman, I-Conn., chairman of the Senate Homeland Security and Governmental Affairs Committee. The bill also would require disclosure 30 days after any securities trade of more than $1,000 and would compel all disclosures to be available electronically.
Momentum for the requirements began building last fall after CBS’ 60 Minutes broadcast an expose on several lawmakers’ allegedly profitable stock deals at a time when they were working on related legislation.
The Shelby amendment would require certain employees of executive branch and independent agencies (though much of the uniformed services would be exempt) to build on procedures of the 1978 Ethics in Government Act and, beginning in two years, post their stock trades online. The exact number of federal employees who would be affected is in dispute. Shelby envisions it at around 28,000, which is roughly how many currently are required to report their finances publicly. Lieberman, who spoke against the amendment before it passed 58-41, put the figure at 300,000 or more, about the current number of feds who are required to file confidentially to agency ethics offices. His staff said he is drafting a request to the Office of Government Ethics to clarify the universe of employees who would be required to report trades.
A spokesman told Government Executive the Office of Government Ethics is “reviewing the legislation to determine the impact on the executive branch.”
Opponents of the expansion to federal employees were concerned about the costs and paperwork that some say would duplicate what’s already required. Julie Tagen, legislative director of the National Active and Retired and Federal Employees Association, told Government Executive, "There are laws on the books today against insider trading that apply to all Americans, including government officials. NARFE does not condone people profiting from inside official information. [But] do we really need another law to enforce integrity in government?"
Senior Executives Association President Carol A. Bonosaro said she could not comment without knowing more of the legislation’s details, but the “financial disclosure reports required to be filed by career senior executives are pretty detailed.”
Good-government groups have praised the overall bill. Citizens for Responsibility and Ethics in Washington, for example, lauded an amendment that would deny pensions to former or incumbent lawmakers who are convicted of a public corruption felony.
Lisa Gilbert, deputy director of the Congress Watch branch of Public Citizen, said, “The executive branch already had far stronger ethics restrictions around trading than the legislature -- including a requirement that administration personnel divest from stocks that could prove a conflict of interest. The addition of Sen. Shelby’s amendment will further tighten up the already strong executive branch ethics rules by requiring real-time disclosure, which Public Citizen applauds.”
On the House side, Majority Leader Eric Cantor, R-Va., told ABC News two days before the Senate acted that his chamber will pass a version this month that addresses insider trading both on Capitol Hill and in the agencies. Before the Shelby amendment appeared, Cantor had complained that the legislation “does not adequately cover those connected with the federal government in the executive branch.”
The overall bill was opposed by three senators. Jeff Bingaman, D-N.M., said in a statement, “current law already prohibits members of Congress and federal employees from engaging in insider trading. To the extent that these laws need to be clarified, I strongly support taking steps to make those prohibitions absolutely clear. But I can’t support a bill that places unreasonable and burdensome reporting requirements on over 300,000 federal workers.”
Sen. Richard Burr, R-N.C., told home-state radio station WWNC on the eve of the vote, “we’re going to have political theater this week as to whether it applies to the executive branch, whether it doesn’t. The fact is SEC law applies to every person who trades in America.”
Sen. Tom Coburn, R-Okla., said he considered the new disclosure requirement a waste of time, offering instead an amendment to require the Senate to determine whether new programs are duplicative and overlapping before they are created.