Congress Weakens Insider Trading Requirements in STOCK Act

Thursday, 25 Apr 2013 07:41 AM

By Michael Kling

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Congress has gutted the Stop Trading on Congressional Knowledge (STOCK) Act, a law designed to prevent insider trading by Congressmen and other top government officials.

Insider trading is still illegal for lawmakers and their staff members, but finding out what they are trading will be very difficult, critics say.

The bill, which has already been signed into law by President Obama, eliminates the creation of a publicly accessible database and the mandatory electronic filing of personal financial disclosures by the president, cabinet members, Congressmen and government staffers.

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The bill has prompted howls of protest.

“Without the provisions, the STOCK Act is made toothless,” writes Dan Auble, personal finances researcher for the Center for Responsive Politics, a research group tracking money in U.S. politics. “Insider trading by members of Congress and federal employees is still prohibited, but the ability of watchdog groups to verify that Congress is following its own rules is severely limited because these records could still be filed on paper — an unacceptably outdated practice that limits the public’s access.

“This,” Auble says, “is not true disclosure.”

Many noted that the new bill was swiftly and quietly passed and signed into law.

“Who says nothing ever gets done in Washington?” The Huffington Post states. “Swiftly and without fanfare, Congress and President Obama have made it easier for top federal employees to trade on inside information.”

The original STOCK Act was signed into law — with much fanfare — last year after media reports, as well as academic studies, found that lawmakers with key insider information were suspiciously lucky in their stock trades.

One study, according to The Post, indicated that stock picks of lawmakers beat the broader market by 12 percent a year.

Staffers were also trading stocks of businesses that would be impacted by legislation in front of Congress.

Yale law professor Jonathan Macey writes in The Wall Street Journal that even the initial law had loopholes.

“On closer examination, it appears that what Congress really wants is to keep making the big bucks that come from trading on inside information but to trick those outside of the Beltway into believing they are doing something about this corruption,” Macey says.

Federal employee unions had opposed the law, arguing that it would put staffers at risk, and The National Academy of Public Administration had criticized the law, saying it would create a national security risk, The Post notes.

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