Senators introduce "STOCK Act" to stop "insider trading" in Congress

iStockphoto DHuss

This story was corrected at 6:30 p.m. to clarify that two separate bills are being introduced

A bill to stop "insider trading" in Congress is gaining momentum with two new Senate supporters.

Sen. Scott Brown, R-Mass., today introduced the Stop Trading on Congressional Knowledge (STOCK) Act of 2011, which would prohibit members or employees of Congress, as well as executive branch employees, from using nonpublic information obtained through their public service for investing or any attempt at personal financial gain. Sen. Kirsten Gillibrand, D-N.Y., is introducing a slightly different version of the legislation on Wednesday.

Like everyone else, members of Congress are subject to current insider trading laws. However, current insider trading laws do not apply to nonpublic information about current or upcoming congressional activity -- that's because members of Congress aren't technically obligated to keep that information confidential.

So, for instance, if a lawmaker learns an upcoming bill will grant a company a large government contract, which could boost that company's stock, he or she is free to buy that stock ahead of the bill's public introduction. This form of "insider trading" is one of the reasons why there are so many wealthy members of Congress, CBSNews.com reported earlier this year.

Democratic Reps. Louise Slaughter of New York and Tim Walz of Minnesota introduced legislation in the House to stop this practice -- but the bill, which has been introduced before, has never had more than 14 congressional sponsors. Now, however, there is more interest in the bill after a "60 Minutes" report shedding new light on congressional "insider trading."

CBSNews.com Series: United States of Influence

"Members of Congress should live under the same laws as everyone else," Brown said in a statement today. "If they trade on inside knowledge to line their own pockets, they should be punished. Serving the public is a privilege and honor, not an opportunity for personal gain."

The legislation would also require members of Congress and employees to report the purchase, sale or exchange of any stock, bond, or commodities future transaction in excess of $1,000 within 90 days.

Gillibrand's legislation would, in addition to enabling the Securities and Exchange Commission to prosecute cases of insider trading by members of Congress, also make such trading a violation of the House and Senate rules.

Out of 975 federal entities, Congress and the Supreme Court are the only two that have no rules or laws prohibiting them from trading securities based on nonpublic information.

Congressmen can get away with "the type of insider trading that would send Martha Stewart to prison," Craig Holman, government affairs lobbyist for the consumer advocacy organization Public Citizen, told CBSNews.com in June. "They go into hearings and confidential meetings with business interests, understanding new legislation is going to come out next week," and are free to trade on that information.

A report released earlier this year by four universities found that on average, stock portfolios held by House members from 1985 to 2001 beat the market average by approximately 6 percent annually. In 2004, the same group of professors found that the average stock portfolios held by members of the Senate beat the market average by about 10 percent.

Watch the "60 Minutes" report below:

[thowell76]

I just created a petition entitled Congress: To stop the Insider trading by Congress members that receive insider info,, because I care deeply about this very important issue.

I'm trying to collect 100 signatures, and I could really use your help.

To read more about what I'm trying to do and to sign my petition, click here:
http://www.change.org/petitions/congress-to-stop-the-insider-trading-by-congress-members-that-receive-insider-info?share_id=JGWOcqLuCr&

It'll just take a minute!

Once you're done, please ask your friends to sign the petition as well. Grassroots movements succeed because people like you are willing to spread the word!

[GoldTrader]

Congress passed a law making insider trading illegal for the private sector and exempted itself by avoiding prompt reporting requirements. The insider trading loophole, that they give themselves is that they use time to hinder procession and cover things up. The SEC cannot have adequate enforcement without prompt disclosure. People calling for longer disclosure times probably just want more time to cover corrupt activities, and have more time to destroy evidence.

[GoldTrader]

Congress hampers adequate enforcement of the securities laws, by refusing prompt public disclosure. The laws apply, but are unenforceable against elected public officials, because they refuse to disclose information in the time permitted for everybody else. The delayed reporting of securities transactions, defeats, obstructs, and impairs its use as timely evidence. If this STOCK act with long 90 day reporting times passes, it will just confirm what the people already suspect about a double standard for congressional insider trading.

The STOCK act allows congress people to by puts and calls, options and stocks, all day long without reporting anything, as long as each individual trade is under $1,000.00. Self-interested congressional officials do not want to put an end to the lucrative trading opportunities that are made available to them when they receive important nonpublic

[Wbt70]

Ben Franklin's prediction on high compensation in public offices :

"And of what kind are the men that will strive for this profitable preeminenence, through all the bustle of cabal, the heat of contention, the infinite mutual abuse of parties, tearing to pieces the best of characters? It will NOT be the wise and moderate; the lovers of peace and good order, the men fittest for the trust. It will be the bold and the violent, the men of strong passions and indefatigable activity in their selfish pursuits. These will thrust themselves into your government, and be your rulers. And these, too, will be mistaken in the expected happiness of their situations; for their vanquished competitors, of the same spirit, and from the same motives, will perpetually be endeavoring to distress their administration, thwart their measures, and render them odious to the people."

[GChu]

CBS News.com is completely devoid of any journalistic ethics and integrity in giving unfettered access to Craig Holman, a lobbyist for Public Citizen, to hijack the free press and CBS media power with his lying, propagandist diatribe, "the type of insider trading that would send Martha Stewart to prison." Holman exists as a freeloader on public donations to Public Citizen, which parasitically seeks public contributions that are not tax deductible. In contrast to Holman, Martha Stewart embodies jobs and the livelihoods of American families.

Grossly incompetent legal representation "would send Martha Stewart to prison." Holman and CBS News are lying about her "type of insider trading." None of the trumped-up charges related to the legality of her small, personal stock sale, and none pertained to "insider trading" in any shape or form. All of the bogus charges related to the time period AFTER her legal stock sale and AFTER she retained legal counsel. There was never any legal adjudication that she was involved in "insider trading" and had "insider information."

Holman abused and misused his free speech rights in his lying vendetta on Martha Stewart. Quoting, endorsing, and embedding Holman in their reporting was an abuse and misuse of the freedom of the press and media power by CBS News.

[greco99-2009]

It has been widely reported that Gillibrand's husband, a foreign national and 'venture capitalist', engaged in hundreds of leveraged options trades that appear to have benefited from insider bailout information.

And, these trades were also bets against the interests of the American people to boot !

[beachbearblues]

If you believe Congress will do some thing about egregious practices like inside trading, then you believe "PIGS CAN FLY'.

IT IS A SAD TESTIMONY THAT THE VAST MAJORITY OF POLITICIANS, regardless of thier political affiliations, have the country's best interest as a priority.

The McConnells, Pelosis, Reids. Cantors, Boehners, and the other clowns found within Congress and Obama's administration, are all talk and no substance when it comes to remedying our country's ailments.

They love "kicking the can down the road", and thrust their chests out like a rooster, thinking they have accomplished greatness from Super Committees and Congressional Panels of uselessness and hot air...

What will be tragic, is for the vast majority of Americans to sit idle, like "ostriches with their heads in the sand" and just put up with all this political/governmental nonsense. Voting these guys out, only has replaced them with another batch of those we need to get rid of. A repeatative cycle that has to be broken.

So if you ask me, politicians should sign a binding contract with their constituents as to what they promised- should any of them fall short due to lack of due diligence, then the stipulation for their removal is part of that contract. By doing this, the "old guard mentality and political fraternity" atmosphere would be placed in check. And perhaps we could then see a restored trust and confidence in those we elect...

[aliciaAZ111]

I have new respect for CBS for this 60 minutes piece. They pointed out corrupt behavior on both sides. It has a unifying effect. This country is so divided right now and congress relishes it. As long as we're busy pointing fingers at one side or the other, congress as a whole is getting off the hook. I say we gather enmasse with our signs and pitch forks on Capital Hill (and at the headquarters of other news agencies that are ignoring this story - the media is supposed to be the watch dog of government. Has anyone noticed this story barely shows up in Google News? It's an outrage. This story should be front-page for the next month!!)

[HowIsThisSurprising]

Ha! Can't wait to see what loophole Congress will create this time.

The correct way to fix the insider trading law is to simply strike the section that excludes any American.

But you know that's not how this problem will be approached.

Instead, Congress will take the existing law, add verbose language (as only it can, all the while telling outsiders they just don't understand politics) that leaves everything up to subsequent interpretation, and kick yet another can down the road to "really" be addressed well after current members are out of office.

Let's just be thankful for the moment of bipartisanship, however small.

I'm 35 years old, fiscally conservative and socially liberal, yet that incorrectly paints a picture I'm all that far from the middle on both of those. Believe it or not, I'm optimistic about our country, capitalism and democracy, keeping in mind none is truly free. Some restrictions/regulations are needed.

But the pendulum has swung and I fear we're nowhere close to the extreme. The Executive Branch has long been stripped of its power (perhaps THIS is what concerned our founding fathers). Every president now has to turn the keys of the car over to Congress, not to mention then wait years for lawyers to argue in the Judicial Branch whether a policy was constitutional.

Makes me physically ill.

---also, seems to me all-concerns-Occupy would be pretty easily fixed with straight forward campaign finance reform. The other part of the equation, lobbying, could be pretty well tackled by improved / standardized and required public disclosure (online info about government project requests, names of contract companies competing and their bids, and a more detailed accounting of expenses that is consistently disclosed to the public every three months). The current system of "fundraiser" loopholes and bland "accounting disclosures" proves how inefficient the government tracks money. It truly scares me to think how poorly my tax dollars are being spent. I know, I know Pelosi...I just don't understand.

[rhythman]

This is an outrage and Boehner is being totally disingenuous that rules already exist to prevent this. If enforceable rules were in place the practice wouldn't be occuring. And Pelosi appears just as suspicious.

Sen. Gillibrand's bill allows for prosecution by the SEC which is exactly as it should be. Everyone else is subject to prosecution; why should Congress not be?

[greco99-2009]

Gillibrand - one of the major offenders. Her husband, a foreign national, is in the investment business.

NYT ran an article on how he used insider information *and* bet against the US interest during the bailout.

Let's see if her bill covers the conduct that the NYT reported her own husband has been engaging in...