Reps. Walz, Slaughter, and Duncan Introduce Bipartisan Legislation to Expand STOCK Act, Bring Transparency to Political Intelligence Industry
Bill Would Ensure Political Intelligence Professionals Are Held to Same Standard as Lobbyists, Includes Media Exemption
GAO Agrees: Transparency Measures Would Assist Insider Trading Investigations
WASHINGTON – Today, Representatives Louise M. Slaughter (D-NY), John J. Duncan (R-TN), and Tim Walz (D-MN) introduced bipartisan legislation to expand the 2012 Stop Trading On Congressional Knowledge (STOCK) Act to bring transparency to the political intelligence industry. The political intelligence industry, which generates $400 million in annual profits by gleaning information from the halls of government and selling it to Wall Street to inform investment decisions, still operates with little scrutiny despite its powerful impact on financial decision-making. The bill – titled the Political Intelligence Transparency Act – would subject those who engage in political intelligence to the same regulations and requirements as lobbyists. These include: registration with the House and Senate under the Lobbying Disclosure Act and revolving door restrictions for Members of Congress, executive branch officials, and their staff and employees. Just like in the Lobbying Disclosure Act, the Political Intelligence Transparency Act carves out a clearly defined exemption for members of the media to collect and disseminate information from government sources.
The original STOCK Act contained requirements for disclosure and oversight of the political intelligence industry. These provisions were cosponsored in the House by 188 Democrats and 99 Republicans, and were passed by the Senate by a 96-3 margin. However, on the way to passage in the House, these political intelligence requirements were stripped from the bill by former Majority Leader Eric Cantor. Despite the bill sponsors’ best efforts, the STOCK Act was passed into law without political intelligence provisions.
“This bill will bring the political intelligence industry out of the shadows and make our democracy more transparent and accountable,” Rep. Walz said. “It’s just plain common sense to have these folks register the same as a lobbyist would. I urge my colleagues to support this bipartisan legislation. Let’s work together to reform the way Washington works and in the process, hopefully restore the American people’s faith in their democracy.”
“This legislation will shine a light on the political intelligence industry, which has operated in the shadows of Washington for far too long,” Rep. Slaughter said. “Our constituents did not send us to Congress so we could be a whisper gallery for Wall Street. These disclosure and transparency provisions will help hold Washington and Wall Street accountable by ensuring that Members of Congress, their staff, and executive branch officials can identify political intelligence operatives who use information not available to the public for monetary gain. Political intelligence provisions in the original STOCK Act enjoyed widespread bipartisan support – I hope to find that same support for this legislation.”
“I have a long history of supporting legislation that brings transparency to government under both Democratic and Republican Presidents and Congresses, including my Presidential library donor disclosure bill,” Rep. Duncan said. “Several years ago, I teamed with Rep. Slaughter on a bill to protect students from credit card debt, and I am happy to be working with her again. This should be a non-partisan issue. I don’t see how anyone could argue that political intelligence activity should be allowed to continue behind closed doors to the benefit of only a very few elites.”
A 2013 GAO report said that disclosure of political intelligence activities could help regulators conduct more thorough investigations of insider trading. Had these provisions passed in the original STOCK Act, they could have helped agencies with the investigation of an incident last year that is still working its way through the legal system.
In 2013, a former Capitol Hill staffer employed by a lobbying firm relayed information on a market-moving policy change regarding Medicare Advantage to a political intelligence firm called Height Securities. After Height Securities reported this information to select investors at 3:42 p.m. on April 1, 2013, shares in several big health insurers rose as much as 6% -- over $660 million -- between the time of Height Securities’ prediction and when markets closed at 4:00 p.m. The change in policy was not officially announced until after markets closed that day. According to the Wall Street Journal, “volume for those companies in those final minutes was higher than the rest of the trading day put together. The government announced its change in policy about 35 minutes after the emailed scoop…shares continued to rise after the opening bell the next day.”
Federal investigators with the Securities and Exchange Commission and the Department of Justice have allegedly traced the leaked information back to the House Ways and Means Committee and have issued subpoenas for documents and testimony. The rarity of an insider trading subpoena from a federal agency to a congressional committee and staff members underscores the gravity of the accusations; it has been nearly a decade since the last formal requests for information on behalf of a federal insider-trading investigation were sent to Congress. Attorneys for the House of Representatives originally sought immunity for the accused staffer, and upon being denied, have refused to comply with the subpoena. A federal judge in New York is set to rule on whether the committee must comply with the subpoena. According to reports, the federal probe has grown considerably and now targets over 44 financial institutions, including hedge funds.