President Obama signed into law today the Stop Trading on Congressional Knowledge Act of 2012 or the STOCK Act. The STOCK Act bans insider trading by members of Congress and their staff as well as various other executive branch and judicial branch employees.
The STOCK Act also amends the Ethics in Government Act of 1978 to require a government-wide shift to electronic reporting and on-line availability of public financial disclosure information. In addition, members of Congress and covered governmental employees must report certain investment transactions within 45 days after a trade. Members of the public will be able to search this electronic database.
There are also various other elements of the STOCK Act related to ethics, including:
- required disclosure of personal mortgages for members of Congress and certain other high level governmental officials;
- limitation on members of Congress and other high level governmental officials that they only may participate in IPOs that are available to the general public at large;
- expanded pension forfeiture for members of Congress who commit acts of corruption while elected; and
- required notification for members of Congress and other high level governmental officials with their ethics office when starting a job negotiation to leave the government.
The STOCK Act also requires the GAO and CRS to produce a report on the role of political intelligence firms in the financial markets.
While the STOCK Act passed Congress with bi-partisan support, some commentators believe the final product was watered-down because it omitted a provision that would have regulated so called “political intelligence” or the practice of gathering information by lawmakers and Capitol Hill aides that could be used to make investment decisions.