Senate OKs insider trading curbs on lawmakers

Reuters News
Posted: Feb 02, 2012 7:23 PM
Senate OKs insider trading curbs on lawmakers

By David Lawder

WASHINGTON (Reuters) - The Senate on Thursday approved new curbs aimed at preventing lawmakers from trading shares based on inside information, but also extended the bill's disclosure requirements to more than 300,000 other federal employees.

The Senate voted 96-3 to pass the Stop Trading on Congressional Knowledge (STOCK) Act, which would require members of Congress to file electronic disclosures of their stock trades within 30 days of the transactions.

As a rare piece of legislation with strong bipartisan support in a deeply divided Congress - and the promise of a quick signature by President Barack Obama - the measure was quickly laden with more than 20 amendments this week.

Senators who saw the "clean government bill" as a vehicle bound for quick passage sought to attach proposals ranging from a ban on executive bonuses at Fannie Mae and Freddie Mac to a limit on terms for members of Congress.

Similar legislation is pending in the Republican-led House of Representatives, and a spokeswoman for Majority Leader Eric Cantor has said he plans to bring it to a vote this month.

After years of languishing, the disclosure bill has gained momentum at a time when voters are fed up with Congress. Opinion polls in recent months have pointed to public approval ratings for Congress hovering around 10 percent.

A November broadcast on CBS' "60 Minutes" about members of Congress trading stock based on inside information they received because of their positions drew national attention to the issue.

"We need to reassure a skeptical public that we understand elective office is a place for public service, not for private gain," said Republican Senator Susan Collins.

Obama, in his state of the Union address last week, asked Congress for swift passage of a bill banning insider trading by lawmakers. "So I am pleased the Senate took bipartisan action to pass the STOCK Act," Obama said in a statement after Thursday's vote, calling it an important step to rebuild trust.

"I urge the House of Representatives to pass this bill, and I will sign it right away," Obama said.

The Senate went one step further, passing the bill with an amendment that imposes the same stock trading disclosure requirements on employees of Executive Branch and independent government regulatory agencies.


Many Executive Branch employees are already subject to stringent financial disclosure rules and are sometimes required to divest holdings or put them into blind trusts they cannot control. But Republican Senator Richard Shelby was keen to put administration officials under the same scrutiny as Congress.

"What is good for the goose, it seems to me, should be good for the gander," said Shelby. "It only seems fair that executive branch officials who are already required to file annual financial reports, also be directed to meet the same additional reporting requirements being imposed on the legislative branch."

Independent Senator Joe Lieberman argued against this, saying it would put a costly and undue burden on more than 300,000 government workers, including secretaries and drivers. He offered an alternative to limit the disclosures to about 2,000 top-level officials.

"We're asking agencies to stretch personnel and resources to fulfill a totally new requirement when in fact we want them save money - not figure out ways to spend more money," Lieberman said.

Senators rejected a Democratic proposal that would have required lawmakers to sell shares in companies which could benefit from votes they might make - a requirement that many Executive Branch officials must abide by to avoid the risk of a conflict of interest.

The bonus ban for government-controlled Fannie and Freddie was also approved on a voice vote. The housing finance giants stirred controversy by announcing large bonuses for executives despite needing tens of billions of dollars in taxpayer bailout funds.

Also surviving the vote was a proposal by Republican Senator Charles Grassley to require professionals who gather "political intelligence" and sell this information to hedge funds and other investors for profit be registered like lobbyists.

The White House-backed bill would also explicitly give the Securities and Exchange Commission more clout in going after members of Congress who use non-public information to buy or sell shares in companies.

(Additional reporting by Thomas Ferraro; Editing by Todd Eastham)