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STOCK Act Update


As the STOCK Act keeps marching through the Senate, on the heels of a State of the Union push from the President, and after a CBS news expose ignited interest in a longstanding proposal from Rep. Slaughter in the House, that Sunlight has supported.

We've been very involved in reviewing and suggesting changes to the draft bills, and here's a summary of our advice:

  1. First, Sunlight is very supportive of the STOCK Act. This fall's expose made a convincing case that insider trading is a real problem, and that Members sometimes put personal financial profit over their official responsibilities.

  2. Perhaps even more significant is the threat to public confidence in government posed by this phenomenon -- the public loathes insider trading, especially from Members of Congress.

  3. Whether insider trading was technically illegal, recent hearings have made clear that no one was capable (or willing) to fully oversee the issue.

  4. The Personal Financial Disclosure system, resulting from the post-Watergate 1978 Ethics in Government Act, is long, long overdue for serious examination and oversight. It may be the envy of much of the rest of the world, and serves as a model for accountable disclosure in other governments, but still suffers from a sort of inter-branch detente, where no one wants to legislatively reopen the complex issues involved in requiring personal finances to be disclosed. If the US is to lead on accountability systems, we should lead on maintaining and strengthening them, too. GAO and others should review the pfd system more broadly, and outside the narrow view of an insider trading scandal.(More on this from GAO to come soon.)

On to the bill text

  1. We had significant concerns about earlier drafts of the bill, since overbroad language ran the risk of criminalizing leaks. Those concerns have been dealt with in more recent drafts. Either the Rules changing language has been watered down and turned into a requirement that the Ethics committee create appropriate prohibitions, or the language has been modified by adding "intent" to the kind of information sharing that is prohibited. In either case, sharing information is very unlikely to get accidentally criminalized.

  2. On enforcing information sharing restrictions, though, the later drafts have significantly weakened the text of the bill, where "personal gain" is a pretty narrow standard, and the Ethics committee is unlikely to be the most reliable source of strong public interest standards. There's a difficult balance to strike here, between Speech or Debate clause issues (where the Executive is Constitutionally barred from meddling in inherently legislative tasks) and potential unintended consequences, the bill's enforcement mechanisms are tricky.  We have a strong preference towards Rules changes over executive branch enforcement, but have little experience in financial investigations, so have little advice on crafting the final shape of the mechanisms.

  3. Sunlight has been pushing for stronger disclosure of both the a) personal financial disclosure forms and b) the new financial transaction reports (to be reported when Members move their money). Both categories of information should be required to be public, should be shared as soon as they are filed, and should be filed electronically.  Additionally, we have detailed advice about how such electronic filings systems should be designed, to capture as much information as possible, and to add useful structured data at the time of information collection. (Daniel will have more on this topic soon.)  The information should be available in bulk, and no login should be required at all to dowload the data.  (That's a ridiculous requirement contained in the most recent Senate draft.)

  4. None of these forms should be destroyed after 6 years. The House and Senate can afford to preserve a two foot tall stack of paper (in the worst case), and can certainly afford to make a digital copy of information perpetually available, especially when it's as politically and historically significant as these disclosures will be.  This information should be maintained online in perpituity, and also regularly transferred to NARA's Center for Legislative Archives for safekeeping.

  5. Sunlight supported the LDA reforms aimed at political intelligence firms, and also understands why the recent drafts suggest a GAO report on their function -- they're somewhat poorly understood.  For our thoughts on elite, commercial services that republish congressional information, see this post. The key point: insofar as these services are worth the price of admission, they reinforce disparities in privilege and access.

Those are our main points on the STOCK Act.  We've got other technical corrections and suggestions, and would be happy to talk to anyone looking for help or thoughts as the legislation moves. We're also happy to see this one piece of legislation pulling along other important reform issues that have languished -- from e-filing in the Senate (more on that soon) to honest services, and even a 72 hour rule in the Senate (where did that come from, Senator Coburn?). Maybe the Senate should have an open amendment process on a reform oriented bill once a quarter.

Update: There's one more provision we've strongly opposed that I should make note of: there's no justification for requiring logins in order to access dowloads of Senate data, as the latest draft requires.  That provision should be removed.  It's wasteful, and discourages reuse. If can offer bulk downloads with no login requirement, so can the US Senate.