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The STOCK Act in Plain Language

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The STOCK Act, recently enacted to address allegations in a 60 Minutes report on Congressional insider trading, isn't the easiest bill in the world to read. So I boiled it down to a somewhat-more plain language summary. While not perfect, this synopsis should help translate the bill into a somewhat more digestible form.

 

Plain Language Summary of the STOCK Act Signed into Law April 4, 2012

Section 1: Short Title

It’s called the STOCK Act

Section 2: Definitions

“Member of Congress” includes Representatives, Senators, Delegates, and the Resident Commissioner (Puerto Rico)

“Employee of Congress” includes anyone whose funding is disbursed by the Secretary of the Senate, Chief Administrative Office of the House, and (generally speaking) officers/employees of the legislative branch support agencies

“Executive Branch Employee” includes the President; Vice President; people who are subject to the supervision of executive branch employees; people who engage in a Federal function; and civil servants who are appointed by the President, Vice President, a member of the uniformed service, the head of a Government controlled corporation, or a person who counts as an “employee.”

“Judicial Officer” means Supreme Court justices, federal court of appeals and district court judges, and any court created by an Act of Congress so long as the judges can hold office during good behavior

“Judicial employee” means any employee of the judicial branch of government (or several similar courts) that performs adjudicatory functions or earns more than 120% of GS-15 pay

The “Supervising Ethics Offices” are the Senate Ethics Committee, the House Ethics Committee, the Judicial Conference, and the Office of Government Ethics

Section 3: Prohibition of the Use of Nonpublic Information for Private Profit

The House and Senate Ethics Committees shall issue guidance clarifying that Members of Congress and staff may not use nonpublic information derived from their position to make private profits.

Section 4: Prohibition on Insider Trading

Provision affirms that Members of Congress and staff are subject to securities law insider-trading provisions. Affirms the existence of a duty of trust and confidence.

Section 5: Confirming Changes to the Commodity Exchange Act

Writes Congress into the securities laws.

Section 6: Prompt Reporting of Financial Transactions

Requires the following people to file a “financial transaction report” within 30-45 days: President, Vice President, executive branch officers and employees who are above a GS-15 (or earn 120%+ above GS-15 pay), certain members of uniformed service, administrative law judges, certain executive branch senior advisors (subject to determination of OGE), postal officials, director of OGE, each agency’s designated ethics official, civilian employees in the EOP who hold a commission or appointment from the president, members of congress and their staff.

This provision goes into effect 90 days after enactment.

Section 7: Report on Political Intelligence Activities

Directs CBO and CRS to submit a report on the role of political intelligence in financial markets to several congressional committees within 12 months.

Political intelligence is narrowly defined as “derived by a person from direct communications” with a federal employee “in exchange for financial compensation.”

Section 8: Public Filing and Disclosure of Financial Disclosure Forms of Members of Congress and Congressional Staff

(a) Public, Online Disclosure of Financial Disclosure Forms

By July 3th (90 days after enactment), Secretary of Senate and Clerk of the House will start publishing Congressional Member and staff financial disclosure forms on the Senate and House websites within 30 days of each report being filed. This provision expires when the House and Senate establish a public disclosure system.

(b) Electronic Filing and Online Public Availability of Financial Disclosure Forms of Members of Congress, Officers of the House and Senate, and Congressional Staff

Within 18 months of enactment (October 18, 2013), Secretary of the Senate & Sergeant At Arms of the Senate and Clerk of the House shall develop systems that enable

  • Electronic filings of reports
  • Public access to financial disclosure reports
  • Public access to transaction disclosure reports
  • Public access to notices of extensions, amendments, and blind trusts
All of these materials shall be maintained through official House and Senate databases that allow the public to search, sort, and download data contained in the reports. No login is necessary to search or sort the data, but a login with the name of the user shall be used to download the data contained in the reports.

People required to file financial disclosure reports with the Secretary of the Senate or Clerk of the House must file financial disclosures electronically using this system.

Notices of extensions for a financial disclosure filing must be available electronically, along with its related disclosure.

Additional time may be granted to implement this system if Congress is notified of the reasons for the extension.

Reports will be retained for 6 years after receipt of the report for everyone except Members of Congress; filings from Member of Congress shall be retained for 6 years after the date the individual ceases to serve in Congress. Afterward, reports will be destroyed unless there is an ongoing investigation. Some reports may be destroyed after 1 year for: people nominated but not confirmed by the Senate, people not elected to office, people no longer a candidate for President, Vice President, or Congress.

Section 9: Other Federal Officials

OGE shall issue guidance for executive branch employees regarding the prohibition on using nonpublic information derived from one’s government job to make a private profit.

The Judicial Conference shall issue guidance for federal judges and judicial employees regarding the prohibition of use of nonpublic information derived from a government job to make a private profit.

Securities and Exchange Act insider trading laws apply to executive branch employees and members of the judicial branch. An affirmative duty exists.

Section 10: Rule of Construction

Other federal laws are unaffected by this law.

Section 11: Executive Branch Reporting

(a) Executive Branch Reporting

By July 3rd (90 days after enactment), the President shall ensure all financial disclosure forms are available to the public on the official websites of the respective executive branch agencies within 30 days of filing, along with notices of extensions for filing. This provision expires when a new public disclosure system is established.

(b) Electronic Filing and Online Publication Availability of Financial Disclosure Forms of Certain Executive Branch Employees

Within 18 months (October 13, 2013), the President (through the OGE) shall develop systems that enable

  • Electronic filings of reports
  • Public access to financial disclosure reports
  • Public access to transaction disclosure reports
  • Public access to notices of extensions, amendments, and blind trusts
All of these materials shall be maintained by OGE in databases that allow the public to search, sort, and download data contained in the reports. No login is necessary to search or sort the data, but a login with the name of the user shall be used to download the data contained in the reports.

People are required to file financial disclosure reports with their supervising ethics officer.

Notices of extensions for financial disclosure must be available electronically, along with its related disclosure.

Additional time may be granted to implement this system if the OGE Director notifies Congress.

Section 12: Participation in Initial Public Offerings

The following people may not purchase IPO securities except through offers to members of the general public: President, VP, officer or employee of the executive branch (GS-15 and above), administrative law judges, executive branch policymaking employees (unless excepted by OGE), high-level postal employees, OGE Director and designed agency officials, EOP appointees, Members of Congress or their staff, judicial officers and employees.

Section 13: Requiring Mortgage Disclosure

Mortgages for personal residential real property must be disclosed in certain circumstances. (This is incredibly complicated to parse.)

Section 14: Transaction Reporting Requirements

Transaction reporting requirements don’t apply to widely held investment funds when the fund is publicly traded, its assets are diversified, and the person who must report does not exert executive control over the financial interests held by the fund.

Section 15: Application to Other Elected Officials and Criminal Offenses

Criminal offenses will not negate the retirement or pension money accrued for the President, Vice President, or elected State or local officials.

Adds or modifies a lengthy series of criminal offenses.

Section 16: Limitation on Bonuses to Executives of Fannie Mae or Freddie Mac

Senior executives at Fannie Mae and Freddie Mac cannot receive bonuses during any period of conservatorship for those entities

Section 17: Post-Employment Negotiation Restrictions

Executive and judicial branch individuals may not directly negotiate or have any agreement of future employment or compensation unless they file a statement with a supervising ethics official within 3 days of the commencement or agreement of future employment or compensation. That statement must include the name of the private entities involved and the date negotiations commenced. (Note: this does not appear to be an affirmatively disclosed filing.)

A person filing a statement must recuse him/herself whenever a conflict of interest (or appearance of a conflict) arises, and must notify the supervising ethics office of the recusal. Along with the notice, that person must also submit the previously filed statement. (Note: this does not appear to be an affirmatively disclosed filing, either.)

Section 18: Wrongfully Influencing Private Entities Employment Decisions by Legislative and Executive Branch Officers and Employees

Expands criminal sanctions for when “covered government employees” interfere with employment decisions of private entities on the basis of political affiliation by threatening to withhold an official act or influences the official act of another. In addition to including Members of Congress and the staff, the term “covered government employee” also includes the President, Vice President, and executive branch employees.

Section 19: Miscellaneous Conforming Amendments

(a) Repeal of Transmission of Copies of Member and Candidate Reports to State Election Officials Upon Adoption of New Systems

If a report is electronically filed and is accessible to the public, it no longer needs to be transmitted in paper format.

(b) Period of Retention of Financial Disclosure Statements of Members of the House

Requires the Clerk of the House to maintain Member of Congress information posted on the Clerk public internet site until the end of 6 years after the Member no longer serves in Congress.