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The STOCK Act, in effect, answers “yes,” at least when the information is used in connection with a securities trade. Under the bill, a Member or employee who trades in securities based on material, nonpublic information will be deemed to have engaged in insider trading if that information “was obtained by reason of such person being a Member or employee of Congress,” regardless of whether any other specific duty of confidentiality may be deemed to exist.
Some argue that this approach is too broad, that it will not only deter improper “insider” trading but could well deter most other, perfectly legitimate, buying and selling of securities by Members and staff, or force them to put their assets in cumbersome blind trusts. To which others may, in reply, offer a resounding chorus of: “So what? If people want to serve the public they should be willing to sacrifice private financial interest.” Yes they should, but to what degree? With super-strictures on their financial decision-making such as those that may be imposed by the STOCK Act, will government service attract the best and the brightest, or even the pretty good and the fairly smart?
Beyond potentially imposing additional insider trading restrictions on Members and staffers, the STOCK Act would subject any person to prosecution for insider trading if done on the basis of material, nonpublic information obtained from a Member or employee of Congress.
It is not hard to imagine the profound chilling effect this could have on the legitimate exchange of information and ideas by Members and staff with individuals of all kinds outside Congress.
Building a more accountable Congress is a goal with which everyone should agree. But, because it is based on a mistaken legal premise, is the STOCK Act the best way to reach that goal?
Robert L. Walker is a lawyer in the election law and government ethics practice at Wiley Rein LLP in Washington, D.C. He is a former chief counsel and staff director of both the Senate and House Ethics committees.