While the STOCK Act has dramatically curtailed overall stock trading activity by U.S. senators, many remain active players in the market and frequently trade in corporations they oversee in their official capacity, a new Public Citizen report shows.
Public Citizen is a non-profit advocacy group.
“This is good news and bad news,” says Craig Holman, government affairs lobbyist for Public Citizen’s Congress Watch division. “With less overall trading activity by Congress, the opportunities for self-dealing have declined. But those who continue playing in the market are often trading in businesses they oversee and, in some cases, have even sponsored legislation that could impact their investments.”
The Stop Trading on Congressional Knowledge Act of 2012 was designed to curtail the use by lawmakers and staff of information not publicly available to trade stocks. A year later, lawmakers repealed a key portion of the law that required disclosure of congressional stock activity.
Public Citizen’s study found that the financial value of stock trades of U.S. Senate members has decreased 66 percent before and after passage of the legislation. Additionally, the number of stock transactions has dropped about 68 percent.
The research comes from a database of stock trading activity by members of the U.S. Senate from 2009 through 2015, three years before and after implementation of the STOCK Act.
“Nevertheless, conflicts of interest remain prevalent among those who continue to be active players in the financial markets,” the report says. “Many senators are trading in businesses their congressional committees oversee, some trade in companies with which they have an ongoing business relationship and others have introduced legislation that could have an immediate and direct impact on the value of their personal stocks.”
“To reduce these conflicts of interest, members of Congress, just like senior executive branch employees, should be required to avoid trading in businesses that they directly oversee in their official capacity,” says Lisa Gilbert, vice president of legislative affairs for Public Citizen.
The report also recommends that Congress reestablish the searchable, sortable and downloadable disclosure regime of congressional trading activity that Congress repealed one year after passage of the STOCK Act. The report also suggests “peeling back the covers that cloak the “political intelligence industry,” specifically Wall Street operatives who roam the halls of Congress in search of valuable information to sell on the stock market.
Public Citizen proposes several reforms to strengthen the STOCK Act. These including banning the trading stocks in businesses that members oversee in their official capacity.
“As it stands today, the STOCK Act still bans congressional insider trading, but only a relatively small group of public officials are required to provide timely disclosure of their stock trading activities and these on-line disclosures are no longer sortable and downloadable,” the report says.
“Questionable and ongoing trading activity by some members of Congress, such as Rep. Chris Collins (R-N.Y.) and former Rep. Tom Price (R-Ga.), have renewed concerns about congressional insider trading,” it alleges. “News accounts have documented several instances of members trading stocks in businesses and industries that they oversee in their official capacity.
In some instances, the report claims, “members have even introduced legislation that could have an impact on the stocks in which they trade.” In other instances, members with potential access to insider information have provided trading tips to family, friends and campaign contributors.
Public Citizen has formally requested that the Securities and Exchange Commission and Office of Congressional Ethics look into the stock trading activity of Rep. Collins and former Rep. Price for possible violations of the insider trading law. The report adds that “U.S. Attorney Preet Bharara was reportedly doing precisely that until he was fired by President Donald Trump.”