Illnifan17 and few others asked whether or not it was already illegal for congressional staff to engage in insider trading?

Good question. Unfortunately under the current House rules the practice is not ILLEGAL.  The reason why we need this specific legislation because currently Securities and Exchange Commission (SEC) does not have the authority to hold congressional staffers liable for engaging in insider trading.   Insider trading is the buying or selling of securities on the basis of material, nonpublic information in violation of a duty of confidentiality  - either to the issuing company or to the source of the information.  Members of Congress and their staff do not owe a duty of confidentiality to Congress, and therefore are not liable for insider trading.  In fact we found in a recent Wall Street Journal article, a former SEC enforcement official was quoted as saying:

"If a Congressman learns that his committee is about to do something that would affect a company, he can go trade on that because he is not obligated to keep that information confidential.... He is not breaching a duty of confidentiality to anybody and therefore would not be liable for insider trading."

Strengthof10kman also posed another poignant question whether the problem is a lack legislation or lack enforcement? The answer is both.

Currently the way things are here in DeLay's House - the House Rules are not enforced & they are rather limited.  The Code of Ethics for Government employees, which was adopted by the House and includes a clause (Clause 8) that  provides:

"Any person in government service should.....never use any information coming to him confidentially in the performance of governmental duties as a means for making private profit."

However, this provision has never really been enforced, and it has not been adopted by the Senate.  Furthermore, it is part of the House Ethics Rules - it is not law, so the practice is not ILLEGAL.  In addition, the House ethics rule has absolutely no impact on the sharing of this information with outside political intelligence firms for trading decisions.

Our bill again will criminalize this kind of insider trading.  The Hill, which is a daily newspaper covering day to day congressional affairs on Capitol Hill ran this story on our legislation legislation:

Among the new disclosure requirements that lawmakers are considering imposing on K Street is one to record, for the first time, the political-intelligence work firms do to supplement lobbying revenues.

Political intelligence refers to advice and tips lobbyists provide Wall Street clients about market-moving legislation.

To Democratic Reps. Louise Slaughter (N.Y.) and Brian Baird (Wash.), the practice smacks of a legal version of insider trading, whereby lawmakers and their staffs, and by extension lobbyists, are able to trade on their access to information in order to turn a profit.

Here are summaries of some of the key provisions of HR 5015 including the one covering disclosure requirements imposed on political intelligence firms mentioned in the Hill Article.

Prohibiting Misuse of Nonpublic Information - Under this legislation, the Securities Exchange Commission and the Commodity Futures Trading Commission are directed to issue two rules to prevent nonpublic congressional information from being used improperly for financial gain:

1) The first rule prohibits Members or employees of Congress from buying or selling stocks, bonds, or commodities futures based on nonpublic information they obtain with their status;

2) The second rule prohibits Members, employees, or persons with nonpublic information from disclosing information about any pending or prospective legislative action if they believe that information will be used to buy or sell stocks, bonds, or commodities futures.

Requiring Additional Disclosure - The bill also amends the Ethics in Government Act to require Members of Congress and employees who are subject to current financial disclosure rules to report the purchase, sale, or exchange of any stock, bond, or commodities future transaction in excess of $1,000 within 30 days.  Members and employees who chose to place their stock holding in blind trusts or mutual funds are exempt from this reporting requirement.  Members of Congress and employees are currently required to report these transactions once a year.

Registration of Political Intelligence Firms - The STOCK Act requires Political Intelligence Firms to register with the Clerk of the House of Representatives and the Secretary of the Senate.  Firms specializing in "political intelligence", track congressional activity for information that will impact industries and the financial markets.  However, if these firms are provided with nonpublic information then their clients are given an unfair advantage in the marketplace.  This inside-the-beltway insider trading undermines investor confidence in the fairness and integrity of the securities market.  HR 5015 requires firms specializing in "political intelligence" gathering and obtaining their information directly from a Member or employee of Congress to register with the House and Senate, much like lobbying firms are now required to do.

Thanks again for all the feedback to my last post. As you can see - we are reading all of your questions and comments. They keep us energized and keep us constantly thinking about how we can fight more effectively on your behalf here in the People's House.  - LMS