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STOCK Act’s Pace Worries Experts

Differences between the Senate and House versions of legislation banning insider trading by Members and staff have experts worried about what provisions will make the final cut as the two chambers rush to pass the bill and claim the ethical high ground.

The Senate-passed legislation contained provisions dealing with “political intelligence-gathering activities” and the prosecution of public corruption that were absent from the version House Republican leaders released late Tuesday evening.

The two provisions have become sticking points in a largely bipartisan push to curb insider trading on the Hill, with lawmakers criticizing both House Majority Leader Eric Cantor’s (R-Va.) decision to remove the language and the wording of the provisions passed by the Senate.

The political intelligence “provision was extremely broad, and its impact would have raised more questions than it answered,” Cantor spokesman Brad Dayspring said.

But even some Republicans disagreed. “It’s astonishing and extremely disappointing that the House would fulfill Wall Street’s wishes by killing this provision … why not propose a solution instead of scrapping the provision altogether?” asked Sen. Chuck Grassley (R-Iowa), who proposed the political intelligence language in the Senate’s bill.

“I urge my colleagues to … reinsert language to regulate a growing K Street industry and make the STOCK Act as strong as it was when I first introduced it six years ago,” Rep. Louise Slaughter
(D-N.Y.), a co-sponsor of the original bill, said Wednesday on the House floor.

For years, Slaughter’s STOCK Act languished until a “60 Minutes” episode aired Nov. 13 that highlighted alleged instances in which Members used knowledge about legislative activity to make profitable trades. The broadcast prompted a flurry of Congressional support for the effort — within weeks, almost 100 Members had signed onto the bill and a version was introduced in the Senate.

Now, experts are worried that the speed with which the camps are working to resolve the differences between the two versions of the legislation could result in language that goes beyond the intent of the original bill.

“It remains my view that insider trading prohibitions have always applied to legislative and executive branch officials. The reasoning proffered for the STOCK Act is that it affirms that those provisions apply. To the extent that this is all the bill would be, fine. But I think it goes beyond that,” said Robert Walker of the law firm Wiley Rein.

The original language of the Senate bill — as well as the version released by the House — sought a yearlong study about the sale of political intelligence, how it is used by investors and what effect it has on the financial markets. But the Senate amendment offered by Grassley would require those who provide political intelligence for the “use in analyzing securities or commodities, markets or informing investment decisions” to register under the Lobbying Disclosure Act of 1995. That would have unintended consequences, experts told Roll Call.

It’s “grafting a whole new category onto the existing Lobbying Disclosure Act — it’s broad, vague and problematic,” Walker said.

The American League of Lobbyists, though critical of the language in the Senate bill, also blasted Cantor’s decision to remove the provision entirely.

“While that language was seriously flawed by vagueness and given little opportunity for thoughtful consideration, the language did deal with a gaping loophole in the [Lobbying Disclosure Act] that allows thousands of others to lobby but avoid registering as lobbyists,” the group said in a statement.

Another section in the Senate version called the Public Corruption Prosecution Improvements Act is intended to clarify the definition of “official act” and the crime of accepting illegal gratuities in existing public corruption statutes.

Though that provision has been stripped from the House version, experts say its inclusion in final legislation would run counter to a series of recent legal decisions, creating ambiguities in the law as courts attempt to sort out its intended effect.

“I wouldn’t call it the STOCK Act anymore, I’d call it the ‘Omnibus Crime Act,’” Stan Brand of the Brand Law Group said of the language.

An amendment in the House version that would prohibit Members of Congress from participating in initial public offerings to which they had received special access proved to be a less controversial change. Though it was dubbed the “Pelosi provision” after “60 Minutes” highlighted House Minority Leader Nancy Pelosi’s participation in Visa Inc.’s initial public offering, the California Democrat said the reform effort should move forward and differences should be worked out after the House votes.

“Leader Cantor has put roadblock after roadblock up to slow this bill down, and it is now clear that the only way to heed the President’s call is to pass Cantor’s bill so we can get a conference committee where Democrats will strengthen the final legislation,” Pelosi spokesman Drew Hammill said in a statement.

Democrats also assailed Cantor for redrafting the bill in secret.

Jonathan Strong contributed to this report.

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