[Senate Report 112-244]
[From the U.S. Government Publishing Office]
112th Congress } { Report
2d Session } SENATE { 112-244
_______________________________________________________________________
STOCK ACT
__________
R E P O R T
of the
COMMITTEE ON HOMELAND SECURITY AND
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
to accompany
S. 2038
TO PROHIBIT MEMBERS OF CONGRESS AND EMPLOYEES OF CONGRESS FROM USING
NONPUBLIC INFORMATION DERIVED FROM THEIR OFFICIAL POSITIONS FOR
PERSONAL BENEFIT, AND FOR OTHER PURPOSES
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
December 3, 2012.--Ordered to be printed
-----
U.S. GOVERNMENT PRINTING OFFICE
29-010 PDF WASHINGTON : 2012
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Washington, DC 20402-0001
COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii TOM COBURN, Oklahoma
THOMAS R. CARPER, Delaware SCOTT P. BROWN, Massachusetts
MARK L. PRYOR, Arkansas JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana RON JOHNSON, Wisconsin
CLAIRE McCASKILL, Missouri ROB PORTMAN, Ohio
JON TESTER, Montana RAND PAUL, Kentucky
MARK BEGICH, Alaska JERRY MORAN, Kansas
Michael L. Alexander, Staff Director
Beth M. Grossman, Deputy Staff Director and Chief Counsel
Lawrence B. Novey, Associate Staff Director and Chief Counsel for
Governmental Affairs
Troy Cribb, Senior Counsel
Jonathan Kraden, Counsel
Nicholas A. Rossi, Minority Staff Director
Mark B. LeDuc, Minority General Counsel
Lorinda B. Harris, Minority Counsel
John A. Kane, Minority Professional Staff Member
Trina Driessnack Tyrer, Chief Clerk
112th Congress } { Report
2d Session } SENATE { 112-244
=======================================================================
STOCK ACT
_______
December 3, 2012.--Ordered to be printed
_______
Mr. Lieberman, from the Committee on Homeland Security and Governmental
Affairs, submitted the following
R E P O R T
[To accompany S. 2038]
The Committee on Homeland Security and Governmental
Affairs, having considered an original bill (S. 2038) to
prohibit Members of Congress and employees of Congress from
using nonpublic information derived from their official
positions for personal benefit, and for other purposes, having
considered the same, reports favorably thereon and recommends
that the bill do pass.
CONTENTS
Page
I. Purpose and Summary..............................................1
II. Background and Need for the Legislation..........................1
III. Legislative History.............................................10
IV. Section-by-Section Summary of the Bill..........................11
V. Evaluation of Regulatory Impact.................................14
VI. Congressional Budget Office Cost Estimate.......................14
VII. Changes in Existing Law Made by the Bill, as Reported...........15
I. Purpose and Summary
The Stop Trading on Congressional Knowledge Act of 2012
(STOCK Act), S. 2038, responds to concerns that Members of
Congress and their staff may be exempt from laws prohibiting
persons from engaging in financial transactions based on so-
called insider information. It amends securities and
commodities laws to make clear that Members and staff are not
so exempt, and it amends financial disclosure laws to ensure
that Members and their staffs more quickly and transparently
report their financial transactions.
II. Background and Need for the Legislation
During the ordinary course of their work, Members of
Congress and congressional staff sometimes come into possession
of nonpublic information about matters that could affect the
value of stocks, commodities, or other financial instruments.
Several observers have recently suggested that some Members of
Congress and their staffs have profited by using such ``insider
information'' to make timely investments.\1\
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\1\See, e.g., Brody Mullins et al., Congress Staffers Gain from
Trading in Stocks, Wall St. J., Oct. 11, 2010; Peter Schweizer, Throw
Them All Out (2011); 60 Minutes: Insiders (CBS television broadcast,
Nov. 13, 2011).
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Two studies of the investments of Members of Congress
reached different conclusions about whether the performance of
those investments suggests that Members have traded in
financial markets on the basis of nonpublic information. One
study, conducted in 2004 by Dr. Alan Ziobrowski, a Professor at
the Robinson College of Business at Georgia State University,
found what he termed ``abnormal returns'' in the individual
stock transactions of some Senators over the period of 1993 to
1998.\2\ Analyzing the purchases and sales of Senators who
reported transactions on their annual financial disclosure
reports over that period, Dr. Ziobrowski reported that the
investments of those Senators outperformed the market by nearly
1% per month.\3\ The data underlying the Ziobrowski study,
though, show that a minority of Senators were buying or selling
individual stocks in a given year (ranging from 25 to 38
Senators in each of the years studied) and that just four
Senators collectively accounted for nearly half of all the
transactions in the sample.\4\
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\2\Alan J. Ziobrowski et al., Abnormal Returns from the Common
Stock Investments of the U.S. Senate, 39 J. Fin. & Quantitative
Analysis 661 (2004) (``Ziobrowski study''). In testimony before
Congress, Dr. Ziobrowski explained that the ``abnormal returns'' he
found in his study were the difference in profits earned by Members of
Congress and profits earned by the market as a whole. Statement of Alan
J. Ziobrowski before the Subcommittee on Oversight and Investigations,
House Committee on Financial Services (July 13, 2009), p. 3.
\3\Ziobrowski study, p. 15.
\4\Id. at 6.
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A 2011 study analyzing the stock portfolios of Members of
Congress reached a different conclusion than the Ziobrowski
study. Andrew Eggers of the London School of Economics and Jens
Hainmueller of the Massachusetts Institute of Technology found
that, between 2004 and 2008, the average investor in Congress
underperformed the market by 2-3% annually.\5\ Eggers and
Hainmueller reconstructed the daily holdings of the 422 Members
of the House and Senate who reported owning U.S. stocks in this
period. The authors concluded that ``the evidence for
congressional `insider trading' is in fact surprisingly
weak''\6\ and found Members of Congress, overall, to be
``rather poor investors.''\7\ The authors posited that ``the
most likely explanation for the poor performance of members of
Congress is that they are simply not that different from other
investors.''\8\
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\5\Andrew Eggers and Jens Hainmueller, Capitol Losses: The Mediocre
Performance of Congressional Stock Portfolios, 2004-2008 (December 2,
2011), http://www.mit.edu/jhainm/Paper/Eggmueller_CapitolLosses.pdf.
\6\Id. at 2.
\7\Id. at 3.
\8\Id. at 22.
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These studies, yielding different results, do not provide a
definitive answer about Members' investing behavior. The
Committee nonetheless concluded that it is of the utmost
importance for the American people to have full confidence that
all Members of Congress act to serve the American people rather
than their own financial interests. It therefore reported S.
2038 to establish a clear policy that insider trading will not
be tolerated within the halls of Congress, and to ensure that
any instances of insider trading by Members or their staff will
be subject to the same civil and criminal laws that apply to
everyone else.
Insider trading
There is no statute that specifically prohibits insider
trading--by Congress or anyone else. Rather, the law governing
insider trading is based on many years of court decisions
interpreting section 10(b) of the Securities Exchange Act of
1934 (``Exchange Act''),\9\ which grants the Securities and
Exchange Commission (SEC) broad authority to prohibit
``manipulative and deceptive devices'' in connection with the
purchase or sale of securities, and the associated SEC Rule
10b-5,\10\ which broadly prohibits fraud and deception in
connection with the purchase or sale of securities.
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\9\15 U.S.C. Sec. 78j(b).
\10\17 C.F.R. 240.10b-5.
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Under the relevant court decisions, it is a violation of
section 10(b) of the Exchange Act and Rule 10b-5 to trade
securities on the basis of material, nonpublic information in
violation of a fiduciary or other similar relationship of trust
or confidence--a duty that is owed either to the corporation's
shareholders (the ``classical theory'' of insider trading
liability) or to the source of the information (the
``misappropriation theory'').
The archetypical example of the classical theory of insider
trading liability is the corporate insider who buys or sells
shares of the company he works for based on material nonpublic
information obtained on the job. The Supreme Court explained in
Chiarella v. United States that trading on such information
violates Rule 10b-5 because ``a relationship of trust and
confidence [exists] between the shareholders of a corporation
and those insiders who have obtained confidential information
by reason of their position with that corporation.''\11\ The
classical theory applies to corporate insiders--officers,
directors and employees of a corporation--as well as to
``temporary'' insiders such as attorneys, accountants and
consultants to a corporation.\12\ Rule 10b-5 also reaches those
who ``tip'' material, nonpublic information to others who
trade, as well as ``tippees'' who trade on such
information.\13\
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\11\445 U.S. 222, 228 (1980).
\12\Dirks v. SEC, 463 U.S. 646, 655 n.14 (1983).
\13\Dirks v. SEC, 463 U.S. at 660-62.
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The misappropriation theory--the one more likely to be
applied in a case of insider trading by a Member of Congress--
was first accepted by the Supreme Court in 1997, in the case of
United States vs. O'Hagan.\14\ In that case, the defendant was
a lawyer at a firm that represented the offeror in a tender
offer for the Pillsbury company. The SEC alleged that the
defendant learned of the upcoming tender offer from another
lawyer at the firm and bought shares in Pillsbury before the
offer was announced. Although the defendant did not have a
fiduciary or other duty to the shareholders of Pillsbury--as
would be traditionally required under the classical theory of
insider trading liability--the Court nonetheless held that he
could be prosecuted for violations of section 10(b) and Rule
10b-5, because he breached a duty he owed to the source of the
nonpublic information about the tender offer--his own law firm.
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\14\521 U.S. 642 (1997).
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Neither Congress nor the courts have ever excluded Members
of Congress or any other category of individuals from the
insider trading laws. Some have observed, however, that the
case law, as developed by decades of court rulings, may present
challenges to the SEC or the Department of Justice (DOJ) in
pursuing a case against a Member of Congress.\15\ On December
1, 2011, the Committee held a hearing to obtain a better
understanding of these challenges.\16\ On the specific legal
issue of the reach of section 10(b) and Rule 10b-5, the
Committee heard testimony from three distinguished securites
experts, Professor Donna Nagy of the Indiana University Maurer
School of Law, Professor Donald Langevoort of Georgetown
University Law Center, and Professor John Coffee, Jr. of
Columbia Law School. Mr. Robert Khuzami, Director of the
Division of Enforcement of the SEC also submitted a written
statement for the record.
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\15\See, e.g., Stephen M. Bainbridge, Insider Trading Inside the
Beltway, 36 J. Corp. L. 281 (2011).
\16\Insider Trading and Congressional Accountability: Hearing
Before the Senate Committee on Homeland Security and Governmental
Affairs, 112th Cong. (Dec. 1, 2011) [hereinafter __ Testimony at HSGAC
Hearing Dec. 1, 2011].
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The witnesses were in agreement that Congress enjoys no
exemption from insider trading law.\17\ Professor Coffee laid
out a number of specific factual scenarios that could allow, in
his opinion, the SEC to successfully prosecute a Member of
Congress--for example, if a Member traded on material non-
public information relating to a tender offer (conduct which is
prohibited by SEC Rule 14e-3),\18\ or if a Member knowingly
received a ``gift of information'' from an insider who would
himself or herself be barred from trading.\19\
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\17\Professor Donna Nagy testimony at HSGAC Hearing Dec. 1, 2011 at
page 1; Professor Donald Langevoort testimony at HSGAC Hearing Dec. 1,
2011 at page 2; Professor John Coffee testimony at HSGAC Hearing Dec.
1, 2011 at page 4; Robert Khuzami written testimony submitted for HSGAC
Hearing Dec. 1, 2011 at page 5.
\18\17 C.F.R. Sec. 240.14e-3.
\19\Coffee testimony at HSGAC Hearing Dec. 1, 2011 at page 3.
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The witnesses did not have a uniform view, though, on how
courts might apply the misappropriation theory to Members of
Congress. The specific question in dispute is this: If a Member
traded (or tipped) on the basis of material nonpublic
information gained during the course of the Member's public
service, would a court find that the Member owed a duty of
trust and confidence to the source of the information that had
been violated by the act of trading (or tipping)? For example,
if a Member learned in a confidential briefing by agency
officials of an upcoming regulatory action that would have a
substantial impact on the stock price of a particular company,
could the Member be held liable for insider trading for trading
or tipping on the basis of that information?
Professor Nagy pointed out that ``[p]rosecutors and courts
have cast a tremendously wide net'' in applying Rule 10b-5, and
that ``the linchpin has been a securities trader (or tipper)
who breached a duty of entrustment by secretly profiting from
the use of material nonpublic information that rightfully
belongs to somebody else.''\20\ As an example, Professor Nagy
cited a recent case involving a chemist at the Food and Drug
Administration (FDA) who was charged with violating the law
when he traded on material nonpublic information about pending
drug approvals that he obtained as a result of his job. The
chemist was alleged to have breached his duty of trust and
confidence to his employer in using that information to trade
securities.\21\ Likewise, Professor Nagy submitted,
congressional employees would be liable for insider trading
based on well-established employer-employee misappropriation
precedents.\22\
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\20\Nagy testimony at HSGAC Hearing Dec. 1, 2011 at page 4.
\21\SEC v. Cheng Yi Liang, et al., Exchange Act Rel. No. 21097
(March 29, 2011), http://www.sec.gov/litigation/litreleases/2011/
lr21907.htm.
\22\Id. at 5. Mr. Khuzami cited to other cases involving federal
employees: United States v. Royer, 549 F.3d 886 (2d. Cir. 2008)
(affirming conviction of a FBI agent for tipping information about
ongoing investigations and information on law enforcement databases);
SEC v. John Acree, Litigation Rel. No. 14231, 57 SEC Docket 1579 (Sept.
13, 1994) (announcing a settled action with a former employee of the
Office of the Comptroller of the Currency for trading on the basis of
material nonpublic information concerning banks). See also SEC v.
Saunders, Litigation Rel. No. 9744, 26 SEC Docket 75 (Sept. 2, 1981)
(announcing settled action with the former Director for Communications
for a division of the Naval Electronics Systems Command for purchasing
securities while in possession of material nonpublic information
concerning a contract award).
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While acknowledging that Members of Congress may not be
considered traditional ``employees'' of the federal government,
Professor Nagy noted the Constitution's repeated reference to
public offices being held in ``trust'' and concluded that there
should be little doubt that Members of Congress owe duties of
trust and confidence to a host of parties. According to
Professor Nagy, such duties may be owed to, among others, the
citizen-investors they serve, the United States, the Congress
itself, and federal officials outside of Congress who rely on a
Member's loyalty and integrity.\23\
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\23\Nagy testimony at HSGAC Hearing Dec. 1, 2001 at page 5.
Professor Nagy is also the author of a law review article explaining
her theory. Donna M. Nagy, Insider Trading, Congressional Officials and
Duties of Entrustment, 91 B.U.L. Rev. 1105 (2011).
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Professors Langevoort and Coffee agreed with Professor Nagy
that congressional staff have a clear employment relationship
with Congress and therefore owe a duty of trust and confidence
to Congress with respect to material nonpublic information
gained as a result of their employment.\24\ They questioned,
though, whether courts would find that the unique nature of an
elected office of Congress gives rise to a fiduciary-like duty
owed by Members of Congress to anybody. Professor Langevoort
submitted:
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\24\Langevoort testimony at HSGAC Hearing Dec. 1, 2011 at page 9;
Coffee testimony at HSGAC Hearing Dec. 1, 2011 at page 5.
[A]s elected officials, members of Congress are not
employees or agents in any conventional sense, and so
it becomes difficult to identify a separate owner of
the information to which they owe a legally enforceable
fiduciary duty of loyalty. Under our constitutional
system, duly elected Members have a status separate and
distinct from that of partner, agent or employee, far
different from those with whom in mind the
misappropriation theory was devised.\25\
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\25\Langevoort testimony at HSGAC Hearing Dec. 1, 2011 at page 7.
A very strong argument can be made that Members of Congress
can be prosecuted under the insider trading prohibitions in
existence today. However, given the uncertainty that exists in
how a Court would ultimately rule on this issue, it is
incumbent upon Congress to eliminate any doubt and state
clearly that the insider trading laws that apply to the general
public also apply to Members of Congress. The Committee agrees
with Professor Langevoort's explanation of the importance of
clarifying that the insider trading prohibitions apply to
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Members of Congress:
[T]he prohibition performs an expressive function in
signaling to the people of the U.S. and around the
world that our markets are open, transparent and fair,
and not rigged in favor of the economically or
politically powerful. It is part of the American brand
of deep and liquid capital markets that invite
participation by ordinary retail investors as well as
large financial institutions. Public trust in the
openness and fairness of marketplace institutions is
important for economic stability and growth . . . Just
the perception (whether or not accurate) that Congress
is ``above'' the prohibition that applies broadly
outside of Capitol Hill threatens our long-standing
commitment to fair and open markets.\26\
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\26\Langevoort testimony at HSGAC Hearing Dec. 1, 2011 at pages 2-
3.
S. 2038 thus affirms that, under the insider trading
prohibitions, Members of Congress and their staff owe a duty
arising from a relationship of ``trust and confidence'' to
Congress, the United States Government, and to the citizens of
the United States. This ensures that Members and staff are
subject to the same liabilities and remedies as any other
person who violates the securities laws.
Additionally, the bill provides for similar coverage of
Members and their staffs under commodities laws. Unlike the
body of law covering securities trading under SEC Rule 10b-5,
the commodities laws have not given rise to a broad prohibition
on insider trading. The recent Dodd-Frank legislation, however,
included provisions explicitly prohibiting federal executive
branch employees from engaging in commodities trading based on
nonpublic information gained as a result of their jobs.\27\ S.
2038 amends these provisions to also cover Members of Congress
and their staffs.
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\27\Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub.
L. No. 111-203, Sec. 746.
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The bill also amends the Ethics in Government Act\28\ to
shorten the time in which Members and staff must report covered
stock and securities transactions to 30 days. Members and high-
level congressional staff currently have to report such
transactions only once a year, as part of their annual
financial disclosure forms. Consistent with Justice Brandeis'
adage that ``sunlight is the best disinfectant,'' the bill will
provide more timely information about these transactions and
ensure the public has prompt access to the information.
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\28\5 U.S.C. App. Sec. Sec. 101 et seq.
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``Political Intelligence''
Other versions of the STOCK Act referred to the Committee
(S. 1871 and S. 1903) also would amend the Lobbying Disclosure
Act (LDA)\29\ to require the disclosure and registration of
people involved in collecting ``political intelligence.'' Such
individuals contact congressional or Executive branch officials
seeking information about possible government actions regarding
particular companies or industries. After gathering such
information, political intelligence consultants then analyze,
package, and sell the resulting product to, among others,
individuals or companies who use the material to inform
investment decisions. It is the Committee's understanding that
the term ``political intelligence'' was intended to capture
activity by those who only seek information about the workings
of the government and do not seek to influence the workings of
the government one way or another. If they did attempt to exert
such influence, they would fall under the existing provisions
of the Lobbying Disclosure Act, which already impose disclosure
mandates on those contacting legislative and executive branch
officials in an effort to influence government policy
decisions.
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\29\2 U.S.C. Sec. Sec. 1601 et seq.
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The Committee has very limited information before it about
the scope of the ``political intelligence industry'' or its
implications for either the political process or the financial
markets. Before Congress enacts legislation that could result
in quarterly disclosure requirements for many businesses that
seek information on the activities of the government, there
needs to be better information about the nature of political
intelligence activities: what information is being sought and
received--whether it is merely the same information passed
along to any member of the public who calls his or her Senator
or House Member or an agency, or something different; the
extent to which investors rely on information they obtain from
political intelligence collectors; whether the work of these
individuals differs markedly from that of the financial press;
and what effect the sale of this information may have on our
financial markets.
For these reasons, S. 2038 requires the Government
Accountability Office (GAO), working in consultation with the
Congressional Research Service (CRS), to study the issue and
report back to Congress on its findings. The bill directs GAO
to examine such issues as the prevalence of the sale of
political intelligence, the effect it may have on financial
markets, the extent to which the information sold is nonpublic,
and the benefits, as well as the legal and practical issues
that may arise, from imposing disclosure requirements on those
who engage in political intelligence activities. The Committee
is also interested in the First Amendment implications of
requiring disclosure, outside of the existing definition of
lobbying, as a prerequisite for communicating with Congress or
agencies of the federal government.
The Committee also notes that the LDA provides for both
civil and criminal penalties for violations. The Committee
believes that, to comport with due process values, any
statutory disclosure requirements under the LDA must be clear
so that individuals facing civil or criminal penalties have
fair notice of whether or not disclosure is required. For
purposes of the GAO study, though, the Committee has provided
an expansive definition of political intelligence so that GAO
can look broadly at the issue and provide sufficient
information to Congress that may then be used in targeting
specific problems. For purpose of the study, this section
defines political intelligence as information that is (1)
derived by a seller from direct communications with executive
branch and legislative branch officials and (2) provided in
exchange for financial compensation to a client who intends,
and who is known by the seller to intend, to use the
information in informing investment decisions.
The Committee is confident that GAO has the ability and the
flexibility to conduct a thorough analysis of this issue and
better inform any future congressional action in this area.
Overarching issues
In crafting S. 2038, the Committee sought to affirm that
Members and their staffs are covered by insider trading law
while also (1) legislating in a way that does not undermine the
interactions of Members and the general public; (2) leaving
undisturbed the large body of law related to insider trading
and other securities and anti-fraud laws; and (3) recognizing
that existing prohibitions under House and Senate ethics rules
also provide remedies against illegal insider trading.
In crafting S. 2038, the Committee made clear that while
Members and their staffs are not shielded from insider trading
law, nothing in the bill can be construed in derogation of
existing obligations, duties and functions of a Member of
Congress or an employee of Congress. Every day, Members and
their staff exchange information and views with constituents
and numerous other individuals, including representatives of
companies, associations, non-profit organizations, and the
media. These interactions are vital to the democratic process.
Exchanges of information between Congress and the American
public allow Members to explain actions that Congress is
taking, or is considering. And these exchanges allow the
American people to share with Members their views on how
actions of the government may help, or hurt, them. In this
respect, the role of a Member of Congress is very different
from the role of a corporate insider.
The Committee has heard some concerns that the STOCK Act
leaves Members and their staff vulnerable to charges of
``tipping'' if someone makes a trade based on information
derived from the routine sharing of information between
Congress and constituents. The Committee believes that such
fears are unfounded and that the STOCK Act should have no
chilling effect on the flow of information from Congress to the
citizenry. To prove a case of insider trading, the SEC must
show that a trade was made, in breach of a duty of trust and
confidence, based on material, nonpublic information. In the
case of tipping, there must also be some personal benefit to
the tipper in communicating the information to the tippee.
Additionally, under all fraud cases brought under section
10b of the Exchange Act, there must be a showing that the
defendant acted with ``scienter.'' The Supreme Court explained
in Ernst & Ernst v. Hochfelder that, in the context of Rule
10b-5, scienter ``refers to a mental state embracing intent to
deceive, manipulate or defraud.''\30\ As Mr. Khuzami explained
in testimony before the House Financial Services Committee:
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\30\425 U.S. 185, 193, n. 12 (1976).
[Scienter] is the single biggest thing that protects
the unwary from being trapped in a violation that
inadvertently occurred. You have to be acting with
corrupt intent, knowledge, or recklessness. If you act
in good faith, you are not going to be guilty.\31\
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\31\H.R. 1148, The Stop Trading on Congressional Knowledge Act:
Hearing Before the House Financial Services Committee, 112th Cong.
(Dec. 6, 2011), Hearing Print 112-90 at 32.
Thus, while Members and their staff should not be shielded
from prosecution if each element of insider trading law is
shown, they also should not fall inadvertently into violation
of Rule 10b-5 when, in good faith, they engage in discourse
with members of the public on matters related to their official
duties.
Second, S. 2038 ensures that the shade of the umbrella of
insider trading law covers Members of Congress and their staff;
it does not change the size of the umbrella or the cast of its
shade. In affirming that the insider trading prohibitions apply
to Members of Congress in the same way they apply to everyone
else, S. 2038 makes it clear that nothing in the Act--not the
affirmation of the underlying duty of trust and confidence, nor
the instructions to issue interpretive guidance or the guidance
that may be issued as a result--can be construed to limit or
otherwise alter the construction of the antifraud provisions of
the securities laws or the authority of the SEC or DOJ under
those provisions. S. 2038 includes a rule of construction that
makes this point clear. Likewise, nothing in the bill should be
construed to alter or impair existing statutes on mail and wire
fraud,\32\ honest services,\33\ or other anti-corruption
statutes.
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\32\18 U.S.C. Sec. Sec. 1341, 1343.
\33\18 U.S.C. Sec. 1346.
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Nor does S. 2038 suggest that existing House and Senate
ethics rules are insufficient to discipline a Member or a
staffer who engages in insider trading. As a starting point,
the Code of Ethics for Government Service states in paragraph 8
that a person in government service should ``[n]ever use any
information coming to him confidentially in the performance of
governmental duties as a means for making private profit.'' The
Code was passed by the House and Senate by Concurrent
Resolution in 1958,\34\ has been explicitly incorporated into
House ethics rules,\35\ and is listed in the Rules of the
Senate Select Committee on Ethics as one source for the
Committee's investigative and disciplinary jurisdiction.\36\
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\34\Code of Ethics for Government Service, H.R. Con. Res. 175, 85th
Cong., 72 Stat. B12 (1958).
\35\72 Stat., Part 2, B12, H.Con.Res. 175, 85th Cong. (July 11,
1958).
\36\United State Senate Select Committee on Ethics, Senate Ethics
Manual, 108th Congress, 1st Session (2003) at 387.
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Other specific ethics rules prohibit use of official
position for public gain. For example, Senate Rule XXXVII
prohibits a Member, officer or employee of the Senate from
receiving any compensation, or allowing any compensation to
accrue to his beneficial interest ``which would occur by virtue
of influence improperly exerted from his position as a Member,
officer, or employee.'' The Senate Ethics Manual explains that
this provision was intended ``as a broad prohibition against
members, officers or employees deriving financial benefit,
directly or indirectly, from the use of their official
position[s].''\37\ Rules limiting gifts to Members and staff
under Senate Rule XXXV may be violated under certain factual
scenarios--a Member who receives and trades on a ``tip'' from a
corporate insider, for example, or a staffer who tips a third
party in exchange for something of personal benefit. Moreover,
it is well established that ``[t]he Senate or House may
discipline a Member for any misconduct, including conduct or
activity which does not directly relate to official duties,
when such conduct unfavorably reflects on the institution as a
whole.''\38\ Thus, the ethics rules provide ample basis for the
disciplining of Members or staff who engage in insider
trading.\39\
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\37\Id. at 66 (quoting from the ``Nelson Report'' which accompanied
the original Senate Code of Ethical Conduct, S. Rep. No. 95-49).
\38\Id. at 13.
\39\For example, on November 29, 2011, the House Committee on
Ethics issued a memorandum to all Members and staff summarizing House
rules and standards of conduct that may apply to use of nonpublic
information when engaging in a personal financial transaction.
Memorandum to All House Members, Officers and Employees from Committee
on Ethics on Rules Regarding Personal Financial Transactions (Nov. 29,
2011).
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III. Legislative History
In November, 2011, Senators Scott Brown and Kirsten
Gillibrand introduced S. 1871 and S. 1903, respectively, two
similar versions of the STOCK Act, both of which were referred
to the Senate Committee on Homeland Security and Governmental
Affairs. On December 1, 2011, the Committee held a hearing
entitled ``Insider Trading and Congressional Accountability.''
The Committee heard testimony from the three professors of
securities law noted above as well as from Melanie Sloan,
Executive Director of Citizens for Responsibility and Ethics in
Washington, and Robert L. Walker, Of Counsel, Wiley Rein LLP
and former Chief Counsel and Staff Director of both the Senate
and House Ethics Committees. Mr. Robert Khuzami, Director of
Enforcement for the SEC, submitted a statement for the record.
On December 14, 2011, the Committee considered, as an
original bill, a revised version of the STOCK Act based on the
Gillibrand and Brown bills, additional Committee research, and
the suggestions received at the Committee's December 1 hearing.
(The bill received the number S. 2038 after the Committee
reported it.)
At its December 14 business meeting, the Committee
considered an amendment offered by Senators Collins and
Lieberman adding an explicit statement that Members and
employees of Congress are not exempt from current insider
trading prohibitions. The Collins-Lieberman amendment also
clarified that the bill ``affirms'' (rather than ``states'') a
duty of trust and confidence owned by Members and their staff,
and that nothing in the bill diminishes the ``duties and
functions'' of a Member or employee of Congress (in addition to
not diminishing their ``obligations'').
Senator Levin offered a second degree amendment to the
Collins-Lieberman amendment, aimed at clarifying that the duty
owed by Members and their staff is one ``arising from a
relationship of trust and confidence'' owed to Congress, the
United States Government, and the citizens of the United
States. The Committee adopted both the Levin second degree
amendment and the Collins-Lieberman amendment (as amended) by
voice vote. Senators present for both votes were Lieberman,
Levin, Akaka, Carper, Tester, Begich, Collins, Coburn, Brown,
Johnson, Portman, and Paul.
The Committee next adopted by voice vote an amendment
offered by Senators Begich, Tester, Lieberman, Levin, Brown and
Carper requiring the electronic filing and electronic
disclosure of financial disclosure forms filed by Members of
Congress and senior congressional staff. Senators present for
this vote were Lieberman, Levin, Akaka, Carper, Tester, Begich,
Collins, Coburn, Brown, Johnson, Portman, and Paul.
The Committee then considered an amendment offered by
Senator Paul aimed at making clear that insider trading laws
cover all federal employees. Senator Lieberman offered a second
degree amendment, which clarified that nothing in the section
added by the Paul amendment should be construed to be in
derogation of existing laws, regulations, or ethical
obligations of federal employees. The Committee adopted the
Lieberman second degree amendment and the underlying Paul
amendment, both by voice vote. Senators present for both votes
were Lieberman, Levin, Akaka, Begich, Collins, Coburn, Brown,
Johnson, Portman, and Paul.
The Committee ordered the bill, as amended, reported
favorably by a roll call vote of 7-2. Senators Lieberman,
Levin, Akaka, Begich, Collins, Brown, and Portman voted in
favor of the bill, while Senators Coburn and Johnson voted in
opposition. Senators Carper, Pryor, Landrieu, McCaskill,
Tester, and Moran asked to be recorded in favor of the bill by
proxy, while Senator McCain asked to be recorded against the
bill by proxy.
IV. Section-by-Section Summary of the Bill
Section 1: Short title
The short title of the bill is the ``Stop Trading on
Congressional Knowledge Act of 2012'' (STOCK Act).
Section 2. Use of nonpublic information for personal benefit prohibited
This section amends the Congressional Accountability
Act\40\ by adding to it a new title (Title VI) that prohibits
Members and employees of Congress from using nonpublic
information derived from their positions in Congress for
personal benefit and makes it clear that existing insider
trading prohibitions under the securities laws apply to Members
and staff of Congress. The new title contains the following
sections:
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\40\2 U.S.C. Sec. Sec. 1301 et seq.
---------------------------------------------------------------------------
``Section 601. Definition''
This section defines the terms ``Member of Congress'' and
``employee of Congress.''
``Section 602. General prohibition''
This section lays out the general prohibition that Members
and staff shall not use any nonpublic information that is
derived from their positions in Congress, or gained from
performance of their duties, for personal benefit.\41\
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\41\At the Committee's business meeting to consider the bill, some
Members expressed concern that the breadth of the general prohibition
is unclear. Members agreed to work together to refine its scope and
suggest new language for consideration by the full Senate when the bill
is reported to the Senate floor.
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``Section 603. Implementing rules''
This section directs the Ethics Committees in the Senate
and House to issue rules to carry out the purposes of Section
602.
``Section 604. Applicability to securities laws''
The dispute over the applicability of insider trading laws
to Congress centers largely on the issue of whether Members and
staff of Congress owe a legally enforceable duty to the source
from which they receive material, non-public information. This
section explicitly states that Members and staff\42\ are not
exempt from the securities laws, including the insider trading
prohibitions, and that they owe a duty arising from a
relationship of trust and confidence under the securities laws.
---------------------------------------------------------------------------
\42\As discussed above, the Committee received expert testimony
noting that there is little doubt that Congressional employees would be
liable for insider trading under the misappropriation theory. The
Committee sees no harm, though, in affirmatively stating this coverage.
---------------------------------------------------------------------------
Specifically, subsection (a)(1) provides that Members and
employees of Congress are not exempt from the broad anti-fraud
provisions of the securities laws, including the insider
trading prohibitions. Subsection (a)(2) provides that, for
purposes of insider trading prohibitions under the Securities
Exchange Act, the Section 602 prohibition against Members and
employees using nonpublic information for personal benefit
affirms a duty arising from a relationship of trust and
confidence owed by each Member of Congress and each employee of
Congress to Congress, the United States Government, and the
citizens of the United States.
Subsection (b) authorizes the Securities and Exchange
Commission to issue rules to implement this section and
otherwise ensure that Members and staff are subject to insider
trading prohibitions.
``Section 605. Appropriate punitive, disciplinary, and other remedial
action''
This section ensures that Members and staff who violate the
prohibition under Section 602 are subject to appropriate
disciplinary actions.
``Section 606. Rule of construction''
This section provides that nothing in this title diminishes
existing obligations, duties, and functions of Members and
employees of Congress, and it makes clear that the STOCK Act
does not limit or otherwise alter existing securities laws.
Section 3. Technical, conforming, and clerical amendments
This section makes technical changes to the Congressional
Accountability Act.
Section 4. Conforming changes to the Commodity Exchange Act
This section makes conforming changes to section 4c(a) of
the Commodity Exchange Act\43\ to ensure that the insider
trading prohibitions under that Act apply to Members and staff
of Congress.
---------------------------------------------------------------------------
\43\7 U.S.C. Sec. 6c(a).
---------------------------------------------------------------------------
Section 5. Prompt reporting of financial transactions
This section amends existing financial disclosure rules to
require Members, officers and employees of Congress, for
themselves and for their spouses and dependent children, to
report the purchase or sale of stocks, bonds, commodities
futures, and other forms of securities within 30 days after
such a transaction takes place.
Section 6. Report on political intelligence activities
This section requires that, no later than 12 months after
the date of enactment of the STOCK Act, GAO, in consultation
with CRS, is to submit a report to Congress assessing the role
of ``political intelligence'' in the financial market. This
report is intended to shed light on the practice and better
inform any future congressional action in this area.
Specifically, the section requires GAO to provide an
analysis of: what is known about the prevalence of the sale of
political intelligence and the extent to which investors rely
on such information; what is known about the effect that the
sale of political intelligence may have on the financial
markets; the extent to which information which is being sold
would be considered nonpublic information; the legal and
ethical issues that may be raised by the sale of political
intelligence; any benefits from imposing disclosure
requirements on those who engage in political intelligence
activities; and any legal and practical issues that may be
raised by the imposition of disclosure requirements on those
who engage in political intelligence activities.
Section 7. Public filing and disclosure of financial disclosure forms
of Members of Congress and Congressional staff
This section provides for greater transparency of financial
disclosure forms filed by Members, candidates for Congress, and
employees of Congress.
Subsection (a) requires financial disclosure reports filed
in 2012 (including the new transaction reports required by the
STOCK Act) to be posted on the House and Senate web sites. This
basic form of transparency will be maintained until the
development of an e-filing and disclosure system under the
second part of this section.
Subsection (b) then requires the Secretary of the Senate
and the Clerk of the House to develop systems to allow e-filing
by individuals who are required to file forms with them, and to
establish a public database enabling members of the public to
search, sort and download data from the e-filings.
Section 8. Federal employees
Section 8 affirms that employees in the executive and
legislative branches also are subject to insider trading
prohibitions. The Committee finds no doubt among securities
experts that federal employees are already covered by insider
trading laws.\44\ The Committee finds no harm, though, in
affirming that federal employees owe a duty of trust and
confidence to the United States government and the citizens of
the United States.
---------------------------------------------------------------------------
\44\See n.22, supra.
---------------------------------------------------------------------------
Subsection (a) of this section prohibits federal employees
from using any nonpublic information that is derived from their
positions, or gained from performance of their duties, for
personal benefit.
Subsection (b) then requires the relevant offices
responsible for administering ethics requirements to issue
rules and regulations to carry out the purposes of subsection
(a): the Office of Government Ethics for the executive branch,
the ethics committees of the House and Senate for the
legislative branch, and the Judicial Conference for the
judicial branch. Individual agency ethics offices would be free
to issue supplemental rules and regulations pertaining to
agency-specific restrictions.
Subsection (c) then provides that, for purposes of insider
trading prohibitions under the Securities Exchange Act, the
prohibition set forth in subsection (a) about federal employees
using nonpublic information for personal benefit states a duty
of trust and confidence of each federal employee to the United
States government and the citizens of the United States.
Subsection (d) ensures that Federal employees that violate
the prohibition under Section 602 are subject to appropriate
disciplinary actions.
Subsection (e) defines the term ``federal employee.''
Subsection (f) contains a rule of construction that makes
clear that nothing in this section shall be construed to be in
derogation of existing laws, regulations, or ethical
obligations of Federal employees. In many instances federal
employees are held to stricter ethics obligations than Members
and subsection (f) ensures that existing rules and regulations
are not narrowed by the requirements in this section.
V. Evaluation of Regulatory Impact
Pursuant to the requirements of paragraph 11(b) of rule
XXVI of the Standing Rules of the Senate, the Committee has
considered the regulatory impact of this bill. The
Congressional Budget Office states that S. 2038 contains no
intergovernmental or private-sector mandates as defined in the
Unfunded Mandates Reform Act and would not affect the budget of
state, local, or tribal governments.
VI. Congressional Budget Office Cost Estimate
January 31, 2012.
Hon. Joseph I. Lieberman,
Chairman, Committee on Homeland Security and Governmental Affairs, U.S.
Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for S. 2038, the STOCK Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Matthew
Pickford.
Sincerely,
Douglas W. Elmendorf.
Enclosure.
S. 2038--STOCK Act
S. 2038 would amend the Congressional Accountability Act of
1995 and the Ethics in Government Act. The legislation would
require the Senate and the House of Representatives to
implement an electronic filing system for financial disclosure
forms and provide the public with on-line access to that
information in a searchable database. S. 2038 also would make
clear that Members of Congress, Congressional employees, and
federal employees are prohibited from using nonpublic
information for personal financial benefit. In addition, the
legislation would require more timely reporting of information
about financial transactions by Members and staff.
Based on information from Congressional staff, CBO
estimates that implementing the financial disclosure system
required under S. 2038 would cost $4 million over the 2012-2013
period primarily for new computer hardware and software and
additional labor. In addition, maintaining the new system would
cost $1 million annually, CBO estimates. In total, CBO
estimates that implementing the legislation would cost about $9
million over the 2012-2017 period, assuming appropriation of
the necessary amounts.
The Statutory Pay-As-You-Go Act of 2010 establishes budget-
reporting and enforcement procedures for legislation affecting
direct spending or revenues. Enacting S. 2038 could increase
revenues from civil and criminal fines imposed on federal
employees who use nonpublic information for personal financial
benefit or who fail to file financial disclosure forms;
therefore, pay-as-you-go procedures apply. Civil fines are
recorded in the budget as revenues and deposited into the
general fund of the Treasury. Criminal fines are recorded as
revenues, deposited in the Crime Victims Fund, and spent in
subsequent years. CBO expects that any net effect associated
with collecting and spending such penalties would not be
significant in any year.
S. 2038 contains no intergovernmental or private-sector
mandates as defined in UMRA and would not affect the budgets of
state, local, or tribal governments.
The CBO staff contact for this estimate is Matthew
Pickford. This estimate was approved by Theresa Gullo, Deputy
Assistant Director for Budget Analysis.
VII. Changes in Existing Law Made by the Bill, as Reported
In compliance with paragraph 12 of rule XXVI of the
Standing Rules of the Senate, the following changes in existing
law made by S. 2038, as reported, are shown as follows
(existing law proposed to be omitted is enclosed in black
brackets, new matter is printed in italic, existing law in
which no change is proposed is shown in roman).
* * * * * * *
CONGRESSIONAL ACCOUNTABILITY ACT OF 1995
* * * * * * *
TITLE IV--ADMINISTRATIVE AND JUDICIAL DISPUTE-RESOLUTION PROCEDURES
* * * * * * *
SEC. 413. PRIVILEGES AND IMMUNITIES.
The authorization to bring judicial proceedings under
sections 405(f)(3), 407, and 408, or to bring a judicial
proceeding to enforce the prohibition under section 602, shall
not constitute a waiver of sovereign immunity for any other
purpose, or of the privileges of any Senator or Member of the
House of Representatives under article I, section 6, clause 1,
of the Constitution, or a waiver of any power of either the
Senate or the House of Representatives under the Constitution,
including under article I, section 5, clause 3, or under the
rules of either House relating to records and information
within its jurisdiction.
* * * * * * *
TITLE VI--USE OF NONPUBLIC INFORMATION FOR PERSONAL BENEFIT PROHIBITED
SEC. 601. DEFINITION.
In this title--
(1) the term ``Member of Congress'' means a member of
the Senate or the House of Representatives, a Delegate
to the House of Representatives, and the Resident
Commissioner from Puerto Rico; and
(2) the term ``employee of Congress'' means--
(A) an employee of the Senate; and
(B) an employee of the House of
Representatives.
SEC. 602. GENERAL PROHIBITION.
No Member of Congress and no employee of Congress shall use
any nonpublic information derived from the individual's
position as a Member of Congress or employee of Congress, or
gained from performance of the individual's duties, for
personal benefit.
SEC. 603. IMPLEMENTING RULES.
The Select Committee on Ethics of the Senate and the
Committee on Standards of Official Conduct of the House of
Representatives shall issue rules or regulations to carry out
the purpose of section 602.
SEC. 604. APPLICABILITY TO SECURITIES LAWS.
(a) In General.--
(1) Not exempt.--Members of Congress and employees of
Congress are not exempt from the prohibitions arising
under section 10(b) of the Securities Exchange Act of
1934 and Rule 10b-5 thereunder, including the insider
trading prohibitions.
(2) Duty.--For purposes of the insider trading
prohibitions arising under 10(b) of the Securities
Exchange Act of 1934 and Rule 10b-5 issued thereunder
(or any successor to such Rule), section 602 affirms a
duty arising from a relationship of trust and
confidence owed by each Member of Congress and each
employee of Congress to Congress, the United States
Government, and the citizens of the United States.
(b) Rulemaking Authority.--The Securities and Exchange
Commission may issue such rules or regulations as the
Commission determines are necessary or appropriate to implement
subsection (a) or to otherwise ensure that Members of Congress
and employees of Congress are subject to the insider trading
prohibitions that apply generally.
SEC. 605. APPROPRIATE PUNITIVE, DISCIPLINARY, AND OTHER REMEDIAL
ACTION.
A Member of Congress or an employee of Congress who
violates the prohibition under section 602 shall be subject to
appropriate punitive, disciplinary, and other remedial action
in accordance with any applicable laws, resolutions, rules, or
regulations.
SEC. 606. RULE OF CONSTRUCTION.
Nothing in this title shall be construed to be in
derogation of existing obligations, duties and functions of a
Member of Congress or an employee of Congress or to limit or
otherwise alter the securities laws, the authority of the
Securities and Exchange Commission under such laws, or other
laws of the United States.
TITLE V--GOVERNMENT ORGANIZATION AND EMPLOYEES
* * * * * * *
APPENDIX--ETHICS IN GOVERNMENT ACT OF 1978
* * * * * * *
TITLE I--FINANCIAL DISCLOSURE REQUIREMENTS OF FEDERAL PERSONNEL
* * * * * * *
Sec. 101. Persons required to file
(a) * * *
(b) * * *
(c) * * *
(d) * * *
(e) * * *
(f) * * *
(g) * * *
(h) * * *
(i) * * *
(j) Within 30 days after any transaction required to be
reported under subparagraph 102(a)(5)(B) of this Act, a Member
of Congress or officer or employee of Congress shall file a
report of the transaction.
* * * * * * *
Sec. 105. Custody of and public access to reports
(a) * * *
(b) * * *
(c) * * *
(d)(1) Any report filed with or transmitted to an agency or
supervising ethics office or to the Clerk of the House of
Representatives or to the Secretary of the Senate pursuant to
this title shall be retained by such agency or office or by the
Clerk or the Secretary of the Senate, as the case may be.
(2) Such report shall be made available to the public[ for
a period of six years after receipt of the report]--
(A) in the case of a Member of Congress until a date
that is 6 years from the date the individual ceases to
be a Member of Congress; and
(B) in the case of all other reports filed pursuant
to this title, for a period for six years after receipt
of the report.
(3) After [such six-year period] the relevant time period
identified under paragraph (2), the report shall be destroyed
unless needed in an ongoing investigation, except that in the
case of an individual who filed the report pursuant to section
101(b) and was not subsequently confirmed by the Senate, or who
filed the report pursuant to section 101(c) and was not
subsequently elected, such reports shall be destroyed [one] 1
year after the individual either is no longer under
consideration by the Senate or is no longer a candidate for
nomination or election to the Office of President, Vice
President, or as a Member of Congress, unless needed in an
ongoing investigation.
* * * * * * *
TITLE 7--AGRICULTURE
* * * * * * *
CHAPTER 1--COMMODITY EXCHANGES
* * * * * * *
SEC. 6C. PROHIBITED TRANSACTIONS.
(a) In General.--
(1) * * *
(2) * * *
(3) Contract of sale.--It shall be unlawful for any
employee or agent of any department or agency of the
Federal Government or any Member of Congress or
congressional employee who, by virtue of the employment
or position of the Member, employee or agent, acquires
information that may affect or tend to affect the price
of any commodity in interstate commerce, or for future
delivery, or any swap, and which information has not
been disseminated by the department or agency of the
Federal Government holding or creating the information
or by Congress in a manner which makes it generally
available to the trading public, or disclosed in a
criminal, civil, or administrative hearing, or in a
congressional, administrative, or Government
Accountability Office report, hearing, audit, or
investigation, to use the information in his personal
capacity and for personal gain to enter into, or offer
to enter into--
(A) a contract of sale of a commodity for
future delivery (or option on such a contract);
(B) an option (other than an option executed
or traded on a national securities exchange
registered pursuant to section 78f(a) of Title
15); or
(C) a swap.
(4) Nonpublic information.--
(A) Imparting of nonpublic information.--It
shall be unlawful for any employee or agent of
any department or agency of the Federal
Government or any Member of Congress or
congressional employee who, by virtue of the
employment or position of the Member, employee
or agent, acquires information that may affect
or tend to affect the price of any commodity in
interstate commerce, or for future delivery, or
any swap, and which information has not been
disseminated by the department or agency of the
Federal Government holding or creating the
information or by Congress in a manner which
makes it generally available to the trading
public, or disclosed in a criminal, civil, or
administrative hearing, or in a congressional,
administrative, or Government Accountability
Office report, hearing, audit, or
investigation, to impart the information in his
personal capacity and for personal gain with
intent to assist another person, directly or
indirectly, to use the information to enter
into, or offer to enter into--
(i) a contract of sale of a commodity
for future delivery (or option on such
a contract);
(ii) an option (other than an option
executed or traded on a national
securities exchange registered pursuant
to section 78f(a) of Title 15); or
(iii) a swap.
(B) Knowing use.--It shall be unlawful for
any person who receives information imparted by
any employee or agent of any department or
agency of the Federal Government or any Member
of Congress or congressional employee as
described in subparagraph (A) to knowingly use
such information to enter into, or offer to
enter into--
(i) a contract of sale of a commodity
for future delivery (or option on such
a contract);
(ii) an option (other than an option
executed or traded on a national
securities exchange registered pursuant
to section 78f(a) of Title 15); or
(iii) a swap.
(C) Theft of nonpublic information.--It shall
be unlawful for any person to steal, convert,
or misappropriate, by any means whatsoever,
information held or created by any department
or agency of the Federal Government or by
Congress that may affect or tend to affect the
price of any commodity in interstate commerce,
or for future delivery, or any swap, where such
person knows, or acts in reckless disregard of
the fact, that such information has not been
disseminated by the department or agency of the
Federal Government holding or creating the
information or by Congress in a manner which
makes it generally available to the trading
public, or disclosed in a criminal, civil, or
administrative hearing, or in a congressional,
administrative, or Government Accountability
Office report, hearing, audit, or
investigation, and to use such information, or
to impart such information with the intent to
assist another person, directly or indirectly,
to use such information to enter into, or offer
to enter into--
(i) a contract of sale of a commodity
for future delivery (or option on such
a contract);
(ii) an option (other than an option
executed or traded on a national
securities exchange registered pursuant
to section 78f(a) of Title 15); or
(iii) a swap, provided, however, that
nothing in this subparagraph shall
preclude a person that has provided
information concerning, or generated
by, the person, its operations or
activities, to any employee or agent of
any department or agency of the Federal
Government to Congress or any Member of
Congress or congressional employee
voluntarily or as required by law, from
using such information to enter into,
or offer to enter into, a contract of
sale, option, or swap described in
clauses (i), (ii), or (iii).
* * * * * * *