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Video Interview: Discussing Recent STOCK Act Developments with LXBN TV

Recent developments have brought once and future changes to the STOCK Act. Not surprisingly, these changes afford less transparency for public sector conduct and potentially far greater disclosure obligations for the private sector.

Moreover, the political intelligence community’s “close up”, which we warned about last week while wearing our best Little Orphan Annie dress, is upon us as the Securities and Exchange Commission just today announced issuance of the subpoenas we knew were “only a day away”.

I talk about it all with LexBlog here:


Video Interview: Discussing Recent STOCK Act Developments with LXBN TV

Is the “Political Intelligence” Community Ready for its Close Up? (It Better Be)

Some time ago, we alerted you to the STOCK Act and warned purveyors of “political intelligence” to prepare for some “enhanced scrutiny”. Think of it as akin to “enhanced interrogation” without the need for towels. (And for those for whom a talking head is worth a thousand words, I discuss all this here courtesy of my good friend Colin O’Keefe at LexBlog).

For those new to the issue, the Stock Act was a reaction to news reports appearing to demonstrate that some members of Congress and their staff were benefitting from stock trades based on nonpublic information. Specifically, as we wrote previously, the bill affirmed that Members of Congress are not exempt from insider trading laws and mandated comprehensive online disclosure of trading activities by Congress. Parallel language in the bill designed to mandate enhanced disclosure by “political intelligence” firms died in the House of Representatives.

In an election year, a bill like the STOCK Act made a good deal of sense. This year, it would appear, not so much. In case you missed it, the Senate recently slipped language through in the dark of night gutting the Act’s application to staffers and eliminating the requirement that mandated disclosures actually be searchable online. In a nice touch, the White House quietly announced that the President had signed the bill limiting the STOCK Act on the day your taxes were due. Commentators from the Sunlight Foundation to OpenSecrets to Jon Stewart voiced outrage.

Meanwhile, as Stewart and other political commentators are focused on what is happening with regard to the public sector, a real push towards enhanced disclosure on the part of “political intelligence” firms is proceeding at full steam.

First, the United States Government Accountability Office this month issued a comprehensive report analyzing the current market for political intelligence and examining potential impediments to expanded disclosure and reporting requirements designed to capture these activities. The implications of that report can be found in this excellent law firm client alert. While significant constitutional and practical impediments stand in the way of legislation designed to regulate the gathering, analysis and dissemination of public information (like the paytoplaylawblog!!!), the smell of cordite is clearly in the air and we should all remain alert.

Second, alarm bells went off in Washington last week as POLITICO reported that Senator Grassley issued a letter to a Washington law firm and a former aide seeking information on whether the law firm had tipped off a political intelligence firm about non-public Medicare Advantage rates. The resulting client memo, issued one hour before market close, triggered a surge in buying of health insurer stocks and resulting Congressional scrutiny. Just this week, the law firm in question announced it would no longer do business with political intelligence firms.

All of this leaves political intelligence and law firms – which appear in virtually all cases to be doing nothing illegal or unethical in analyzing and distilling public information better than the rest of us – reaching for the antacid.

This is definitely an issue to bookmark.

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Is the “Political Intelligence” Community Ready for its Close Up? (It Better Be)

The STOCK Act Explained (video interview)

Still have questions about what the STOCK Act really means?

In this interview with LexBlog Network Television, I explain the legislation, what drove it, and where it could be headed.

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The STOCK Act Explained (video interview)

Taking Stock of The STOCK Act. . . . Wither “Political Intelligence”?

Proponents of ethics reform and increased political transparency in Washington don’t often see reform proposals pass through Congress by overwhelming margins, and rarely does anyone bemoan an excess of “political intelligence” in Washington, but that’s exactly what happened on Capitol Hill this past week. While the reform community can’t quite be sure what version of reform will survive the ongoing tug of war between the U.S. Senate and U.S. House of Representatives, it is clear that those trading on “inside political knowledge” are clearly in the transparency crosshairs.

If you are a consultant, a lobbyist, a law firm, or simply a person with inside knowledge of how Washington thinks, this post pertains to you (but you already know that, of course).

Two relevant reform proposals emerged in the wake of growing public outrage generated by CBS’ “Sixty Minutes” and other reports highlighting the ability of elected officials and their staff to trade on otherwise “non-public” information for personal investment gains. Near universal public outrage is about the only catalyst for Congressional action these days but, despite bipartisan grass-roots calls for reform, no singular solution is ever presented by Congress…. Instead, as many might have predicted, Congress produced two competing visions of what problems need to be addressed and how to go about it.

The Senate set forth its vision last Thursday when it passed the Stop Trading on Congressional Knowledge (“STOCK”) Act of 2012 in a lopsided, 96-3 roll call vote. In addition to tackling the fundamental problem not so subtly referenced in its title, the STOCK Act seeks to implement a number of aggressive ethics rules and revisions to the Lobbying Disclosure Act aimed at further restricting legislative and executive branch conflicts of interest and mandating more transparency in the area of non-lobbyist political consulting.

Most significantly for “Establishment Washington”, included within the Senate proposal’s ban on “insider trading” is a controversial obligation that all “political intelligence” consultants register and disclose their activities as if they were federal lobbyists, and a contentious legislative fix to the poorly-written “honest services fraud” statute that was recently-deemed unconstitutional by the U.S. Supreme Court in contexts outside of bribery and kickback schemes.

The language of the Senate bill would reach individuals and entities who engage in “political intelligence contacts” for the purpose of obtaining information from officials of the executive and legislative branches of government “for use in analyzing securities or commodities markets, or in informing investment decisions.” Any organization employing or retaining an individual who engages in one such contact would be required to register and report in the same fashion as if they were a lobbyist-registrant under the Lobbying Disclosure Act (LDA).  As such, they would be subject to the same quarterly and semi-annual disclosure requirements that lobbyist-registrants currently meet.

On a quarterly basis, via a Form LD-2, “political intelligence” registrants would need to disclose the “issue areas” their organizations are discussing, the legislative body or federal agencies they are contacting, the employee(s)/consultant(s) that engage in such contacts, and the total expenses incurred with regard to the intelligence-gathering activities. On a semi-annual basis, via a Form LD-203, political intelligence registrants would also need to disclose political contributions and contributions to events honoring or recognizing covered executive or legislative branch officials. Such contribution reports would be required of both individual consultants and their employing organizations, effectively opening up a new segment of the Washington political class to public scrutiny of its campaign and non-campaign donations. Certain limited exemptions to these disclosure requirements do exist under the Senate version of the bill, but they are not nearly as broad as those carved out under the LDA for current lobbyist-registrants.

Reform and transparency are all well and good, but these requirements proved too much for the House (and legions of the suddenly activated “political intelligencia”) to accept.

Yesterday morning, the House followed the Senate’s lead by passing its own amended version of the STOCK Act by a similarly enormous voting margin – 417 to 2 to be exact – but without the requirement that non-lobbyist “political intelligence” consultants register and report their activities. Likewise, the House version of the bill refrains from amending the honest services fraud statute to allow for its use in non-bribery and non-kickback scenarios.

House Majority Leader Eric Cantor (R-VA) articulated the House rationale when he commented that the Senate’s disclosure requirements were something “outside of what we do” and that they were not part of the original purpose of the STOCK Act legislation. Also criticized was the “vagueness” of the political intelligence provisions as pertains to anything that happens in Washington.

Thus, in as sure an effort towards “assisted suicide” as Congress has in its arsenal these days, the amended House STOCK Act calls for a federal study of the “political intelligence” industry for the purpose of making future legislative recommendations and additionally prohibits lawmakers from receiving access to initial public offerings of stock. THAT always results in action, right?

Looking to the future, many believe that the political intelligence requirements of the Senate’s STOCK Act are yet another reformulation of recent efforts attempting to compel increased disclosure, and thus disincentivize, political spending by corporations and wealthy individuals. This blog has discussed similar efforts by the SEC, Congress, the ABA, and the Obama Administration in the past. And as such, it is easy to understand the negative reaction that has come from these House Members and many on K Street. Particularly when coupled with the drastic effect the expansion of registration and reporting requirements would have on business activities in and around Washington, D.C moving forward.

In the end, it will be interesting to see whether the overarching goal of banning “insider trading” by Members of Congress and congressional staff becomes collateral damage in the battle over establishing political intelligence registration and reporting requirements. Stranger things have happened on Capitol Hill. Anyone selling information or access in Washington needs to be closely watching Congress in the coming weeks to see how this tug of war ends.

But you already know that.

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Taking Stock of The STOCK Act. . . . Wither “Political Intelligence”?