Senate Passes House-Amended Insider Trading Legislation

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On Thursday, March 22, the Senate cleared the House version of the Stop Trading on Congressional Knowledge Act (STOCK Act) by unanimous consent. The legislation will now head to the President’s desk to be signed into law. The legislation was originally introduced by Senator Joseph Lieberman (I-CT) following a CBS 60 Minutes piece alleging that Congressional Members were making money by trading stocks using non public information. It explicitly prohibits Members of Congress, the President, and other federal employees from trading stocks based on non-public Congressional information. In our view, this new law will very likely have a chilling effect on the ordinary exchange and collection of information about Congressional and Executive Branch activities and actions.

Among other things, the STOCK Act creates a specific fiduciary duty for Members and staff with respect to knowledge obtained as a result of their position. The legislation also prohibits certain federal employees from buying or selling securities, swaps, or commodity futures based on non-public, material information gained during the course of their employment. Under the legislation, such employees would have to report the purchase, sale, or exchange of any stock, bond, or commodity future transaction in excess of a certain amount, within 30 days of the transaction. The legislation would prohibit such employees from disclosing non-public information relating to any pending or prospective legislative action on commodities or securities.

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