Better late than never.
If there's one old, well-worn saw that's tailor-made to fit the STOCK Act, it's that one. Nearly six years in the making, the law to Stop Trading on Congressional Knowledge was all ready to fill out the forms and file for Social Security when, in November of last year, it got a new lease on life.
60 Minutes aired an expose on "insider trading" on Capitol Hill. We here at The Motley Fool followed up with a refresher course on the issue, which we've been writing about for some time. President Barack Obama even got in on the act, publicly calling on Congress to "send me a bill that bans insider trading by members of Congress, and I will sign it tomorrow." And it all came to a head last week, when the Senate finally and overwhelmingly approved an updated version of the bill originally introduced by Reps. Louise Slaughter and Brian Baird (since replaced by Congressman Tim Walz), all those years ago.
But the battle isn't over.
The STOCK Act is "late" in another sense, too. No sooner had the Senate approved its version of the STOCK Act, then House Majority Leader Eric Cantor committed to move forward on a similar bill that had been stuck in committee in the House. But it wasn't until late last night -- hours away from the date the House was scheduled to vote on it -- that we finally got a glimpse of the updated House bill.
So what's it look like? Actually, it's not half-bad.
Working off the Senate version of the STOCK Act ("S. 2038" for you Congress watchers), rather than the original House version (H. 1148), which has been superceded by events in the Senate, the bill going to the House floor tomorrow contains three main points that we can call "new."
A box on both your houses
First and foremost, the House bill sheds new light on a provision that entered the act through the Senate's amendment process. In addition to putting Congress in a tighter box, as regards members' ability to trade on inside information, the STOCK Act will now extend insider-trading restrictions to the executive branch of government: "Each officer or employee in the executive branch ... who occupies a position classified above GS-19 and ... each officer or employee in any other position determined by the Director of the Office of Government Ethics to be of equal classification" must now report their stock trades within 30 days of making them.
Heavy is the head that wears the crown
Speaking of ethics, one of the scandals that really helped light a fire under the STOCK Act last year was an allegation that then-House Speaker Nancy Pelosi and her husband had leveraged the speaker's office into preferential access to the Visa (NYSE: V ) IPO a few years back. Pelosi says she did nothing wrong, but that's not preventing House Republicans from needling her with a little line item they're calling the "Pelosi Provision."
Basically, this rule (officially labeled "Sec. 12 Participation in Initial Public Offerings") says that a member cannot "purchase securities that are the subject of an initial public offering ... in any manner other than is available to members of the public generally."
Can't argue with that.
Two steps forward, one step back
Now, the news isn't all good. On the minus side, the House version of the STOCK Act takes a step back from the Senate's requirement that "political intelligence" (P.I.) firms register in a manner similar to lobbyists in Washington. The Senate version of the bill originally required such registration, then watered it down in committee, calling instead for an investigation into whether registration was really necessary, then turned about once more, and reinstated the registration requirement during the amendment process. (It's enough to make a Fool dizzy.) Now, after P.I. lobbyists went nuts, the House is going back to what was agreed to in committee in the Senate: No law. Just a "study."
Even here, though, we can't complain too much. If it took a watering down of this restriction to get the STOCK Act out of committee in the Senate, it's no huge surprise that similar compromise may be needed in the House. Meanwhile, the act's imposition of a "duty of trust and confidence" on congressmen and their staffers (and now administration officials, too) means that tipping any third parties (P.I. firms included) to nonpublic information gleaned from one's official position is clearly verboten.
In short, we think there's very little to get upset about in the House version of the STOCK Act, as currently written. We wouldn't mind a clearer requirement that financial disclosures be made in a standardized format, and with exact asset values stated. We wouldn't mind seeing the registration requirements for P.I. firms re-re (or is it re-re-re?) -instated.
But let's not let the perfect be the enemy of the good, people. The bill is good as written and it's better late than never.