Please ensure Javascript is enabled for purposes of website accessibility

"The Frog Can Swim Just Fine"

By Molly McCluskey - Apr 2, 2013 at 8:55PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The STOCK Act's proponents weigh in on the latest impediments to stop insider trading in Congress.

A new report from the National Academy of Public Administration calls for Congress to immediately suspend the online reporting requirements of the STOCK Act, which is set to go into effect on April 15. The law calls for public disclosures of stock purchases within 45 days of a trade exceeding $1,000 and applies to 28,000 senior executives, including the president, Congress, and various elected and non-elected officials across the federal government. The law included an amendment for the creation of an online, searchable database of trades.

The report claims that disclosing the financial trades of senior government executives and members of Congress would leave them exposed to extortion, blackmail, and identity theft. It claims that the reporting requirements are akin to "boiling a frog" and would constitute a threat to national security and endanger top officials. Furthermore, it claims the requirements would make it difficult to attract talent to senior executive positions and pose unnecessary risks to those involved. The report cites concerns from officials in the department of Defense and State. You can access the original report on the NAPA website here (link opens a PDF file).

Rep. Tim Walz (D-Minn.) was a co-author of the House version of the bill with Rep. Louise Slaughter (D-N.Y.). Walz spoke with us as part of our STOCK Act series last year, and he wrote an editorial for the Fool. This morning, he told me: "Government reform is a journey, not a destination. The main purpose of the STOCK Act is to ensure our elected officials play by the same rules as everyone else, and I believe it accomplishes that goal." He continued: "As with any law, it's important to get the implementation of it right, and over the coming weeks I'll examine ways we can work to improve the bill."

But one of the main concerns of the report, that such disclosure would leave senior executives vulnerable to identity theft, may not be a very strong one. Steve Weisman is a senior lecturer at Bentley University and the author of 50 Ways to Protect Your Identity in the Digital Age. He says the report is exaggerating the potential risk.

"Identity theft is certainly serious, and it's true that the more information you have about someone, the easier it is to make them a victim of identity theft," Weisman says. "But the information that would need to be disclosed to make them easy prey to identity thieves, like a mother's maiden name or previous addresses, wouldn't be in these reports. In the criticisms that I found in the report, that it could lead to identity theft, I never found how."

During our investigation into the STOCK Act, we analyzed years' worth of trades made by members of Congress and cross-referenced them by committee. We didn't have to file a Freedom of Information Act request or obtain special permission. We were able to access them through the Center for Open Politics' website OpenSecrets.org. Granted, the spreadsheets weren't pretty, and more than one set of eyes crossed attempting to decipher them. But we had the information, we published it, and no one was kidnapped or blackmailed as a result (to our knowledge.)

This reporting makes that information more accessible -- not because we Fools are a threat to national security or wanting to blackmail our officials, but because we, as citizens, as investors, and as voters, deserve to know that our elected officials are voting in the interests of their constituents, and not their wallets. The database is an important piece of the STOCK Act, a bill that had its heart chipped away by amendments, exceptions, and provisions over the course of its journey. From a provision for the political-intelligence industry to an exclusion of mutual funds from reporting requirements, the law that was passed was a mere shadow of its intended form. To strip away the database is to eliminate a very key piece of enforcement: public pressure. The reason, to protect senior officials from identity theft, simply isn't a valid one.

Says Weisman: "I think the frog would be able to swim just fine with the temperature of the water from these disclosures."

Editor's note: This article has been updated with a new link to the NAPA report.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
336%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.