House of Representatives Waters Down Insider Trading Bill to Protect “Consultants”

AllGov:

Friday, February 10, 2012
Ignoring the wishes of their counterparts in the Senate, the House of Representatives on Thursday adopted an ethics bill that lets private industry consultants who take advantage of legislative intelligence off the hook.

The Stop Trading on Congressional Knowledge Act, or Stock Act, would ban lawmakers from making trades on the stock market that rely on private information gleaned from inside the halls of Congress. But a provision requiring the same of Washington, DC, consultants who are not registered lobbyists was left out of the House bill.

The Senate version of the legislation, which already cleared the upper house, included the provision that put the same restrictions on “political intelligence consultants” that already pertain to lobbyists. These consultants share information gained from members of Congress with hedge funds, mutual funds and other clients.

One Republican, Senator Charles Grassley of Iowa, was not happy with the move by the GOP-controlled House. “It’s astonishing and extremely disappointing that the House would fulfill Wall Street’s wishes by killing this provision,” Grassley wrote. “The Senate clearly voted to try to shed light on an industry that’s behind the scenes.”

Instead of clamping down on insider trading by consultants, the House version mandates a federal study of the industry—a time-honored way of avoiding taking any real action by lawmakers.

The two versions of the bill will now be reconciled by a Senate-House conference.
-Noel Brinkerhoff