To the editor:
The Senate passed a bill late last week called the STOCK Act, which ostensibly deals with insider trading in Congress.
The vote was 96-3 — two Republicans and one Democrat voted no. As with Sarbanes-Oxley — which sailed through with three "no" votes in the House in 2002, yet is now criticized by everyone from GOP candidates to the Obama administration as being overly burdensome on legitimate smaller public companies — this vote tally could indicate that the "yes" votes simply followed the stampede and glossed over serious objections from the three dissenters.
What is not widely known, perhaps not even by some of the senators who voted for it, is that this bill is in significant part an anti-disclosure bill that would likely result in less transparency about Congress' doings.
The bill doesn't just bar employees of Congress from trading on non-public information; in many instances, it bans their disclosure of this information as well. The bill actually imposes a specific "duty" of "confidence," meaning confidentiality, with regard to information about Congress' actions that could affect the markets.
This is problematic, I write in OpenMarket.org, because "members and staffers have no practical way of assuring that those to whom they spread information won't use it for investment purposes. As a result, communication about important matters with outside groups may decrease markedly, and the very aim of transparency in government that was an impetus for this bill would be undermined." For example, a staffer who wanted to alert fiscal watchdog groups about a forthcoming earmark benefiting a Fortune 500 company, would do so knowing he or she could face liability if someone who received his or her email, trades in the stock. The bill could also effectively ban members and staffers from meetings and conference calls with ideological activists unless those meetings were open to the public.
News stories have raised legitimate concern about too much power and privilege in Congress and sensible reforms should be enacted.
And I favor some provisions in the STOCK Act subjecting members of Congress and their staffs to more rapid and specific disclosure of their investments.
But with regard to disclosure, there has been concern that the broad application of insider trading rules to communications in the private sector has inhibited disclosure about corporate wrongdoing. Congress should fix this, rather than compound the error with a whole new set of anti-disclosure rules that would muzzle much of the communication necessary for sunlight and reform.
John Berlau
Director
Center for Investors and Entrepreneurs
Competitive Enterprise Institute
Washington, D.C.
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