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Taking the Teeth out of the STOCK Act

NPR reported earlier this week that Congress has quietly overhauled important provisions of the STOCK Act . For those that don't know, the STOCK ("Stop Trading on Congressional Knowledge") Act was signed into law in April 2012 and sought to prevent "Members of Congress and employees of Congress from using nonpublic information derived from their official positions for personal benefit, and for other purposes."

The STOCK Act was supposed to prevent Members and Congressional staff from trading on insider-information by (1) increasing transparency through open public access on official websites of financial disclosures, (2) supplementing ethics requirements thorough bans special IPO access, pension forfeiture for corrupt members, and other measures, and (3) "expressly affirm[ing] that Members of Congress and staff are not exempt from the insider trading prohibitions of federal securities laws."

However, on Monday the provision which sought to increase transparency was nullified in a matter of seconds, without debate or vote, through unanimous consent. Now the records will be stored--on paper--in the basement of the Cannon House Office Building and searchable only in the most inefficient manner. The reasoning for this nullification was based upon a report by the National Academy of Public Administration that found "online financial disclosure requirement can harm both federal agency missions and employees."

While some were concerned about the privacy of federal employees -- notably, the ACLU filed a lawsuit on their behalf that was later dismissed without prejudice according to documents available on LexisNexis -- most saw the STOCK Act as a major step in the fight against insider-trading by federal employees. Its revision will make it much harder to identify potential conflicts of interest and other financial improprieties by government employees.