Stop Trading on Congressional Knowledge Act

Floor Speech

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The Senator from Connecticut.

Mr. LIEBERMAN. I thank the Chair. Mr. President, I want to begin debate, and I do so with gratitude that the distinguished ranking member Senator Collins is here, as well as Senator Brown of Massachusetts, whose original legislation, along with Senator Gillibrand, forms the basis of this proposal that comes out of our committee.

I want to go back to the beginning, to President Washington, whose Farewell Address seems to take on more relevance as time goes by, although it is obviously more than 200 years old now. Washington said in his Farewell Address that ``virtue or morality is a necessary spring of popular government'' and that we cannot ``look with indifference'' at anything that shakes that foundation or, continuing his metaphor, dries the spring.

I think we have to say in the long proud course of American history since then there have been very few times where the springs of trust in popular government have been more dry than they are in our time.

I am grateful my colleague Senator McCain is not on the Senate floor now because when we get to this subject, he usually says: When you look at the public opinion polls on Congress, the numbers of people who have a favorable impression of this body are so low we are down to close relatives and paid staff. Usually, when I am with him, I add: I'm not so sure about all the paid staff.

But, in any case, we have an opportunity with this piece of legislation to take a small step forward toward rebuilding public trust in Congress and to restoring those necessary springs of popular government--the trust of the people in us. This goes back just to last fall and early winter. A book appeared by an author named Peter Schweizer who was then interviewed on ``60 Minutes.'' He made allegations that some Members of Congress and their staffs have used information gained on their jobs to enrich themselves with timely investments, particularly in the stock market. Those allegations, as Washington might have said, certainly dried the springs of trust that we should have with the American people, even more than they already are.

So today I am proud to rise to bring before the Senate the STOCK Act, which stands for Stop Trading on Congressional Knowledge Act of 2012. This piece of legislation puts into law language and reporting requirements that will make it clear to the American people we understand being a Member of Congress means we have a responsibility to the public, a public trust, and any Member of Congress or staff member here who violates that trust will be punished.

This bill was reported as an original bill out of the Committee on Homeland Security and Governmental Affairs on December 14 with a bipartisan vote of 7 to 2. In advancing this bill, as I have said, Senator Collins and I worked closely with Senators Gillibrand and Brown of Massachusetts, both of whom sponsored versions of the STOCK Act. Senator Levin, who has just spoken, worked closely with us on the substitute amendment that will be filed, and I thank them all for their contributions on this piece of legislation. I also thank the Senate majority leader, Senator Reid, for deciding this important piece of legislation would be one of the first items we take up in Congress this year.

The specific rules making insider trading illegal are found in a large body of Securities and Exchange Commission regulatory activities pursuant to section 10(b) of the Securities Exchange Act of 1934 and court decisions interpreting those activities. Our Committee on Homeland Security and Governmental Affairs held a hearing on this topic in December, and the Securities and Exchange Commission actually filed a statement with us for the record declaring its belief that currently there is authority in the law to investigate and prosecute congressional insider trading cases. The chief enforcement officer of the SEC said:

Trading by congressional members or their staffs is not exempt from the Federal securities laws, including the insider trading prohibitions.

But other witnesses at that hearing, including Georgetown University Law Professor Donald Langevoort and Columbia Law School Professor John Coffee told us that while the SEC might be technically right, in their opinion there was ambiguity in the law and they couldn't be sure how a court would rule if there was a challenge to the SEC's authority to bring an insider trading case against a Member of Congress or a staff member.

That is because, as the professors explained, a person may be found to have violated insider trading laws only if he or she breaks a fiduciary duty, a duty of trust and confidence owed to somebody--typically to the shareholders of a company or to the source of the nonpublic information. They argued it is possible a judge might decide that Members of Congress do not have a fiduciary duty--in the way in which it has normally been interpreted--to anyone with respect to the nonpublic information that we receive while carrying out our duties.

Now, I must say that I find it hard to see it that way. It seems to me self-evident that a public office is a public trust and that Members of Congress have a duty to the institution of Congress, of course to the government as a whole, and ultimately, most importantly, to the American people not to use information gained during their time in Congress--and unavailable to the public--to make investments for personal benefit. But the fact is there are some very experienced and intelligent legal experts who told our committee they couldn't certify a judge would see it exactly that way.

That is the first purpose of this act, the STOCK Act: to clarify the ambiguity of securities law by explicitly stating that Members of Congress and our staffs have a duty of trust to the institution of Congress, to the United States Government, and to the American people--a duty that Members of Congress violate if we trade on nonpublic information we gain by virtue of our public position.

The bill also requires the ethics committees of both Houses of Congress to issue guidance to clarify that Members and staff may not use nonpublic information derived from their positions in Congress to make a private profit.

Besides these changes--and this is different and important--our committee decided the STOCK Act should require Members of Congress and their staffs to file public reports on our purchases or sale of stocks, bonds, commodities, futures, or other financial transactions exceeding $1,000 in value within 30 days of the transaction. Right now, as the Acting President of the Senate knows, these trades are reported once a year in our annual disclosure statements. This proposal would change that to within 30 days of the trade.

More timely reporting of this kind will allow not just the SEC but the public to assess whether there is anything suspicious or wrong about the timing of the trade and conduct in the Senate. That kind of real transparency will be an additional deterrent to unethical or illegal behavior.

The bill also contains another important provision offered in committee by Senators Jon Tester and Mark Begich that will require the financial disclosure forms filed by Members and staff to be filed electronically and perhaps even more significantly, therefore, be available online for public review. The fact is, our reports are now available for public review. But people have to go to the Office of the Secretary of the Senate and ask for copies of them. There is no sensible reason to make someone physically come to the House or Senate to see a copy of one of our financial disclosure forms. They are public records and they ought to be easily available to the public online, and this proposal will make sure that happens.

Those are the three major provisions of the proposal, as I see it: to affirm a clear fiduciary duty under the insider trading law so it is clear Members of Congress and our staffs are covered by them; secondly, to require disclosure of trades in excess of $1,000 within 30 days; and, third, that those trades and our annual financial report will be electronically filed and, therefore, be available online.

May I say, as we begin the second session of the 112th session of Congress, we begin with so much distrust of our Federal Government that I think passing the STOCK Act could have a positive effect on how we are being perceived, and particularly if, as I hope, we pass it on a bipartisan basis. The STOCK Act was passed out of our committee in exactly that way. I believe it has the support of Members and leaders of both parties in the House and Senate, and President Obama has promised to sign it as soon as it comes to his desk.

So let me end by quoting again from our first President, this time from his Inaugural Address, where he set the ideals for the new government that our country would have. He said:

The foundations of our national policy will be laid in the pure and immutable principles of private morality ..... and the preeminence of free government [will] be exemplified by all the attributes which can win the affections of its citizens and command the respect of the world.

Enacting this proposal into law will say to our disappointed, our skeptical, our troubled constituents that we understand and accept Washington's wisdom.

I thank the Chair, and at this time I yield to my dear friend, the distinguished ranking member of our committee, Senator Collins.

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Mr. LIEBERMAN. I appreciate the comments.

Mr. President, I am pleased to report that I just received notice that within the hour the administration put out the Statement of Administration Policy--the so-called SAP--strongly endorsing this legislation, S. 2038, and we appreciate that very much. It is a very strong statement of support for the principles and exactly the kinds of things Senator Collins, Senator Brown, Senator Gillibrand, Senator Tester, and I have been saying.

As the President said in his State of the Union speech, if we can get this bill to his desk--and the sooner the better--he will sign it as soon as he possibly can.

If there is no one else who wishes to speak at this time, I would suggest the absence of a quorum.

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