The collection and use by financial firms of non-public information derived from Congress and federal agencies – commonly referred to as "political intelligence" - has been receiving some significant scrutiny from the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) lately. This type of information gathering is similar to lobbying, but does not currently trigger registration or disclosure requirements under the Lobbying Disclosure Act. Although Congress has defined political intelligence and is considering pending legislation to regulate and require disclosure of this activity, there are currently no federal laws or ethics rules that specifically govern the gathering of political intelligence. In general, political intelligence is a poorly understood and unregulated activity that can prove problematic for individuals and firms that provide it without an adequate understanding of insider trading laws.
The Stop Trading on Congressional Knowledge Act (STOCK Act) of 2012, which expressly applies insider trading laws to members of Congress and their staff, defined "political intelligence" as information:
Under certain circumstances, political intelligence may be considered material, non-public information.
The STOCK Act required the Government Accountability Office (GAO), with assistance from the Congressional Research Service (CRS), to prepare a 2013 report on political intelligence activities. This report identified current regulatory gaps and was widely viewed as a possible prelude to legislation to regulate and require disclosure of political intelligence activities.
In March 2016, Senator Grassley (R-IA) introduced S. 2738, the Political Intelligence Transparency Act of 2016 and Congresswoman Louise Slaughter (D-NY) introduced a House companion bill. It is unlikely either bill will be enacted prior to the end of the current Congress. Both bills would amend the LDA to require the disclosure of political intelligence activity and both bills define "political intelligence activities:"
The DOJ and the SEC, for which insider trading remains a top priority, are not waiting for new authorities from Congress in order to pursue political intelligence cases. In June 2016, the U.S. Attorney for the Southern District of New York and the SEC announced insider trading charges involving non-public information obtained from the Food and Drug Administration. In November 2015, the SEC announced a $375,000 penalty from a political intelligence firm. In a separate case, also in November 2015, a federal judge ruled that the House Ways & Means Committee must cooperate with SEC investigators probing political intelligence activities. The Ways & Means Committee was granted a stay in December of 2015 order to pursue an appeal citing unresolved issues related to the Speech & Debate Clause of the U.S. Constitution.
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