H.R. 5015, 109th Congress: Banning Securities Trading by Members of Congress and Their Staff Based upon Nonpublic Information

H.R. 5015, 109th Congress: Banning Securities Trading by Members of Congress and Their Staff Based upon Nonpublic Information

Order Code RS22422
April 18, 2006
CRS Report for Congress
Received through the CRS Web
H.R. 5015, 109th Congress: Banning
Securities Trading by Members of Congress
and Their Staff Based upon Nonpublic
Information
Michael V. Seitzinger
Legislative Attorney
American Law Division
Summary
H.R. 5015, 109th Congress, would prohibit securities trading based upon nonpublic
information relating to Congress and would require additional reporting by Members of
Congress and congressional employees concerning their securities transactions. The bill
would also require political intelligence consultants, defined in the bill, to register with
the Secretary of the Senate and the Clerk of the House of Representatives. This report
will be updated as needed.
H.R. 5015, 109th Congress, was introduced on March 28, 2006, and referred to the
Committees on Financial Services, House Administration, Judiciary, and Agriculture.
The bill would explicitly prohibit securities trading based upon nonpublic information
relating to Congress and would require additional reporting by Members of Congress and
congressional employees concerning their securities transactions.
Section 2 of the bill would amend Section 10 of the Securities Exchange Act of
1934,1 the general antifraud provision, by adding subsection (c). This subsection would
require the Securities and Exchange Commission (SEC) to issue rules prohibiting any
person from buying or selling securities of any issuer while the person possesses material
nonpublic information concerning any pending or prospective legislative action relating
to the issuer if the information was obtained because of the person’s being a Member or
employee of Congress or if the information was obtained from a Member or employee of
Congress and the person knew that the information was so obtained.
The new subsection would also require the SEC to issue rules prohibiting any
Member or employee of Congress or any other person from disclosing material nonpublic
information concerning any pending or prospective legislative action concerning any
1 15 U.S.C. § 78j.
Congressional Research Service ˜ The Library of Congress

CRS-2
issuer if that Member, employee, or other person had reason to believe that the
information would be used to buy or sell the securities of the issuer based upon the
information. Section 2 of the bill would also add an identical subsection to Section 4c
of the Commodities Exchange Act2 to require the Commodity Futures Trading
Commission to issue rules prohibiting the same kinds of activities concerning
commodities trading that the SEC must issue concerning securities trading.
Section 3 of the bill would amend Section 103 of the Ethics in Government Act of
19783 to require Members of Congress and officers and employees of the legislative
branch who are required to file under the Ethics in Government Act to file a report of any
transaction in securities involving at least $1000 within 30 days of the transaction.
Section 4 of the bill would amend Section 3 of the Lobbying Disclosure Act of 19954
by inserting after the terms “lobbying activities” and “lobbyists” the terms “political
intelligence activities” and “political intelligence consultants.” “Political intelligence
activities” would be defined as:
political intelligence contacts and efforts in support of such contacts, including
preparation and planning activities, research and other background work that is
intended, at the time it is performed, for use in contacts, and coordination with the
political intelligence activities of others.
“Political intelligence contact” would be defined as:
any oral or written communication (including an electronic communication) to or from
a covered legislative branch official, the information derived from which is intended
for use in analyzing securities or commodities markets, that is made on behalf of a
client with regard to the formulation, modification, or adoption of Federal legislation
(including legislative proposals).
“Political intelligence firm” and “political intelligence consultant” would also be defined.
The intention of this section of the bill is to further the goal of prohibiting the trading of
securities by Members of Congress and congressional employees based upon the receipt
of inside information relating to their congressional duties. Political intelligence
consultants, like lobbyists, would be required to register with the Secretary of the Senate
and the Clerk of the House of Representatives.
2 7 U.S.C. § 6c.
3 5 U.S.C. App. § 103.
4 2 U.S.C. § 1602.