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Stop Trading On Congressional Knowledge Act Of 2012

Under the previous order, the Senate will resume consideration of the motion to concur in the House amendment to S. 2038, which the clerk will report.

The legislative clerk read as follows:

Motion to concur in the House amendment to S. 2038, an original bill to prohibit Members of Congress and employees of Congress from using nonpublic information derived from their official positions for personal benefit, and for other purposes.

Under the previous order, there will be 4 minutes of debate, equally divided in the usual form.

Sen. Joseph I. Lieberman

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I thank the Chair. I urge my colleagues on both sides of the aisle to support this bipartisan and now bicameral congressional ethics measure. This started as a response to stories and allegations that Members of Congress would not be held liable for insider trading. It then developed into what I think is the most significant congressional ethics legislation we have adopted in at least 5 years. It has been in a lot of other public disclosure and good government measures.

I wish to give particular thanks to Senator Kirsten Gillibrand and Scott Brown, who led the effort and took the initiative that got this ball rolling.

I yield the rest of my time to Senator Gillibrand.

Sen. Kirsten E. Gillibrand

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I thank the Chairman.

We are certainly taking a significant step forward, on behalf of the American people, toward restoring some faith our country has in their government. I wish to thank Leader Reid for his leadership, Chairman Lieberman, Ranking Member Collins, Senator Brown, and all our colleagues on both sides of the aisle who worked so hard to pass this legislation.

I wish to thank my colleague from New York, Louise Slaughter, who fought so hard and so long toward this effort.

This legislation was a rare instance where 96 Senators came together to deliver results for the American people. We passed a strong bill with teeth that will clearly and expressly make it illegal for Members of Congress, their staff, and their families to gain personal profits from nonpublic information gained through their service.

I strongly believe we have to make it clear no one is above the law and that Members of Congress need to play by the exact same rules as every other American. It is simply the right thing to do.

This is a commonsense bill and Americans can be assured our only interest is in their interest. When President Obama signs the STOCK Act, we will have begun to restore the public's faith in Washington.

The Senator's time has expired.

The Senator from Maine.

Sen. Susan Collins

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Madam President, I ask that I be notified after 1 minute.

The Senator will be notified.

Sen. Susan Collins

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Mr. President, I rise to speak in favor of the STOCK Act, which we will be voting on very shortly. This legislation is based on a bill that was first introduced in the Senate last fall by Senator Scott Brown, and a similar one introduced by Senator Gillibrand. I wish to commend them both for their work on this legislation. As a cosponsor of Senator Brown's bill, I especially want to recognize his leadership on this issue.

I also wish to recognize Chairman Lieberman for all the work he has done in moving this important bill through our committee, through a robust debate here on the Senate floor, and to final passage today.

Last fall, press reports on ``60 Minutes'' and elsewhere raised the question of whether lawmakers are exempt, either legally or practically, from the insider trading laws.

The STOCK Act is intended to affirm that Members of Congress are not exempt from our laws prohibiting insider trading. As we saw when we first considered this legislation, despite reassurances from legal experts and the SEC that no so such exemption exists, there has been persistent disagreement about the issue. That's why we feel it is important to send a very clear message that Members of Congress are not exempt from the insider trading laws, and that is exactly what this bill does.

Last month the Senate passed its version of the STOCK Act by an overwhelming bipartisan margin of 96 to 3. That bill had, at its heart, the affirmation of a duty arising from the relationship of trust and confidence already owed by Members and their staff to the Congress, the U.S. Government, and the citizens we serve.

As I explained when we considered the Senate version, this is not a new fiduciary duty, in the traditional sense, but the recognition of an existing duty. The bill we passed also affirmed that the employees of the executive and judicial branches owe a similar duty, and must also comply with the insider trading laws.

There are differences, of course, between the bill we passed last month and the House version before us today. I believe we could have quickly resolved those differences in conference, and would have preferred that route. Still, this is a strong bill that has received overwhelming bipartisan support. It preserves the core of the bill passed by the Senate: to make absolutely clear that elective office is a place for public service, not for private gain. Underscoring that important message is the chief purpose of the STOCK Act, and that is why I support it.

The Senator has 1 minute.

Sen. Susan Collins

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We need to send a strong message that elective office is the place for public service and not private gain.

Sen. Patrick J. Leahy

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Mr. President, I, again, filed a carefully drafted version of the bipartisan Public Corruption Prosecution Improvements Act as an amendment to the STOCK Act. Despite near unanimous approval for this amendment just a few short weeks ago, there was an objection by the House Republican leadership to the anti-corruption measure and Senate Republicans objected to going to conference to restore this important anti-corruption provision which had been stripped out of the bill. I am deeply disappointed that the Senate is taking up the House version of the bill that stripped out our bipartisan anti-corruption measure without consideration or a vote.

My amendment reflects a bipartisan, bicameral agreement and would strengthen and clarify key aspects of Federal criminal law to help investigators and prosecutors attack public corruption Nationwide. The House stripped this amendment from the STOCK Act after a flurry of misinformation about what the amendment actually does. Senator Cornyn and I took concerns very seriously and addressed them effectively when we drafted the amendment. The amendment I seek to offer includes a further belt-and-suspenders modification to address any legitimate concern. It is carefully and narrowly drawn and will only reach clearly corrupt conduct.

The Senate Judiciary Committee has now reported the Public Corruption Prosecution Improvements Act with bipartisan support in three successive Congresses and it has passed the Senate by voice vote. The House Judiciary Committee reported a companion bill unanimously. It is past time for Congress to act to pass serious anticorruption legislation. That is what the Public Corruption Prosecution Improvements Act amendment would be.

Public corruption erodes the trust the American people have in those who are given the privilege of public service. Loopholes in existing laws have meant that corrupt conduct goes unchecked. The stain of corruption has spread to all levels of government and victimizes every American by chipping away at the foundations of our democracy. My amendment would help us to take real steps to restore confidence in government by rooting out criminal corruption.

In Skilling v. United States, the Supreme Court sided with a former executive from Enron and greatly narrowed the honest services fraud statute, a law that had been appropriately used for decades as a crucial weapon to combat public corruption and self-dealing. The Court's decision leaves open the opportunity for State and Federal public officials to secretly act in their own financial self-interest, rather than in the interest of the public. This amendment, in a precise manner without ambiguity, closes this gaping hole in our anticorruption laws.

If we are serious about addressing the kinds of egregious misconduct we have seen too often in recent years, Congress should enact meaningful legislation to give law enforcement the tools necessary to enforce our anticorruption law. The STOCK Act is much less meaningful without this important, substantive reform. I am deeply disappointed that the Senate apparently will not take the opportunity to support taking these modest steps to bring those who undermine the public trust to justice.

Sen. Carl Levin

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Mr. President, today the Senate has the opportunity to vote in support of the STOCK Act. If we vote for the House amendment to the Senate bill, we can send this legislation right to President Obama to be signed into law. That is exactly what we should do.

The lifeblood of our democratic government is the contract between the people and their elected representatives, a contract that must be based on trust that elected officials will act for the good of our Nation and in the interests of their constituents, and not for personal gain. To ensure that we maintain that trust, our Nation has laws and our Congress has rules that establish clearly the responsibilities of government officials, Members of Congress and their staffs and provide for the enforcement of violations.

The legislation before us is, in a way, preventative maintenance to protect that trust. It is a tightening up of our legal and ethical guidelines as part of what must be a constant effort to assure that the interests of our Nation and our constituents come first. Our constituents must have confidence that Members of Congress and our staffs will not use our positions for our personal financial benefit.

To be clear, as it stands now, it is a violation of the trust our constituents place in us, a violation of the democratic process, a violation of the securities laws, and a violation of congressional ethics rules for Members of Congress or their employees to engage in insider trading--the use of information not available to the public to make investment decisions. But questions have been raised about insider trading by Members of Congress. The legislation before us today is designed to ensure that those questions are answered. It removes any doubt that insider trading by Members and employees of Congress is against the law and against Congressional rules. It is important to remove that doubt because any appearance of a breach in trust between Congress and our constituents is corrosive to honest, open and effective government.

Back in December, the Homeland Security & Governmental Affairs Committee, of which I am a member, held extensive discussions on the need to preserve that trust, including a very productive hearing on December 1. Later in December, our committee held a markup and approved the Stop Trading on Congressional Knowledge Act, or STOCK Act. I want to commend our chairman, Senator Lieberman, and our ranking member, Senator Collins, for their leadership, and the many members of the committee, Democratic and Republican, who made contributions to that process.

Two things became clear during our hearings and our markup. The first is that there was consensus that we should remove any uncertainty about the prohibition against insider trading. The second thing that became clear was significant bipartisan desire to avoid any unintended consequences as we sought to remove any uncertainty. We reported out the legislation because of widespread agreement on our goals, but there remained concerns about the means, and it was understood that we would attempt to address those concerns before the bill came to the floor.

And so a number of us worked in the weeks after the markup to make sure that our goals and our means were in concert. We met that objective, and our consensus was reflected in the language of the bill that passed the Senate by a vote of 96 to 3. The House amendment before us today retains the key language from the Senate bill that Senator Lieberman, Senator Collins and I, among others, worked so hard to get right. While some provisions that I supported have been removed by the House amendment, the central purpose of this bill remains the same. The House amendment, like the Senate bill it replaces, removes any uncertainty over the prohibition on insider trading, and it avoids unintended harmful consequences that concerned some of us.

I would now like to discuss two critical provisions in the bill before us today. The first reassures the American people that there are no barriers to prosecuting Members and employees of Congress for insider trading. It does so through language establishing that Members and employees of Congress have a duty arising from ``a relationship of trust and confidence'' with the Congress, the government, and most importantly, with the American people. Establishing such a duty removes any doubt as to whether insider trading prohibitions apply to Congress. It is also important that the bill's language makes clear that in offering this new language it does not in any way prevent enforcement of the anti-insider trading provisions contained in current law. Again, I am confident that under current law, Members of Congress and our staffs are prohibited from insider trading. This bill will ensure that the current prohibition is unambiguous, and thereby strengthened.

The second major provision of the legislation instructs the Ethics Committees of both chambers to issue clear guidance to members and staffs regarding the prohibition on profiting from inside information. This guidance will clarify that existing rules in both chambers relative to gifts and conflicts of interest also prohibit the use of nonpublic information gained in the conduct of official duties for private profit.

Let me briefly mention one other provision, unrelated to insider trading but nonetheless an important step forward in terms of gaining the confidence of our constituents. As one of the originators of the Lobbying Disclosure Act of 1995, I am well aware of the value of transparency in government. The bill before us improves congressional transparency by requiring that personal financial disclosure filings required of members and certain staff are made available electronically to the public. But because this bill also significantly expands the number of officials required to file public disclosures, including law enforcement, military, and intelligence officers, it is critical that this provision be implemented in a way that is consistent with our national security interests. Care should be taken to ensure that public filers are not made unnecessarily vulnerable to malicious use of personal information.

The House amendment also removes a provision of the Senate bill that would have required political intelligence consultants to register in a way similar to how lobbyists are required to register currently. Instead, the House amendment, like the version of the Senate bill that was reported by the Homeland Security and Governmental Affairs Committee, requires the Comptroller General of the United States to study the role of political intelligence in financial markets and report back to Congress. It is corrosive of open government for political intelligence consultants to sell their access to officials. Before Congress acts to address this issue, we must learn more about it, which is why I support this study. I look forward to working with my colleagues to address this issue once we have the benefit of the Comptroller's report.

In addition to the insider trading and disclosure provisions, this bill contains numerous other important improvements to our ethics laws. I urge my colleagues to join together today, to pass this legislation and send it to President Obama for his signature.

I ask unanimous consent that my statement appear in the Record at the appropriate place before the vote on the STOCK Act.

Sen. Joseph I. Lieberman

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Madam President, I rise today to support cloture on the motion to concur in the House amendment to the ``Stop Trading on Congressional Knowledge Act,'' the ``STOCK Act''--S. 2038.

We have come a long way in a short time in a bipartisan fashion on this bill, which does many good things.

I want to start by thanking my colleagues, Ranking member Collins and Senators Gillibrand and Brown for all their work on this bill.

And I want to thank Majority Leader Reid for making the STOCK Act the first bill the Senate debated after the winter recess.

Mr. President, this problem received a jolt of momentum late last year when ``60 Minutes'' aired allegations that some Members of Congress and their staffs used information gained on their jobs to enrich themselves with time-sensitive investments in the stock market and nothing could be done because Congress had exempted itself from insider trading laws.

We took the issue up at a hearing of the Homeland Security and Governmental Affairs Committee in December and established that the charge that Congress had exempted itself from insider trading laws was just not true. However, it was also clear that existing laws needed to be clarified.

At our committee hearing, several securities law experts told us that there was ambiguity in the law and they could not 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.

That is because, as the experts explained, a person may be found to have violated the insider trading laws only if he or she breaks a fiduciary duty, a duty of trust and confidence owed to somebody--to the shareholders of the company, or to the source of the nonpublic information, for example.

The experts told us that it is possible that a judge looking at existing case law might conclude that Members of Congress owe no duty to anyone with respect to the nonpublic information they receive while carrying out their duties. Now, if I were a judge, I would not see it that way. It seems self-evident that public office is a public trust, and that Members of Congress have a duty to the institution of Congress, to the government as a whole, and to the American people not to use information gained during their time in Congress--and unavailable to the public--to make investments for personal profit.

But the fact is that there are some very smart legal experts who are concerned that a judge would not see it that way. And this lack of clarity could in fact shield a Member of Congress from prosecution for insider trading.

The STOCK Act clarifies this ambiguity in the Security Exchange Act of 1934 by explicitly stating that Members of Congress and our staffs have a duty of trust to the institution of Congress, to the U.S. Government, and to the American people--a duty that Members of Congress violate if they trade on non-public information they gain by virtue of their 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 non-public information derived from their position in Congress to make a private profit.

Besides these changes aimed at insider trading, the STOCK Act includes other significant Congressional ethics legislation. For example, it requires Members of Congress and their staffs to file public reports on their purchases or sale of stocks, bonds, commodities futures or other financial transactions exceeding $1,000 within 30 days of the transaction. Currently these trades are reported once a year. Timelier reporting will allow the SEC and the public to assess whether there is anything suspicious about the timing of the trade.

The bill also contains important language that requires financial disclosure forms filed by Members and staff be filed electronically and--perhaps even more significantly--be available online for public review.

There really is no sensible reason to make someone come physically into the House or Senate to see a copy of one of these financial disclosure forms, which are public records.

The bill will also require the Government Accountability Office to study and report back to Congress on so-called ``political intelligence'' consultants who sell information derived from government officials to investors.

The STOCK Act also contains several provisions that were added in the Senate or House to strengthen the bill, including language offered by Senator Blumenthal related to the denial of Congressional benefits to Members who commit public corruption crimes; language offered by Senator Boxer that will, for the first time, require Members of Congress and senior Executive Branch officials to disclose their mortgages on their annual financial disclosure forms; and language offered by Senator McCain to prohibit executives of Fannie Mae and Freddie Mac from receiving bonuses while the firms remain in federal conservatorship.

This is a very strong bill, in fact, the strongest Congressional ethics reform bill that has been passed by Congress since we passed the Honest Leadership and Open Government Act in 2007.

This bill was reported as an original bill out of the Committee on Homeland Security and Governmental Affairs on December 13 by a vote of 7 to 2. Then, after thorough debate on the Senate floor, including the consideration of 20 amendments, the bill passed the Senate on Feb. 2 by a vote of 96 to 3.

The bill was sent to the House, which moved quickly and approved the STOCK Act just a week later by a lopsided majority of 417 to 2.

This is Congress at its best. A problem was identified that cut directly to the public's faith in this institution and we dealt with it quickly and on a bipartisan basis in both Houses.

This should not only be applauded but serve as a model as we take up other crucial legislation, such as Postal reform and cybersecurity. This shows we can work together rather than engage in a perpetual partisan tug of war.

Mr. President, in his farewell address to the Nation, President Washington said that ``virtue or morality is a necessary spring of popular government'' and that we cannot ``look with indifference'' at anything that shakes that foundation.

The STOCK Act offers us a chance to restore trust in our elected government and to show those who, with their votes, gave us the honor of representing them here, that the only business we do here is the people's business.

Sen. Harry Reid

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There are many important issues facing our country today and solutions will require bipartisan cooperation. The STOCK Act has enjoyed overwhelmingly bipartisan support because it addresses a key issue, namely government accountability to the American people.

Members of Congress and those we employ must be held accountable to the same standards and laws as the citizens we represent. We owe a duty of trust and loyalty to the American people to conduct our private lives with the highest integrity and to never abuse our office to gain unfair or unethical financial advantages. I am pleased that we have voted overwhelmingly to pass a bill that closes any loopholes, real or perceived, in this regard.

I would note specifically that the STOCK Act requires that Members of Congress and their staffs abstain from profiting on any nonpublic information derived from a person's position or gained in the performance of official responsibilities. The bill also makes absolutely clear that Members and staff are not exempt from the insider trading prohibitions arising under the securities laws, including section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.

However, and I think my distinguished colleague from Connecticut will agree, the STOCK Act should not be interpreted as limiting government transparency in any way. Discourse with the public, whether privately or publicly, is vital to maintaining a healthy democratic society.

Sen. Joseph I. Lieberman

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I thank the Senator from Nevada. I am happy about the reforms that Congress has adopted, and I agree that the STOCK Act is not intended to limit government transparency or hinder dissemination of information to interested parties regarding Congressional activities and deliberations.

In the interest of clarity for the record, I would like to state that the STOCK Act does not turn information regarding Congressional activities and deliberations that was previously not material, into material information with respect to securities laws. I would also note that a Member or employee of Congress who, in the course of performing their duties, has a nonpublic conversation with a citizen or constituent does not automatically violate the duty imposed by Section 4(b)(2) the STOCK Act.

Sen. Harry Reid

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I thank the Senator from Connecticut for his comments. With regard to the Chairman's last remark, I would like to point out that my office has fielded concerns from multiple sources that the duty language may be interpreted by the SEC as creating liability for public officials and their staff when communicating privately with constituents. There is concern that a threat of this would have a significant chilling effect on government transparency. I understand however that in conversations with my leadership staff the SEC has explicitly clarified that it does not view the STOCK Act as creating new limitations on the disclosure of Congressional information in conversations with constituents. I also understand that leadership staff has been assured by the SEC that any case brought under the insider trading prohibitions would still require the SEC to prove that a Member of Congress or their staff acted with scienter, which means acting corruptly, knowingly, recklessly or in bad faith.

Sen. Joseph I. Lieberman

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The Democratic leader is correct. As the Director of

Sen. Harry Reid

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Furthermore, it is my understanding that Section 11 of this bill is not intended to override the authority of the President to exempt from public availability the financial disclosure reports of individuals engaged in intelligence activities, which is contained in section 105(a)(1) of the Ethics in Government Act. As to the executive branch, section 105(a)(1) applies to all of the public availability requirements of this bill.

Sen. Joseph I. Lieberman

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That is correct. It is not the intent of the STOCK Act to override the President's authority for necessary exemptions for intelligence activities.

Sen. Susan Collins

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I yield the remainder of my time to Senator Scott Brown.

The Senator from Massachusetts.

Sen. Scott Brown

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Madam President, today, we put America first and we passed a bipartisan and now bicameral bill the President will sign, and we took a step to ending the deficit of trust hurting our democracy. I wish to thank Senator Gillibrand and the leadership of Senator Collins and Senator Lieberman for marking this up so quickly. Today is a good day.

The STOCK Act will affirm that Members of Congress are not above the law and will increase transparency by requiring Members of Congress and highly compensated Federal employees to disclose all their trading activity within 45 days. Today, America is a government by the people and for the people, and that means our elected officials must follow the same laws as everybody. We have taken a step toward reestablishing trust, and today we are one step closer to making every seat the people's seat.

I encourage everybody to support this passage.

Under the previous order, the clerk will report the motion to invoke cloture.

The assistant legislative clerk read as follows:

We, the undersigned Senators, in accordance with the provisions of rule XXII of the Standing Rules of the Senate, hereby move to bring to a close debate on the Reid motion to concur in the House amendment to S. 2038, the Stop Trading on Congressional Knowledge Act. Harry Reid, Jeff Bingaman, Daniel K. Inouye, Joseph I. Lieberman, Tim Johnson, Daniel K. Akaka, Richard J. Durbin, Charles E. Schumer, John Barrasso, Scott P. Brown, Mitch McConnell, Jon Kyl, Richard C. Shelby, Rob Portman, John Cornyn, John Hoeven, Marco Rubio, Lisa Murkowski, Jeff Sessions, Mike Johanns, Tom Coburn, Susan M. Collins.

By unanimous consent, the mandatory quorum call has been waived.

The question is, Is it the sense of the Senate that debate on the motion to concur on the House amendment to S. 2038, an act to prohibit Members of Congress and employees of Congress from using nonpublic information derived from their official positions for personal benefit, and for other purposes, shall be brought to a close?

The yeas and nays are mandatory under the rule.

The clerk will call the roll.

The assistant legislative clerk called the roll.

Sen. Jon Kyl

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The following Senator is necessarily absent: the Senator from Illinois (Mr. Kirk).

The yeas and nays resulted--yeas 96, nays 3, as follows:

[Rollcall Vote No. 56 Leg.] YEAS--96 Akaka Alexander Ayotte Barrasso Baucus Begich Bennet Bingaman Blumenthal Blunt Boozman Boxer Brown (MA) Brown (OH) Cantwell Cardin Carper Casey Chambliss Coats Cochran Collins Conrad Coons Corker Cornyn Crapo DeMint Durbin Enzi Feinstein Franken Gillibrand Graham Hagan Harkin Hatch Heller Hoeven Hutchison Inhofe Inouye Isakson Johanns Johnson (SD) Johnson (WI) Kerry Klobuchar Kohl Kyl Landrieu Lautenberg Leahy Lee Levin Lieberman Lugar Manchin McCain McCaskill McConnell Menendez Merkley Mikulski Moran Murkowski Murray Nelson (NE) Nelson (FL) Paul Portman Pryor Reed Reid Risch Roberts Rockefeller Rubio Sanders Schumer Sessions Shaheen Shelby Snowe Stabenow Tester Thune Toomey Udall (CO) Udall (NM) Vitter Warner Webb Whitehouse Wicker Wyden NAYS--3 Burr Coburn Grassley NOT VOTING--1 Kirk

On this vote, the yeas are 96, the nays are 3. Three-fifths of the Senators duly chosen and sworn having voted in the affirmative, the motion is agreed to.

Cloture having been invoked, the motion to refer falls as inconsistent with cloture.

Under the previous order, all postcloture time is yielded back, the motion to concur in the House amendment with amendment No. 1940 is withdrawn, and the motion to concur in the House amendment is agreed to.

Under the previous order, the motion to reconsider is considered made and laid upon the table.