Itâ€™s about time â€“ Finally, someone in a real position of power is speaking out about the stunningly over-broad, ludicrously vague and 100% unconstitutional “STOCK Act.” This past week, the SECâ€™s Co-Chief of Enforcement, George Canellos, publicly critqued the 2012 law which purports to create a new category of speech known as â€œpolitical intelligence.â€ What is political intelligence exactly? Nobody really knowsÂ for sure (clearly, one part of the problemÂ . . .)Â WhatÂ IT clearly IS NOTÂ is â€œBEING SMART ABOUT POLITICS.â€ But whatever IT IS, once IT gets connected to a securities transaction (even tangentially), EVERYONE involved is at risk of liability for insider trading.
According the legislation, political intelligence is defined as follows:
â€œInformation derived by a person from direct communication with an executive branch employee, a Member of Congress, or an employee of Congress; and provided in exchange for financial compensation to a client who intends, and who is known to intend, to use the information to inform investment decisions.â€ See Pub. L. No. 112-105, 126 Stat. 291 (April 4, 2012)
Now it might sound like that only applies to some shady group of insider operatives but if you take even a moment to consider the implications, itâ€™s easy to see thatâ€™s not the case . . .
- Example: Youâ€™re a Wall Street Journal reporter who regularly has â€œon-backgroundâ€ discussions with Members of the House Financial Services Committee and their staffers. Your job as a journalist is to tell your readers the â€œinformationâ€ you learn during those and other conversations. Thatâ€™s more or less the definition of reporting. Moreover, The Wall Street Journal: (1) receives compensation from its â€œclients;â€ (2) obviously “knows” that many of its readers â€œintend to use the information to inform investment decisions;” and (3) pays your sallary….. Nervous yet???? And even if you’re not a reporter, I sure hope you didn’t read the business section today. OR EVER.
The STOCK ACT clearly violates the speech, petitioning and press clauses of the First Amendment. It contains no protections for the media or any other groups. Nevertheless, at least for now, itâ€™s also the law of the land.
So hereâ€™s what Enforcement Co-Chief Canellos thinks:
â€œCanellos argued that the STOCK Actâ€™s usefulness is also limited because it does not adequately define a member of Congressâ€™s duty to keep confidential information private. He also feels that the Act is ambiguous as to whether a member may freely discuss legislation with industry officials and constituents, which is part of a memberâ€™s job. Canellos stated that therefore ultimately the question might be whether the official directed information for a good or a bad purpose.â€
Ok – not exactlyÂ scathing enough for my taste, but at least it’s a start.
AS FOR THE REST OF YOU, DO THE RIGHT THING, STOP BEING A FUGITIVE AND GET OVER TO YOUR LOCAL SEC OFFICE! JUST TURN YOURSELF IN ALREADY!!