Stock Act amendment affects Wall Street traders

Expands legal definition of ‘lobbyist’

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The House plans to vote Thursday on its version of a bill to crack down on congressional insider trading and political intelligence peddling, even as the version that passed the Senate last week has raised concerns it could turn the act of calling a congressional staffer about a bill into a lobbying activity.

Sen. Chuck Grassley, Iowa Republican, succeeded in adding a provision to the Senate bill that will require anyone who seeks information from a government official to help them analyze markets or make investment decisions to register as a lobbyist.

But analysts said that is so broad that it could sweep up average citizens, adding thousands of people to the rolls of official lobbyists by classifying them as “political intelligence consultants.”

Under the definition, Wall Street analysts who gather information for investment firms would have to register as lobbyists for the first time. But some experts say the provision is so vague it could apply to anyone who seeks information from a friend on Capitol Hill — even if the information is public.

“If you read it in the newspaper, on the Internet or in the trade press, it’s not a problem,” said Tom Susman, editor of the Lobbying Manual, a guide to federal lobbying law. “But if you call your member of Congress because you want direct information, that’s political intelligence.”

The fight came as part of the broader Stock Act, which would make members of Congress subject to sanctions if they use insider information for financial gain.

Mr. Grassley’s amendment, which passed 60-39, will require those seeking information to register as lobbyists.

Mr. Grassley told his colleagues that they need to crack down on a multimillion-dollar industry where Washington insiders peddle their knowledge to Wall Street firms that leverage it for profit.

“There is a growing unregulated industry with no transparency,” Mr. Grassley said. “If a lobbyist has to register in order to advocate for a school or a church or a private corporation, shouldn’t a lobbyist have to register if they’re seeking information that ends up in making people a profit.”

The provision caught the attention of industry groups over the weekend. The Washington law firm Covington & Burling sent out a notice Monday warning clients that hedge funds, private equity funds and investment advisers who don’t currently have to register under lobbying rules might need to change their practices to avoid registration.

“The reach of the law, if enacted, would likely extend far beyond the financial services sector,” the firm wrote. “For example, a company that seeks to gather information from covered federal officials regarding the likely congressional or regulatory reaction to a proposed merger or acquisition might be required to register.”

Others charge that it doesn’t close loopholes that allow Washington insiders like former House Speaker Newt Gingrich and former Senate Democratic Leader Tom Daschle to earn millions from consulting without registering as lobbyists.

House Majority Leader Eric Cantor didn’t say whether the House version would include the Grassley amendment, but promised to release amendments to the House bill Tuesday evening, ahead of a vote later this week.

Mr. Cantor said that the House bill extends the ban on insider trading to the executive branch and makes it easier for a member of Congress convicted of a crime to lose their pension — similar to the Senate bill. It also prohibits public officials and their staff from receiving special access to initial public offerings due to their positions.

“Tonight, we will introduce a strengthened and expanded Stock Act, and remove provisions that would have made the bill unworkable or raised more questions then they answered,” Mr. Cantor said.

Howard Marlowe, president of the American League of Lobbyists, hopes to convince Congress to expand the provision to include any information gleaned from Capitol Hill — not just information that could inform investment activity.

“We want to use this as an opportunity,” Mr. Marlowe said. “We want to be more inclusive and pick up the Gingrichs, the Daschles and the thousands of other people who are ABAL — Anything But A Lobbyist.”

To others, the provision extends far beyond its intended effects.

Mr. Susman said that as he reads the bill, he believes it could apply to a “humongous” number of people — from businesses trying to make real estate decisions to individuals seeking to sell a home.

“If I call a friend on the Hill to find out if there’s likely to be action on a tax bill because I’m thinking about selling my second house, I’m caught as a political intelligence consultant,” he said. “That’s clearly information collection for purposes of making a financial decision.”

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