Left to Right: David Leland, partner at Skadden, Arps, Slate, Meagher & Flom LLP; Charles Borden, partner at Allen & Overy LLP; and Stephen L. Cohen, assistant director for the Division of Enforcement of the U.S. Securities and Exchange Commission
“For the most part, political intelligence is about trying to figure out what is going to happen,” said Charles Borden, partner at Allen & Overy LLP in Washington, D.C. “They typically reach out to government employees … to try to understand what exactly is happening with respect to proposed legislation and regulations.”
After various media outlets began to allege that members of Congress were profiting by trading based on nonpublic knowledge, the activities of the political intelligence industry were brought to the forefront, ultimately resulting in the passage of the STOCK ACT.
“Lobbyists and consultants who deal with Congress on a day-to-day basis are particularly concerned about the potential chilling effect on communications between Congress and lobbyists,” said David Leland, partner at Skadden, Arps, Slate, Meagher & Flom LLP in Washington, D.C. “Even lobbyists who do not engage in political intelligence are still concerned about their access to inside information because information is really the lifeblood of lobbying.”
“When I was on the other side as a congressional staffer, I relied on lobbyists to pass along information that I might not have,” Leland added. “It is really creating a lot of concern for the government affairs industry that this legislation will discourage congressional staffers and some members of Congress from sharing information.”
Although the STOCK Act makes it plain that such trading is illegal for members of Congress and legislative branch staff, lawyers and political intelligence professionals are debating which types of information are grounds for violation of insider trading laws.
The Securities and Exchange Commission looks at a wide variety of information to decide whether someone has violated insider trading laws. The line between general research and insider trading is determined by whether there was a breach of duty and whether the material information was nonpublic, said Stephen L. Cohen, associate director for the SEC’s Division of Enforcement.