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Feb. 10, 2012 – 10:18 p.m.

Reid Looks to Resolve Insider-Trading Bill Differences With Conference

By Alan K. Ota, CQ Staff

Senate Majority Leader Harry Reid plans to call for a conference to resolve significant differences between House and Senate bills that would bar insider trading by lawmakers and aides.

The move sets up another round of negotiations between the two chambers and puts Reid, D-Nev., on a collision course with House Majority Leader Eric Cantor, R-Va.

The principal points of contention will be Senate provisions on political-intelligence consultants and prosecution of public officials that Cantor dropped from the legislation before sending it to the House floor.

The House passed its amended version of the Senate’s bill (S 2038) by a vote of 417-2 on Feb. 9. The tally was 96-3 when the Senate passed the measure a week earlier.

Reid could appoint senators to a conference committee as early as Monday. The three who voted against the bill — Democrat Jeff Bingaman of New Mexico and Republicans Richard M. Burr of North Carolina and Tom Coburn of Oklahoma — said they would not object.

House Republican leaders said they found “ambiguities” and conflicting provisions in the bill the Senate passed after considering multiple amendments from both parties. And senators have suggested that House leaders created unintended problems by assembling their version in leadership offices without committee consideration.

Senate negotiators will be trying to restore two Senate provisions the House discarded. One would require political-intelligence consultants to register and file disclosure statements, and the other is intended to fight undisclosed “self-dealing” by public officials and make it easier for prosecutors to pursue public corruption cases.

New provisions added by Cantor are attracting less controversy and are likely to remain in the final version. They would bar lawmakers and some executive and judicial branch officials from participating in initial public stock offerings, and extend to high-level executive and judicial branch employees a requirement that they disclose negotiations for new jobs.

The swift pace of the legislation through both chambers is attributable more to the need to restore some credibility to a Congress that has seen its public approval rating hit an all-time low than to any need to explicitly ban insider trading by lawmakers.

Insider trading is prohibited by Securities and Exchange Commission regulations, and lawmakers are also subject to ethics rules.

Indeed, the Office of Congressional Ethics, an outside body set up to review allegations and make referrals to the House ethics committee, has contacted Financial Services Chairman Spencer Bachus, R-Ala., about his investments. He insists he has abided by the rules and expects full exoneration.

Two Senate Objectives

Both versions of the legislation would bar lawmakers and senior employees of the executive, legislative and judicial branches from using non-public information for private profit. The House bill would require lawmakers, senior aides and senior executive branch employees to disclose transactions of stock and other securities within 45 days. The Senate would impose a 30-day deadline.

Reid Looks to Resolve Insider-Trading Bill Differences With Conference

Sen. Charles E. Grassley, R-Iowa, is fighting to restore his provision that would require political-intelligence consultants to register and file disclosure reports similar to those required for lobbyists. Political-intelligence consultants gather information about congressional activity that is useful to hedge funds, investment companies and other clients.

Grassley complained about the “chutzpah of the people in the House of Representatives” and noted that his provision was similar to one in a House insider trading bill (HR 1148). “I will have a better chance in conference,” Grassley said.

The senator added that his provision would exempt journalists and some constituent groups in order to avoid infringing on First Amendment rights.

But Cantor has signaled that the House will stand its ground and work to ensure that Grassley’s disclosure requirement does not become law. His provision in the House bill calls for a study by the Government Accountability Office and the Congressional Research Service of the role of political intelligence in financial markets.

“Think of the wording: political intelligence. I mean, there’s so much to question about what that even means,” Cantor said.

Senate Homeland Security and Governmental Affairs Chairman Joseph I. Lieberman, I-Conn., on Feb. 9 said he will try to restore a bipartisan provision that was sponsored by Judiciary Chairman Patrick J. Leahy, D-Vt., to help prosecutors fight “self-dealing” by public officials.

The language was added to the Senate bill without opposition, and Leahy said he does not understand why the House dropped it.

The provision is an effort to reverse part of a 2010 Supreme Court ruling that narrowed the scope of a 1988 law (PL 100-690) providing criminal fraud penalties for undisclosed self-dealing by public and corporate officials.

Sen. John Cornyn, R-Texas, who backed Leahy’s amendment, said he will try to help “get it back.”

Cantor has not publicly outlined his negotiating strategy, saying during a Feb. 9 press conference that he hopes the overwhelming vote in the House might put pressure on the Senate to concede.

Lieberman described as “on its face, reasonable” another House-added provision that would bar lawmakers and senior employees of all three branches of government from taking part in initial public offerings of stock. That provision was meant to draw attention to an investment that Paul Pelosi, husband of House Minority Leader Nancy Pelosi, D-Calif., made in Visa Inc. in March 2008.

And Lieberman said he agreed with the House that Grassley’s provision on political-intelligence consultants was “premature.”

Both versions would extend disclosure requirements to lawmakers and senior aides, as well as senior employees of the executive branch. But Lieberman and Susan Collins, R-Maine, said they want to analyze the Senate-passed bill to ensure that new public disclosure requirements do not apply to more than 300,000 executive branch employees who are now required to file confidential financial disclosure statements under the 1978 ethics overhaul (PL 95-521).

Reid Looks to Resolve Insider-Trading Bill Differences With Conference

“We have to do a deeper dive on that. There’s a conflict in what the people believe is the coverage,” Collins said.

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