CQ WEEKLY – VANTAGE POINT
April 7, 2012 – 11:25 a.m.
Insider Trading Law Presents a Tech Challenge
By Rachael Bade, CQ Staff
President Obama signed legislation into law last week explicitly banning insider trading by members of Congress, their top staff and thousands of other federal employees. The law includes a requirement for two elaborate central databases of financial disclosure information, including stock transactions, to be online and searchable within the next 18 months — one for the executive branch and another for Congress.
Such data exists now only in fragments within individual agencies that compile reports from their own senior employees. Putting the data together and making it as useful as Congress envisions will be a huge challenge for the Office of Government Ethics, or OGE, which is to jump-start the electronic system for the executive branch, and for the Secretary of the Senate, the Senate Sergeant at Arms and the House Clerk, which are charged with designing a similar database for the legislative branch.
In an analysis of the legislation before it was completed, the OGE wrote that it was “unequipped to undertake an IT development project of this complexity and magnitude.”
According to the analysis, more than 350,000 employees from various government agencies and departments, as well as lawmakers and those working for them, will have to file their disclosure reports using these electronic databases. The new law says the databases, which will be maintained on official House and Senate websites for the legislative branch and on OGE’s website for the executive branch, must “allow the public to search, sort and download data contained in the reports.”
Lawmakers, their top aides and other government executives currently file annual financial reports, but not all are available online. Some small agencies don’t want to set up an entire website for a handful of disclosure reports.
On Capitol Hill, House members’ reports are online; senators’ reports are not — they are available only to those who visit a Senate office building.
The new databases would include all of these disclosures, along with thousands more filed by employees brought under the disclosure requirements, plus reports of stock transactions by some of them.
The Stop Trading on Congressional Knowledge, or STOCK, Act is intended to stop lawmakers and other employees from using confidential information they learn in their jobs to inform their stock trades. The measure requires lawmakers and certain high-level employees to report stock trades within 45 days of the transactions, or within 30 days of when they learn of the trades.
The ethics office in March launched a new website that allows users to search the disclosures of about 1,000 presidential appointees, but it’s nowhere near the size of the database Congress now wants.
The new law also stipulates that the websites allow the public to comb through files and find which employees are invested in which companies, for example. OGE says such advanced technology is unprecedented in the federal government. “No system has been developed by an agency that has the costly searchable, sortable function required,” the agency wrote in its analysis.
OGE’s current role in the disclosure process is supervisory. The office sends inspectors to each agency to ensure that their systems comply with financial disclosure law requirements. Creating a centralized database for all the disclosures “fundamentally changes the relationship between agency ethics officials and agency employees,” read the OGE analysis.
Another challenge: The new systems would be costly.
Insider Trading Law Presents a Tech Challenge
The Army Department disclosure system — which is one of the most advanced but is neither sortable nor searchable — cost $7 million to develop, and costs $3.4 million to operate each year and $20 million to maintain.
Since the executive branch system created by the law will be much more expansive, it could cost more than the OGE’s entire annual budget, which was just under $14 million in fiscal 2012. OGE employees aren’t yet sure how much the new system will cost.
The agency says its limited staff could also cripple its ability to meet the demands of the new task. Right now, the OGE has 80 employees to implement its current duties, but STOCK’s enactment will surely require more because thousands of employees will report thousands or even millions of securities transactions on a year-round basis.
Under the new law, the office has until October 2013 to launch the new database.