Measuring the Repercussions of the Insider-Trading Bill

What will the impact be on lobby firms if the STOCK Act becomes law?

It appears increasingly unlikely that the final version of the bill, designed to prevent insider trading in Washington, will mandate registration by those engaging in political intelligence.

Although the version passed by the Senate included such a provision, the House version did not. (See our earlier report.)

The original sponsors of the House bill – Reps. Louise Slaughter (D-NY) and Tim Walz (D-MN) – sent a letter Thursday to House and Senate leadership, asking for creation of a conference committee to resolve differences between the two bills.

Slaughter is working to restore the reporting requirement, while many in the financial sector are working against it.

“Regardless of whether you require registration, the STOCK Act in general will have a chilling effect on political intelligence,” said Michael W. Mayhew, chairman and director of global research for Integrity Research Associates.

Those who engage in collecting and distributing information in the capital are likely to think twice about whether that information is confidential, he said.

For lobbyists, political intelligence is typically a sideline rather than a primary focus.

When Integrity Research Associates measured worldwide political intelligence activities in 2009, it found that lobby firms and consultancies handled less than 10 percent of the total $402 million global market.

An estimated 30 percent was attributed to policy research providers. The largest share of political intelligence was conducted by major investment banks such as Goldman Sachs and JPMorgan Chase.

Most of these activities are conducted, not surprisingly, in the United States. But because it’s unregulated, the political intelligence sector is difficult to measure.

In recent years, particularly with the heightened regulatory focus of the Obama administration, investors have been willing to spend more for knowledge about Washington’s intentions.

“This industry has really grown quite rapidly for the past three or for years,” Mayhew said.

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