Political intelligence is understanding what is happening in Washington – it is the who, what, why, where and when of Washington. Almost all Washington insiders rely on their own political intelligence networks to navigate and interpret the landscape of politics and policy. Political intelligence is essential to successfully operating in Washington as it allows individuals and organizations to take the everyday actions that occur and translate them into how it affects their constituencies. Using political intelligence opens the door to understanding what has happened and what will happen.
- Read First Street President John Jenkin’s Op-Ed Redefining political intelligence
Stop Trading on Congressional Knowledge (STOCK) Act
The STOCK Act explicitly prohibits Members of Congress and employees of Congress from using nonpublic information derived from their official positions for personal benefit, and for other purposes. An amendment added to the bill, includes executive branch employees in this prohibition. The bill prohibits trading of stocks and other securities on the basis of confidential or nonpublic information. Additionally, the bill requires prompt financial reporting by Members and employees of Congress of any equity transactions. While the STOCK Act was introduced in the past two congresses, a recent 60 minutes story and a mention by the President in his State of the Union address, brought the issue to the national spotlight and and spurred its relatively quick passage by Congress’s two chambers.
The Grassley Amendment
With the introduction of the STOCK Act, the phrase “political intelligence” gained national prominence for its inclusion in an amendment offered by Senator Grassley. The amendment defines political intelligence as providing information gathered about the government to investors who then trade stock on that information. The amendment adjusts the Lobbying Disclosure Act of 1995 to apply to political intelligence consultants. Specifically, it requires political intelligence consultants register as political consultants.
Research by Integrity Research Associates, a firm that tracks the investment research industry, indicates that the political intelligence industry has become a roughly $100-million a year business in the US and a $400-million a year business globally. According to Grassley, requiring political intelligence providers to register under the LDA will create the same level of transparency required for lobbyists. The Grassley amendment passed by a 60-39 vote in the Senate but was left out of the House version of the STOCK Act. The House version of the STOCK Act requires the government to study and report on the role of political intelligence in the financial markets within 12 months.
Covington & Burlington provides intelligence on the Political Intelligence provisions in the STOCK Act
What’s Happening Now on the STOCK Act
Update: The STOCK Act was signed into law by the President on April 4, 2012.
First Street Research Group Analyst, Alex Bronstein-Moffly Discusses the STOCK Act on The Daily Wrap from Wall Street Journal with Michael Castner. Listen here.
The House and Senate both passed different versions of the STOCK Act, see ProPublica’s comparison, with the Senate version containing the political intelligence amendment and the House version omitting it. Following a long period of evaluation, the Senate Majority Leader Harry Reid decided to put the House version of the STOCK Act up for a vote, omitting the political intelligence provision. The House version of the STOCK Act passed the Senate on 96-3 vote, Senator Grassley the author of the political intelligence provision was one of the three Senator’s that voted against the bill.
- Senate passes scaled-down version of bill to ban insider trading by officials – The Senate approved legislation Thursday formally banning lawmakers and all senior federal workers from making financial trades based on information gleaned from their oversight work.
- Reid moves to adopt House-passed version of lawmaker insider-trading bill – The Senate Majority Leader moved to adopt the House version the STOCK Act, and skip a bicameral conference. The House version bars lawmakers from trading equities based on insider information, but does not include the controversial restrictions on political intelligence-gathering.
- Senators ask for chance to re-tweak STOCK Act– A bipartisan pair of senators are asking Senate leaders to let them push amendments stripped out of legislation barring insider trading by lawmakers, warning the current bill is “significantly weakened.” Sens. Charles Grassley (R-Iowa) and Patrick Leahy (D-Vt.) sent a letter Monday asking for a conference committee be established to rectify differences between House and Senate versions of the Stop Trading on Congressional Knowledge (STOCK) Act.
- Senate may try House STOCK bill – Senate Democratic and GOP leaders are considering taking up a House-passed version of the STOCK Act. The House bill, pushed by House Majority Leader Eric Cantor (R-Va.), dropped the Senate political intelligence provision. The provision was sponsored by Sen. Chuck Grassley (R-Iowa) and required “political intelligence consultants” to register as lobbyists. Grassley reacted angrily to the House move, saying it was “astonishing and extremely disappointing that the House would fulfill Wall Street’s wishes by killing this provision.”
- Public Citizen Delivers Petition Signed by 46,000 People to Reid, Boehner – The petition calls for the reinstatement of the transparency requirement for political intelligence activities.
- Senior executives group opposes STOCK Act disclosure requirements
- SEC head signs off on STOCK Act
- Political intelligence disclosure fight heats up – Even after both the House and Senate passed landmark legislation to ban insider trading, lawmakers are still squabbling over a controversial provision that would require so-called political intelligence firms to reveal their clients.
Political Intelligence Industry Players
- The OSINT Group
- JNK Securities Corp – Press release on STOCK Act here
- Gerson Lehrman Group
- Cypress Group (Advisory)
- Integrity Research – Analysis of political intelligence industry can be purchased here
- Public Insight
- Marwood Group
- Oxley Consulting
- Coleman Research
- International Strategy & Investment Group Inc.
- Bloomberg Government
- First Street
Political Intelligence In the News
Wall Street Journal Series on Political Intelligence Industry. Note: This series was written before STOCK Act Amendment
- Hedge Funds Pay Top Dollar for Washington Intelligence
- Investors Bullish on Fed Tips
- Inside Capitol, Investor Access Yields Rich Tips
First Street Research Group on Political Intelligence
- Measuring the Repercussions of the Insider-Trading Bill
- Divided Efforts to Regulate Political Intelligence
Other interesting stories about Political Intelligence:
- New Developments in the “Duty of Trust and Confidence” – Michael Mayhew of Integrity Research talks about the effect that the STOCK Act and the Political Intelligence amendment would have on the SEC’s “duty of trust and confidence” provision for prosecuting insider trading.
- How Insiders Trade on Congressional Information – Good look at the scope of the Political Intelligence industry outside of dollar amounts. Notes there are an estimated 300 firms are engaged in the business of gathering and selling ‘political intelligence’.
- Political intelligence: Wall Street pays handsomely for Washington inside dope
- ‘Political Intelligence’ Congress’ Topic Of The Week – NPR’s Robert Siegel talks with Wall Street Journal investigative reporter Brody Mullins about what the political intelligence industry does and why Senator Chuck Grassley and others feel strongly that it should be regulated.
- Senate Adds Flawed Political Intelligence Amendment to Insider Trading Bill – Univ. of Minn. law professor Richard Painter discusses civil liberty concerns with Political Intelligence Amendment
- Jon Stewart: Stockblockers – Political Intelligence
- What Is ‘Political Intelligence’? – The New Republic examines the industry
- How expert networks came to dominate Wall Street – An early look at Wall Street information networks
- Political-Intel Industry Sees New Threat in Stock Act