STOCK Act-Required GAO Report on Political Intelligence Summarizes Findings

Mandated by the Stop Trading on Congressional Knowledge Act of 2012 (“STOCK Act”), the Government Accountability Office (GAO) issued a 
long-awaited report on the role of political intelligence in the financial markets. GAO was required to report findings on: 

  • what is known about the prevalence of the sale of political intelligence and the extent to which investors rely on such information
  • what is known about the effect that the sale of political intelligence may have on the financial markets
  • the extent to which information that is being sold would be considered nonpublic information
  • the legal and ethical issues that may be raised by the sale of political intelligence
  • any benefits from imposing disclosure requirements on those who engage in political intelligence activities any legal and practical issues that may be raised by the imposition of disclosure requirements on those who engage in political intelligence activities.

Over the last 12 months, GAO interviewed individuals at political intelligence, media, financial services and law firms; trade associations; advocacy organizations; and executive and legislative branch officials. In its report, GAO concluded the following:

  • There are no laws or ethics rules that specifically govern the sale of information by a political intelligence firm. However, there are laws and ethics rules that govern insider trading, the purchase or sale of material nonpublic information and disclosure of nonpublic information.
  • The prevalence of the sale of political intelligence is not known and is therefore difficult to quantify because political intelligence gathering is often aggregated with other information sources.
  • Financial compensation is usually not tied to specific sources of information or investment decisions.
  • There is a lack of consensus on key definitional terms.
  • Investors sometimes respond to political intelligence in making investment and business decisions.
  • Components of disclosure, such as key terms, establishing who would administer and enforce registration and reporting requirements, and identifying the elements and characteristics of disclosure, are practical issues to be addressed.

While the GAO did not make recommendations regarding its findings, the report does outline areas for consideration regarding compliance programs for political intelligence firms and the consumers of political intelligence.

A copy of the GAO report can be found here.

Contact Information

If you have questions concerning this alert, please contact:

James Benjamin
jbenjamin@akingump.com
212.872.8091

Michael Asaro
masaro@akingump.com
212.872.8100

Steven Ross
sross@akingump.com
202.887.4343

Melissa Laurenza
mlaurenza@akingump.com
202.887.4251