WASHINGTON — The Senate gave final approval Thursday to an ethics bill that bans insider trading by members of Congress, clearing the measure for President Barack Obama, who called for such legislation in his State of the Union address two months ago.
Passage came swiftly after the Senate voted, 96-3, to end debate on the measure, which was approved in the House by a vote of 417-2 last month.
The lopsided votes showed lawmakers desperate to regain public trust in an election year, when the public approval rating of Congress has sunk below 15 percent.
The bill originated in the Senate. But House Republican leaders rewrote it, and the Senate on Thursday accepted the changes.
Watchdog groups and some lawmakers said the changes had weakened the bill by killing two important provisions added on the Senate floor in early February.
One provision would have regulated a growing industry that collects “political intelligence” from political insiders for the use of hedge funds, mutual funds and other investors. The second provision dropped from the bill would have given prosecutors powerful new tools to pursue public corruption cases.
The Senate majority leader, Harry Reid, D-Nev., said Republicans had blocked efforts to go to a conference to negotiate differences with the House.
Sen. Joe Lieberman, IConn., the chief sponsor of the bill, said its passage should “help assure our constituents that we are in Washington to address their concerns and not to profit personally while we are at it.”
A few lawmakers, led by Rep. Louise Slaughter, D-N.Y., have tried for years to enact restrictions on stock trading by members of Congress. Their efforts drew little support until new attention to the practice last year prompted a flood of support for the idea and Obama’s backing.
Sen. Susan Collins, RMaine, who helped write the bill, explained the surge in support.
“At a time when public confidence in Congress is so low,” Collins said, “we must act to remove any doubt that the law and rules against insider trading apply to members of Congress.”
The bill, the Stop Trading on Congressional Knowledge Act, or STOCK Act, prohibits members of Congress from trading stocks and other securities on the basis of confidential information that they receive as lawmakers. It makes clear that the insider-trading ban in federal law applies to lawmakers and their aides, and to officials in the executive and judicial branches of the federal government.
Federal securities law does not explicitly exempt members of Congress, but experts disagree on whether and when lawmakers may be found to have violated the existing ban on insider trading. The bill is meant to eliminate any ambiguity, although lawyers said that prosecutions would still be difficult.
The legislation says that lawmakers owe “a duty arising from a relationship of trust and confidence” to Congress, the federal government and citizens of the United States — a duty they violate by trading on “material nonpublic information.”
The bill passed by Congress requires lawmakers to disclose the purchase or sale of stocks, bonds, commodities futures and other securities within 45 days of transactions. The information would be posted on the Web.
Thousands of federal agency officials would be subject to similar reporting requirements.
The Office of Congressional Ethics is investigating stock trades by Rep. Spencer Bachus, R-Ala., chairman of the House Financial Services Committee. He predicted last month that he would be exonerated.
The bill passed by Congress also requires lawmakers and executive branch officials to disclose the terms of mortgages on their homes. It prohibits them from receiving special access to initial public stock offerings. And it will deny federal pensions to members of Congress who are convicted of felonies involving public corruption.
But the proposed regulation of “political intelligence” firms was scrapped, over the objections of Sen. Charles Grassley, R-Iowa. Grassley said people who trolled for political intelligence and sold it to Wall Street should register and disclose their clients, as lobbyists have long been required to do.
Rejection of this proposal was “a victory for Wall Street and a defeat for the American people — a victory for the hedge funds and big banks that like the secrecy of the status quo,” Grassley said.
However, critics, like the House Republican leader, Eric Cantor of Virginia, said the definition of political intelligence was exceedingly vague. As a result, they said, the registration requirement could have applied to people seeking information from their members of Congress about the status of legislation.
Aides to Sen. Kirsten Gillibrand, D-N.Y., an architect of the bill, said she was working with Grassley on a standalone piece of legislation to regulate the political intelligence industry.
Grassley said he was willing to modify the language so the registration requirement would not apply to people who made business decisions, such as hiring employees and building factories, based on information they received from talking with a member of Congress.
Front Section, Pages 4 on 03/23/2012