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House Republicans have been forced to close a potential loophole on their much-touted insider trading law -- a loophole CNN uncovered and reported about last month.

Because of CNN's report, the Senate and House passed new legislation Thursday to close the loophole that could have allowed family members of some lawmakers to profit from inside information.

Senators who were critical of the loophole after it was unearthed applauded the fix.

The STOCK Act, one of the rare bipartisan bills passed this year, was signed by President Barack Obama in April.

Lawmakers proclaimed that the bill, officially called the Stop Trading on Congressional Knowledge Act, would restore trust in government. It also applied new rules to some employees of the executive branch.

But CNN discovered the law that members of Congress thought they voted for earlier this year wasn't exactly as advertised. The STOCK Act requires that any trades of $1,000 or more made on or after July 3 have to be reported to the House and Senate within 45 days. But the House and Senate came out with two completely different interpretations of that rule.

In the Senate, the Ethics Committee released one page of guidelines in June ruling that members and their spouses and dependent children all have to file reports after they make stock or securities trades. But the House Ethics Committee disagreed.

Its 14-page memo released in June found that House members and aides covered by the law that their spouses and children were not covered. The Office of Government Ethics, which oversees all federal executive branch employees, sided with the House, informing its employees that their spouses and children don't need to file these periodic reports.

Both of the lead sponsors of the Senate bill didn't realize the discrepancy until CNN brought it to their attention last month.

Massachusetts Republican Scott Brown, the only Republican senator to attend the White House signing ceremony, said he was "obviously very concerned."

"Say I find out some information, I tell my wife and she goes and trades on it, what's the difference?" Brown told CNN.

Brown, who speaks constantly about this bill in his neck-and-neck race for re-election against consumer advocate Elizabeth Warren, said the whole point of passing the law was to demonstrate that members of Congress weren't held to a different standard.

Why was there a difference?

Robert Walker, a Washington ethics attorney and former chief counsel for both the House and Senate Ethics Committees, explained that the Senate bill did include a provision that covered spouses and children, but when Cantor's office wrote the House version, this language was shifted to a different section of the bill. The change meant that spouses and dependent children weren't subject to the new reporting requirements.

"The House recrafted some of the provisions of it and moved some of the provisions around. In that process, some of the Senate bill that applied to filing of these new reports was moved from one section of the bill to the other," Walker said.

The Senate Ethics Committee decided to stick with the spirit of the law that senators originally intended, but the House Ethics Committee went with the letter of the law, which included the loophole not requiring spouses and children to report financial transactions in a timely fashion.

Why did it matter?

The loophole went to the heart of what the STOCK Act set out to do.

While there were already laws in place barring members of Congress or the executive branch from profiting from nonpublic information that they learn in the course of their duties, it was extremely difficult for those at the Securities and Exchange Commission to enforce those laws.

The financial disclosure forms House members and senators were already required to file only come out once a year, making it tough to track any relationship between legislative action and a stock trade. That's why the STOCK Act added the rule that after each trade over $1,000 a report had to be filed in a timely manner.

In addition to closing the loophole for spouses and dependent children, the new legislation passed by the House and Senate also made a change that the Obama administration requested.

Some administration officials voiced concerns that the ability of foreign governments to view personal financial information about top government employees posed a national security threat.

To address those concerns, the bill gave executive branch employees a waiver from the requirement to disclose their stock or securities trades until September 30 to allow some additional time to determine the appropriate procedures for those officials.[i[More at http://www.cnn.com/2012/08/02/politics/stock-act-loophole/index.html?h
pt=hp_bn3

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