Washington (CNN) – The U.S. House on Friday eliminated a key requirement of the insider trading law for most federal employees, passing legislation exempting these workers, including congressional staff, from a rule scheduled to take effect next week that mandated online posting of financial transactions.
Aides to lawmakers insisted the changes were needed to avoid potential security risks to federal employees by revealing personal information.
The House vote followed similar action by the Senate Thursday. The votes were done with little notice and came at a time when most people were paying attention to the Senate’s work on high profile issues like guns and immigration.
One advocacy group pushing for greater government transparency blasted the move, saying it “guts" the law.
"Not only does the change undermine the intent of the original bill to ensure government insiders are not profiting from non-public information, it sets an extraordinarily dangerous precedent suggesting that any risks stem not from information being public but from public information being online,” Lisa Rosenberg of the Sunlight Foundation wrote in a statement,
This isn't the first time the new insider trading law, called the STOCK (Stop Trading on Congressional Knowledge) Act has been caught up in controversy.
In July 2012, CNN exposed a loophole in the law that could have allowed some family members of lawmakers to potentially profit from insider information. Because of CNN”s investigation both the House and the Senate passed legislation to clarify that the law applied to family members of all members of Congress.
The STOCK Act required that in addition to members of Congress, both executive branch employees and senior congressional aides also needed to report their stock trades regularly and post them online.
With this change those federal workers would still have to report any securities trades over the law's $1,000 threshold within 45 days. While these reports would be publicly available, they would no longer be posted online in a format that anyone can search or download.
The president, vice president, Cabinet secretaries, deputy secretaries, as well as members of Congress and candidates for Congress, would still need to post their financial transactions online.
Federal employees began expressing concerns about the national security risks of posting personal financial information online soon after government agencies moved to implement the STOCK Act last year.
Online posting was supposed to begin August 31, 2012, but Congress passed extensions three separate times pushing off the compliance date.
In December, the last time the House and Senate approved another extension signed by the president, they also directed the National Academy of Public Administration (NAPA), a non-profit group of public management experts chartered by Congress, to study whether there were real security risks associated with putting this kind of financial information on the Internet.
The report, delivered to the Hill in March 2013, said the insider trading law's disclosure rules could harm federal agencies’ missions and workers.
It recommended Congress "indefinitely suspend the online posting requirements and the unrestricted access to searchable, sortable, downloadable databases while continuing implementation of other requirements of the STOCK Act." Unless Congress acted, the law’s requirements would have gone into effect on Monday.
The report also went beyond the national security issue and cited potential privacy and safety issues arising from the online disclosure of personal financial information.
House Majority Leader Eric Cantor's spokesman Rory Cooper told CNN the decision to enact new legislation now was in direct response to the study.
"In December when we extended the STOCK Act deadline for public disclosure of Financial Disclosures, we required a study by the non-partisan and independent National Academy of Public Administration. This was their recommendation, and the House and Senate agreed it was the best course of action for the time being," Cooper told CNN in a written statement.
A senior House Democratic aide told CNN that after Congress received the report there were bipartisan discussions at the leadership level in the House and Senate. All agreed to move forward with language exempting all legislative aides along with executive branch employees.
"The study came back and very clearly said that this was an issue," this aide emphasized.
The Sunlight Foundation’s Rosenberg argued the exemption of these in federal agencies and Capitol offices, which she called an "epic failure," would result in "more corruption and less trust in government."
The bill now goes to the president for his signature.