As a new administration arrives in the nation’s capital amid heightened scrutiny over conflicts between government service and personal business interests, a little-used law—the Stop Trading on Congressional Knowledge Act (the “STOCK Act”)—is deservedly getting renewed attention.

Although enacted in 2012 primarily to eliminate the then-existing doubt that insider trading prohibitions applied to congressional members and their staff, the STOCK Act also explicitly confirmed the ban on insider trading by members of the executive (and judicial) branch as well.

By explicitly imposing “a duty arising from a relationship of trust and confidence with regard to material non-public information” on all “executive branch employees,” Pub. L. No. 112-105, §§ 9(b)(1), the STOCK Act confirmed what federal prosecutors and SEC enforcement attorneys had long known: that executive branch employees commit securities fraud when they trade or tip on the basis of material nonpublic information derived from their official government positions. See U.S. v. Cheng Yi Liang, No. DKC-11-0530 (D. Md. 2011) (plea agreement in a pre-STOCK Act prosecution of an FDA employee who traded on nonpublic information regarding drug approvals).

However, the STOCK Act went further than merely confirming that insider trading prohibitions applied to persons serving in the executive branch.

Notably, it expanded the definition of “executive branch employee” to include the president and the vice president. See STOCK Act § 2(3)(B). It also imposed a new disclosure regime on the president, the vice president, and certain other officials holding positions subject to annual financial disclosure under the Ethics in Government Act of 1978 (5 U.S.C. app. 4, § 101, et seq.), requiring such officials to file periodic public financial reports disclosing specified “covered transactions” occurring while they serve in these positions. See STOCK Act § 11(b), as amended by Pub. L. 113-7, § 1(b)(2).

“Covered transactions” are transactions of stocks, bonds, commodities futures, and other forms of securities. 5 U.S.C. App. § 102(a)(5)(B).

And perhaps most interestingly, the STOCK Act required the Office of Government Ethics (OGE)—the independent agency charged with advising executive branch employees about the panoply of existing ethics laws—to issue interpretative guidance to clarify “that no executive branch employee may use non-public information derived from such person’s position ... or gained from performance of ... [their] official responsibilities as a means for making a private profit.” See STOCK Act§ 9(a)(2).

Prior to the STOCK Act, most laws prohibiting government officials and employees from acting for their own benefit—including the primary criminal statute, 18 U.S.C. 208, and the primary civil statute, the Ethics in Government Act—excluded the president and vice president. By defining the term “executive branch employee” to include both the president and vice president, the STOCK Act unequivocally expanded insider trading prohibitions to both office holders. See 15 U.S.C. 78u.

As for public disclosure, the STOCK Act enhanced the requirements previously imposed on specified executive branch officials to report to their agency ethics officers and to the public certain types of financial transactions on an annual basis. It added a requirement that officials covered by the Ethics in Government Act, including the president and vice president, file reports by the earlier of 45 days after they have engaged in specified “covered transactions” or 30 days after receiving notification of the transaction. Agencies are required to make these periodic transaction reports public within 30 days of the filing date. See STOCK Act § 11(a)(3).

Finally, the STOCK Act directed OGE to issue guidance as needed to clarify that executive branch employees cannot use nonpublic information “as a means for making a private profit.” STOCK Act § 9.

Although OGE had already issued guidance under the Standards of Ethical Conduct for Employees of the Executive Branch 1 that prohibited the misuse of nonpublic information for personal benefit, the STOCK Act language was more stark and, because it was Congress speaking, more significant.

Thus, any “executive branch employee,” including the president and the vice president, is arguably prohibited by an act of Congress (and not merely interpretive guidance from OGE) from using nonpublic information gained in their employment (regardless of its materiality) in making a private profit.

Such language, yet to be interpreted by a court, is extremely broad and exceeds insider trading prohibitions, as it applies whether or not the profit was derived from trading stocks or other financial instruments and focuses instead on the misuse of nonpublic information in an executive branch employee’s private business ventures.

Indeed, because the STOCK Act language speaks about “a means for making a private profit” without tying the profit to the executive branch employee, it would appear that a violation of the STOCK Act occurs whenever an executive branch employee shares nonpublic information gained in his/her official duties with another person, and that person uses the information to make a private profit in his/her private business affairs.

Executive branch employees are often exposed to information that has not been disseminated to the general public and is not authorized to be made public.

As a result of the renewed attention to the requirements of the STOCK Act, all executive agency employees, from the president on down, must take greater care to avoid using nonpublic information for their—or even another’s—personal benefit.

1 5 C.F.R. 2635.702 reads as follows: “An employee shall not engage in a financial transaction using nonpublic information, nor allow the improper use of nonpublic information, nor allow the improper use of nonpublic information to further his own private interest or that of another, whether through advice or recommendation, or by knowing unauthorized disclosure.”