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Wall Street Sees Analysts Snagged by Political Intelligence Bill

Feb. 7 (Bloomberg) -- A U.S. Senate measure that would place restrictions on people who gather and sell government information to hedge funds may entangle bank research analysts and others on Wall Street, according to lawyers and lobbyists.

The Securities Industry and Financial Markets Association, which represents firms including Goldman Sachs Group Inc. and JPMorgan Chase & Co., held a rare weekend call for members on Feb. 4 to discuss the measure, according to two people with direct knowledge of the call.

The provision, part of a broader bill that passed the Senate last week and is scheduled to face a House vote this week, may require analysts and others to register with Congress and disclose contacts with government officials, according to a legal analysis prepared for the group’s members.

“There are going to be a lot of entities and organizations who will not want their people anymore to contact government officials to get information which might be used for a number perfectly appropriate purposes,” Robert L. Walker, an attorney for Wiley Rein LLP who is listed as one of the authors of the legal memo, said of the impact of the provision.

The broader bill would ban lawmakers, their staffs, and much of the executive branch from trading stocks, commodities or futures based on confidential information they learn on the job. Senator Charles Grassley, an Iowa Republican, succeeded last week in adding the provision that targets trading in so-called “political intelligence.”

Such information may include conversations with lawmakers, congressional staff or other government officials about the future of legislation or regulations that have not been made public. That information has been targeted by lawmakers, who are pushing to identify firms and individuals in the business and force them to disclose their clients.

‘Who They Are’

Grassley said the requirement will assure that “when these people come around to get information from you to sell to hedge funds, you’ll know who they are.”

“You give them information, they’ve got information that people don’t have on Wall Street and they sell it,” Grassley said on the Senate floor before the vote on his provision. “You ought to know what you’re being used for.”

In advance of the Sifma call, participants were provided a four-page memo on the provision prepared for Kenneth Bentsen, the executive vice president of public policy for the group. The memo, which says it was written by Wiley Rein lawyers including Walker, notes that because of the way the provision is drafted, “even the routine activities of research analysts would appear to fall within the covered scope of this definition,” according to a copy obtained by Bloomberg News.

Concern About Interpretation

“There’s always a little of the ‘this is Armageddon’ approach, but you do have to be concerned about how broadly this bill may be interpreted,” Peter Henning, a former Securities and Exchange Commission enforcement lawyer, said of the bank concerns in a telephone interview.

The practice of selling information derived from contacts with lawmakers or their staff is not new -- lobbyists have been doing it for years and are required to register with the Secretary of the Senate. Lawmakers, in increasing numbers after a series of Wall Street Journal stories on the issue, have trained their sights on another version of information gathering, which they refer to as “political intelligence.”

Senate Majority Leader Harry Reid stripped the political intelligence disclosure requirements from the measure the Senate initially considered last week. Instead, it called for a study of the issue. Grassley’s amendment, which was reattached to the bill with the support of 32 Republicans, 27 Democrats and one independent, overruled the opposition of Senate leadership.

The future of the measure is now in the hands of the House, which Majority Leader Eric Cantor, a Virginia Republican, said would vote on a version of the broader bill this week.

‘Most Important Part’

Representative Louise Slaughter, the New York Democrat who has been one of the measure’s leading advocates, said last week she would push against efforts to change or water down the legislation. Slaughter told reporters on Feb. 3 that she was “particularly pleased” that the Senate voted to include Grassley’s provision because “that’s the most important part of the bill.”

Lobbyists and lawyers pushing for changes to the measure face growing momentum behind idea that had languished for years, said Henning, who is now a law professor at Wayne State University in Detroit.

“The entire bill has taken on the aura of ‘Mom and apple pie’ and you just can’t be against it,” Henning said. “This used to be dead on arrival, but now it’s so alive I don’t know how you can fight it.”

To contact the reporters on this story: Phil Mattingly in Washington at; Robert Schmidt in Washington at

To contact the editor responsible for this story: Maura Reynolds at

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