Sense on Cents

Gaining sensitive, market moving information is NOT by its very nature illegal or unethical. In point of fact, those who are ingenious and industrious enough to outwork and outsmart the competition are fully deserving of the benefits and rewards that come their way.

That ingenuity and industriousness are cornerstones of capitalism. I love it and commend those who ethically pursue these paths to success.

That said, how are these pursuits regulated? Who is monitoring the exchange of what might be exceptionally sensitive and insider information? Great questions.

With many in Washington having access to incredibly sensitive information which can move markets, are we to believe that the handling of that information is always done in an ethical and legal fashion? Let’s not be so naive as we enter into the developing world of those who traffic in Political Intelligence.

Again, I refrain from painting this exchange of political intelligence with a broad and incriminating brush, but in light of the voluminous body of work which Sense on Cents has defined as Wall Street-Washington Incest (only about 150 separate commentaries on that link collated over the last three years), we should take a closer look at this space.

A firm known as The Osint Group puts forth the following description of its business,

Political Intelligence

To understand what policy and political leaders are doing today and planning for tomorrow, institutional investors need to do more than monitor news and data services. You need to know more. You need answers to your questions from a consistently reliable source of insight into the world of politics and policy.

Every day in Washington and within government institutions across the globe, decisions are made that affect the prospects and profitability of individual companies and entire industries. The investment and political worlds are both in the midst of a sea change. Higher levels of regulation are in the works, no matter which party is in control.

The forces driving these changes – the political contests and policy debates – are not as familiar to investment professionals as fundamental, technical or quantitative research. Our “Political Intelligence” service is built on a single powerful idea: to provide institutional investors with accurate, actionable and timely information created by the currents of political forces and regulatory decisions.

The OSINT Group has assembled a group of experts from the ranks of lobbying, academia, government consulting, industry, journalism and law who are skilled in every major area of policy and politics.

Our political intelligence operation differs from standard ‘lobbying’ in that The OSINT Group is not looking to influence legislation on behalf of clients, but rather provide unique ‘monitoring’ of information through our personal relationships between lawmakers, staffers, and lobbyists working the K Street – Pennsylvania Avenue corridor.

Providing this service for clients who do not want their interest in an issue publicly known is an activity that does not need to be reported under the Lobbying Disclosure Act (LDA), thus providing an additional layer of confidentiality for our clients.  Because of our unique relationships in Washington, we are able to outsource government affairs requests at a discount to a specialized firm that best fits a client’s interest where these activities are required.

This service is ideal for companies seeking a competitive advantage by allowing a client’s interests to remain confidential as the relationship between the client and the outsourced firm is protected by attorney-client privilege.

Sounds like a fascinating business.

Those who appreciate the Sense on Cents virtues of truth, transparency, and integrity are compelled to ask if our regulators are qualified and equipped to monitor this space. Are our legislators and their staffs aware of what exactly is and is not “inside information” and how that information should be handled?

Senator Chuck Grassley (R-IA) weighs in on this sensitive topic in writing, Grassley Outlines Case for Political Intelligence Amendment:

In the dark of night Tuesday, the House released its version of the STOCK Act, which wiped out any chance at meaningful transparency for the political intelligence industry.

What we are faced with is a powerful industry that works in the shadows.  They don’t want people to know what they do or who they work for.  They are afraid of sunlight.

My amendment was adopted here in the Senate on a bipartisan basis, a rare occurrence recently. It simply requires registration for lobbyists who seek information from Congress in order to trade on that information.

It’s straightforward.  If trades are taking place based on political intelligence obtained from Congress or the executive branch, people should know who is gathering such information.

Not requiring political intelligence professionals to register and disclose their contacts with government officials is a gaping loophole that my amendment fixes.  In fact, political intelligence firms actually brag about this loophole.

Dark of night . . . works in the shadows . . . afraid of sunlight? Those mental images are not conducive to a healthy “sense on cents”.

I do not ever think the playing field on Wall Street is ever going to be level, but if we are to expose the potential of increased incestuous activities between those in Washington with sensitive information and those on Wall Street willing to pay for it, the world of political intelligence cannot and should not operate under a welcome cover of clouds and in the dark of night.

Sunlight remains not only the great disinfectant but also provides an environment and atmosphere in which a strong and robust spirit of capitalism can thrive.

Now that’s what I’m talking about!! What about you? Comments, questions, constructive criticisms encouraged and appreciated.

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets, our economy, and our political realm so that meaningful investor confidence and investor protection can be achieved.

This entry was posted on Thursday, February 16th, 2012 at 9:54 AM and is filed under General, insider activity, insider trading. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.