In the Senate debate last week to amend the STOCK Act, a measure to prevent insider trading by lawmakers and some federal officials, Sen. Charles Grassley (R-Iowa) successfully attached a smart proposal to the bill to require “political intelligence” firms to face disclosure requirements just as other lobbying firms are forced to disclose their clients.

The secretive world of political intelligence firms is only known outside of the financial industry and the Beltway by way of several investigative pieces by the Wall Street Journal. In essence, these firms do not qualify as traditional lobbyists because they exist to provide Wall Street speculators with advanced knowledge of impending legislative actions. An exposé published in 2006 revealed that major hedge funds, including Elliott & Associates, D.E. Shaw & Co., and Angelo Gordon & Co., worked with political intelligence companies to make investment decisions.

Grassley’s amendment to the STOCK Act is being met with vitriol by political intelligence professionals. CNBC spoke to several firms involved in this industry, and predictably, they claim that simple disclosure will result in disaster. The hyperbolic consultants, including Charles Gabriel, a congressional staffer turned political intelligence operative for Wall Street, laughably told CNBC that the Grassley measure will “hurt … middle class Americans”:

“The language adopted in the Senate could seriously cut off dialogue between investors, members, and Hill staff writ large,” warns Charles Gabriel, managing director or Capital Alpha Partners. “In our view to the detriment of American retirees, who could see their savings suffer as a result.” […]
“Members can perhaps be forgiven for rushing to judgment with an election-year fix for inadequacies perceived in the application of insider trading statutes to Congress, punctuated, as they have been, by embarrassing revelations re key members’ opportunistic investing,” said Gabriel. “But most worrisomely of all, the STOCK Act’s prescriptions would arguably hurt the exact middle class Americans whom it is designed to protect.”

Gabriel’s argument, that more disclosure will scare pensions from engaging in discussions with officials, isn’t supported by any evidence. Grassley’s measure will, however, force firms like Capital Alpha Partners to register like any other lobbying firm while going about their business.