TLDR
- A bipartisan group of 20 US senators has proposed new legislation to ban stock trading by members of Congress.
- The proposed ban would extend to spouses and dependent children of lawmakers, as well as the president and vice president.
- The legislation aims to prevent lawmakers from profiting from insider knowledge and to restore public trust.
- Penalties for violations would be significantly increased from the current $250 to 10% of the value of the traded asset.
- The ban would take effect in stages, with full implementation by March 2027.
A group of 20 US senators has proposed new legislation to ban stock trading by members of Congress. The proposed bill, known as the ETHICS Act, would significantly expand and strengthen the existing Stop Trading on Congressional Knowledge (STOCK) Act of 2012.
The initiative comes in response to growing concerns about lawmakers potentially profiting from insider knowledge gained through their official duties.
Recent investigations have revealed that one in seven sitting members of Congress violated the STOCK Act between 2021 and 2023, and that lawmakers have, on average, outperformed the S&P 500 by 17.5%.
Senator Josh Hawley, one of the bill’s sponsors, stated,
“Congress should not be here to make a buck. There is no reason why members of Congress ought to be profiting off of the information that only they get and the rest of the American people don’t get.”
The proposed legislation would prohibit sitting members of Congress from buying stocks and other covered investments immediately upon the bill’s enactment.
It would also prevent them from selling stocks within 90 days of the bill being signed into law. This immediate action aims to quickly address the issue of potential insider trading.
The ban would extend to spouses and dependent children of lawmakers, as well as the president and vice president, starting in March 2027.
This broader prohibition seeks to close potential loopholes and ensure that family members cannot benefit from a lawmaker’s privileged position.
The penalties for violating the new laws would be significantly increased. Currently, the fine for breaking the STOCK Act is just $250 per transgression.
Under the proposed legislation, violators would face a fine of 10% of the value of the asset traded, or forfeit their monthly salary, whichever is greater. This substantial increase in penalties is designed to serve as a stronger deterrent against potential violations.
Senator Gary Peters, chair of the Homeland Security and Governmental Affairs Committee, called the measure “a commonsense piece of legislation that helps maintain trust in this institution.”
The push for this legislation gained momentum following widely reported public disclosures that detailed highly profitable trades made by several top lawmakers during the early days of the COVID-19 pandemic.
Perhaps the most notable case was that of former House Speaker Nancy Pelosi, whose successful trading activity reportedly contributed to her net wealth growing to over $250 million while earning an annual congressional salary of $193,000.
The proposed bill would not allow lawmakers and their spouses to use blind trusts as a workaround. Senator Jon Ossoff, who has advocated for similar legislation since joining the Senate in 2021 and placed his own stock portfolio into a blind trust, stated,
“Members of Congress should not be permitted to trade in stocks while in office. It’s a strong bill that fully achieves that objective.”
The legislation is expected to be marked up in the Homeland Security Committee on July 24. While this push is happening in the Senate, there have been similar bipartisan efforts in the House of Representatives.
Senator Hawley expressed hope that their Republican counterparts in the House would support this initiative.
If passed, this legislation would represent a significant change in how members of Congress manage their personal finances while in office.
Proponents argue that it would help restore public faith in the integrity of lawmakers and ensure that they are focused on serving their constituents rather than potentially profiting from their positions.
