A bipartisan Senate group seeks to ban stock trading in Congress
Image: MarketWatch
This week, a bipartisan group of senators introduced a bill that would ban members of Congress and their immediate family from trading stocks, in an effort to prevent profiting from insider knowledge.
Some quick background: Lawmakers are currently prohibited from using non-public information for private profit under the Stop Trading on Congressional Knowledge (STOCK) Act of 2012. This also requires lawmakers to disclose any stock trades they make within 45 days.
- However, the penalty for violating the STOCK act is a $200 fine – which critics say doesn’t go far enough to disincentivize such behavior.
This new proposal aims to add some bite to that bark. The measure, supported by three Democratic senators and one Republican, would prevent members of Congress from buying or selling individual stocks starting 90 days after being signed into law. The bill, which doesn’t apply to mutual funds or pooled securities investments like ETFs, would also extend to members’ spouses and dependent children starting in March 2027.
- Penalties for violating the proposed law would be set at either the monthly salary of a lawmaker ($10,000+) or 10% of the value of each asset illegally bought or sold – whichever is greater.
Zoom out: Stock trading by elected government officials has come under increased focus from ethics watchdogs following disclosures that several senators made highly profitable trades in early 2020, when Congress was receiving classified briefings warning of how disastrous the Covid pandemic could be for the US economy.
Overall, lawmakers have been so active in the stock market that some traders have launched investment products allowing ordinary Americans to mimic trades made by members of Congress or their spouses.
- A pair of ETFs following the trades of both Democratic and Republican members of Congress have outperformed the Dow since launching last year.
- Additionally, the Autopilot app lets users copy trades of individuals like Nancy Pelosi’s husband, Paul, whose tracker was up 45% last year.
Looking ahead… On July 24, the new bipartisan proposal will become the first congressional stock trading ban to receive formal consideration from a Senate committee.
đź“Š Flash poll: Which of the following best describes your opinion on how the financial investments of Congress and their immediate family should be governed?
See a 360° view of what media pundits are saying
Sprinkles from the Left
- Some commentators argue that a ban on stock trading by members of Congress and their spouses could reassure a frustrated and exhausted public that lawmakers at least recognize the trust deficit they hold with everyday Americans, and are interested in addressing it.
- Others contend that it’s important that elected US officials behave ethically, but also that people perceive that ethics are foundational in our government – and restricting the ability of lawmakers to trade stocks can build trust that they are working in the public interest and have no ulterior financial motives.
- “Members of Congress Should Not be Trading Stocks, Ever” –NY Times Editorial Board
- “No more stock trading for members of Congress” –LA Times Editorial Board
- “Bill would ban stock trading in Congress – and White House” –Boston Herald Editorial Board
Sprinkles from the Right
- Some commentators argue that various guardrails to prevent blatant insider trading by members of Congress are failing to do their job, and lawmakers should enact stronger laws restricting Congress from profiting off inside info learned on the job.
- Others contend that it isn’t obvious that congressional investors have some mysterious foresight about the market, and calls to ban members of Congress from trading stocks could hurt the US by stopping good business men/women and those who aren’t political lifers from seeking office.
- “Nancy Pelosi’s huge portfolio gains again make the case for banning stock-trading in Congress” –NY Post Editorial Board
- “The Misguided Rush to Ban Congress’s Stock Trades” –WSJ Editorial Board
- “Ban it already: Lawmakers made $1 billion from stock deals last year” –Joseph Curl, Washington Times
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