Bipartisan group seeks to ban stock trading in Congress

On Wednesday, a bipartisan group of House members announced an agreement on a new bill that would ban members of Congress from trading or owning stocks—an effort to prevent profiting from insider knowledge.

It represents the strongest attempt to ban congressional stock-trading in recent years, with the bill’s supporters spanning the political spectrum.

• They include hardline conservatives like Reps. Chip Roy (TX) and Tim Burchett (TN)
• Moderate Republicans like Rep. Brian Fitzpatrick (PA)
• And progressive Democrats like Reps. Alexandria Ocasio-Cortez (NY) and Pramila Jayapal (WA)

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’s disclosure requirements is a $200 fine, which critics say doesn’t go far enough to disincentivize such behavior.

This proposal aims to add some bite to that bark

The new measure would require lawmakers to sell all individual stocks within 180 days, even if those assets are held in a blind trust. Newly elected members of Congress would also have to divest of all individual stock holdings before being sworn in.

• Members who fail to divest would face a fine equivalent to 10% of the stock’s value, and also be forced to get rid of any profits from that investment.
• The proposed ban and all of its penalties also extends to lawmakers’ spouses and dependent children.
• However, it doesn’t cover any executive branch officials, including the President, unlike a similar bill from Sen. Josh Hawley, (R-MO) that advanced to committee in July.

But…Despite the growing momentum in support of a trading ban, significant pushback still exists in Congress. Opponents of the move, including Sen. Ron Johnson (R-WI), argue that it would result in fewer worthy candidates from the private sector who are willing to run for office, further increasing the number of career politicians in office.

Zoom out: Congressional stock trading has come under increased scrutiny in recent years, following disclosures that several lawmakers made highly profitable trades while receiving classified briefings warning of Covid’s danger to the US economy in early 2020. Additionally, certain lawmakers—or their spouses—are so active in the markets that traders have launched exchange-traded funds (ETFs) allowing ordinary Americans to mimic their moves.

📊 Flash poll: Which of the following best describes your opinion on how the financial investments of Congress and their immediate family should be governed?

• They should be allowed to participate in the market without insider info
• They shouldn’t own individual stocks, but other investments like ETFs are okay
• They shouldn’t own any market-based financial investments
• Unsure/other