In a renewed effort to safeguard public trust, a bipartisan coalition of Senators introduced a bill on Wednesday aimed at banning sitting members of Congress, their spouses, dependent children, and the sitting President and Vice President from trading individual stocks. The proposed legislation, known as the ETHICS Act, or Ending Trading and Holdings in Congressional Stocks, has been framed to address longstanding concerns over the potential misuse of privileged information for financial gain.
The scrutiny surrounding Congressional stock trades has been growing significantly since the 2009 financial crisis, with an intensified spotlight in recent years. This heightened attention stems from reports of Congress members executing well-timed and profitable trades, raising questions about the fairness of their market activities. In fact, the public’s suspicion has given rise to a peculiar trend: investors tracking and mimicking the trades of sitting Congress members through specialized ETFs.
Central to this controversy is the fear that Congress members and their families might leverage material non-public information, which is inaccessible to the general public, for personal financial gain. Speaking at a press conference on Wednesday, Republican Senator Josh Hawley underscored the unfair advantage this imparts, stating, “There is no reason why members of Congress ought to be profiting off of the information that only they get.”
Joining Senator Hawley in introducing the ETHICS Act are Democratic Senators Jon Ossoff, Jeff Merkley, and Gary Peters. If enacted, this legislation would lead to a historic modification in Congressional stock trading regulations, as it will be the first such bill to receive formal consideration by the Senate’s Homeland Security and Governmental Affairs Committee later in the month.
While this move stands as a significant stride towards ethical transparency, it mirrors previous attempts that have faltered. For instance, in 2023, House members Alexandria Ocasio-Cortez and Matt Gaetz introduced a similar stock trading prohibition that did not progress significantly.
The ETHICS Act stipulates an immediate ban on stock trading for Congress members and outlines an enforced timeline for divesting their stock holdings by the start of the next Congressional session in 2027. Senator Merkley emphasized the intent behind this legislation, remarking, “If you want to serve in Congress, don’t come here to serve your portfolio, come here to serve the people.”
In addition to banning trades, the proposed law would levy substantial fines on violators, far surpassing the current $200 penalty for delayed stock trade disclosures as dictated by the 2012 STOCK Act. Under the ETHICS Act, fines would be set at either the value of a month’s salary or 10% of the value for each asset involved in the violation, whichever amount is greater. “The fines are huge in this bill,” noted Merkley. “A person who is in violation would run up huge impacts very, very quickly.”
However, despite the boldness of this proposal, it faces significant resistance within Congress itself. Many lawmakers express discomfort, particularly concerning the inclusion of their family members under the restrictions. “Members of Congress get very twitchy and when you say your family will be covered too, they have concerns,” Merkley acknowledged.
Given the challenges in securing a standalone vote for the ETHICS Act, Merkley revealed a strategic plan to attach it as an amendment to another high-priority bill in the coming year, aiming to surmount the legislative hurdles and secure its passage.
As the ETHICS Act gears up for introduction to the Senate’s Homeland Security and Governmental Affairs Committee, it symbolizes a critical push towards re-establishing ethical integrity and fortifying public trust in the legislative institution.
