March 5, 2021

Senators Introduce Bill to Ban Members of Congress from Trading

Senators Jeff Merkley (D-OR), Raphael Warnock (D-GA) and Sherrod Brown (D-OH) introduced a bill - the "Ban Conflicted Trading Act" - that would prohibit members of Congress from trading (including short-selling) securities, commodities and futures. Under the proposed legislation, members of Congress would be prohibited from serving as officers or members of any board of any for-profit association, corporation or other entity.

In addition to sitting members of Congress, the Act would apply to officers or employees of Congress required to file a report under the Ethics in Government Act of 1978.

The Act provides as exceptions: (i) investments that were held before the member of Congress took office and (ii) divestitures, so that an individual can sell his or her investment over the six-month period beginning on the date the person took office or the effective date of the Act. The Act also allows the Select Committee on Ethics to authorize a covered person to place securities in a qualified blind trust on a case-by-case basis.

The Act sets forth that an official who fails to comply would be subject to a civil penalty of not less than 10 percent of the value of the investment that was purchased or sold.

Commentary

If enacted, the statute would go well beyond the STOCK Act passed under the Obama administration, which barred members of Congress and other governmental officials from trading based on material nonpublic information obtained through their positions, and essentially bar members of Congress from buying and selling stocks and other securities while in office. As drafted, the statute applies only to sitting members of Congress and certain other individuals employed by Congress. It does not apply, for example, to other household members. If the legislation goes forward, Congress should consider whether the prohibitions ought to apply to household members and to related business interests.

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