CREW Senior Vice President and Chief Counsel Donald K. Sherman testified on April 7th to the House Committee on Administration about prohibiting members of Congress from owning individual stocks. Congress must pass comprehensive legislation that would ban members of Congress, their spouses, and their dependent children from owning or trading stocks or similar financial instruments while in office, according to Sherman’s testimony.
By trading individual stocks in companies about which they may have confidential information or companies they have an opportunity to regulate, Members of Congress are creating egregious actual and potential conflicts of interest. Without comprehensive reform banning this practice, these transactions and the conflicts that arise from them will continue to erode public confidence in Congress and our democracy. In 2020, at least 75 members of Congress owned shares in Pfizer, Moderna, and Johnson & Johnson while simultaneously being asked to vote on legislation that could have had a direct impact on these companies’ share prices. Additionally, at least 15 members of Congress who sat on committees overseeing U.S. military power had financial ties to prominent defense contractors.
In 2012, Congress passed the STOCK Act to bar members from trading on non-public information. However, this legislation has largely failed to hold members to high ethical standards; at least 57 members of Congress have recently violated the Act, largely by failing to report stock trades in a timely manner or at all. To combat these pressing ethical challenges, Congress must create legislation that tackles loopholes in previous legislation, Sherman testified.
Legislation banning Congressional stock trading must satisfy three principles: It must include a blanket ban on trading and owning stocks and similar securities, must extend to spouses and dependent children, and must incorporate a clear and enforceable civil penalty. There must also not be an unreasonably high bar of intent that would make the ban virtually unenforceable.
It is vital that Congress act swiftly to ban Congressional stock trading to restore public trust in elected officials, and hold those who violate the ban accountable.