A Congressional stock trading ban needs teeth: 4 must-have provisions - CREW | Citizens for Responsibility and Ethics in Washington

In recent weeks, a flurry of bills have been introduced to deal with the conflicts of interest created by members of Congress owning and trading stocks. Following months of headlines about dozens of members violating the STOCK Act repeatedly, public pressure has led to growing bipartisan support for banning Congressional stock trading, with momentum continuing to build.

It’s essential that any Congressional stock trading legislation under consideration include a few key provisions that will ensure the ban is clear and comprehensive. Any stock ban bill should include:

1. A comprehensive ban on trading or owning individual stocks, bonds, or other securities.

The legislation must include a comprehensive ban on trading or owning individual stocks, bonds, or other securities. We do not believe that placing individual stocks or similar securities into a blind trust without a commitment to divest is a sufficient solution to the conflicts that these assets present: a trust is only “blind” when the beneficiary does not know what assets the trust holds. This means that trustees must be directed to sell all the member’s individual stocks, and members must not be permitted to retain any individual stocks or similar securities held prior to joining Congress.

We therefore recommend that Congress adopt the provisions of the Bipartisan Ban on Congressional Stock Ownership Act (“Warren-Daines”) related to divestment (subsection (b)).

2. The legislation must have a clear and workable enforcement mechanism.

The legislation must include a clear and workable enforcement mechanism. Congress should ensure that the final bill’s enforcement mechanism is both clear enough that members understand precisely what will happen should they violate the act, and significant enough to serve as a functional deterrent.

We therefore recommend that Congress adopt provisions included in Sen. Ossoff and Sen Kelly’s Ban Congressional Stock Trading Act (“Ossoff-Kelly”) (subsection (g)(2), imposing a civil penalty equal to the monthly rate of pay), Warren-Daines (subsection (d), imposing a $50,000 penalty for each violation), and Sen. Hawley’s Banning Insider Trading in Congress Act (section 202(c)(1), requiring disgorgement of any gains from a trade made in violation of the act to the U.S. Treasury), whichever is greater.

3. The legislation must not have a high bar for intent that would make enforcement unworkable.

Congress must also ensure that the legislation does not create an intent standard that would make enforcement of the legislation unworkable or unlikely–such as a standard requiring proof that a member “knowingly” violated the act.

We therefore recommend that Congress adopt the intent standard from either Ossoff-Kelly (subsection (g)(2)(A), fine assessed on proof of violation), or from Warren-Daines, (subsection (d), fine assessed following proof of conduct amounting to a violation by a preponderance of the evidence).

4. The legislation must ban members and their spouses and dependent children from owning or trading stocks and other individual financial instruments.

The legislation must include a comprehensive prohibition on members’ spouses or dependent children owning or trading individual financial assets. Members must not be permitted to simply transfer their individual assets to a close family member as it would defeat the purpose of the legislation.

We therefore recommend that Congress adopt the prohibition found in Ossoff-Kelly (Section 202(a)(2)(A)).

CREW has circulated these principles to Congress, and calls on all members of Congress to support a stock ban that includes these key provisions. Americans shouldn’t have to wonder if their representatives are making decisions based on their own profits, or their constituents’ best interests. It’s time to pass a strong ban on Congressional stock trading and ownership.

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