Efforts to stop members of Congress from buying and selling stocks and options have been a key interest of retail traders and some elected officials for years. A recent effort to ban the practice passed the U.S. House, but its limited scope and a bundled voter-ID provision sparked confusion and sharp disagreement over what it actually accomplishes.
Stop Insider Trading Act
Members of Congress including Rep. Ro Khanna (D-Calif.) have been among the most vocal to ban stock trading for elected officials. Khanna was one of many Democrats to vote against the Stop Insider Trading Act this week.
The bill passed the House of Representatives with a 232-198 vote, with 13 Democrats supporting the bill. This marked the first congressional stock trading ban bill to reach the House floor for a vote, but differs from a separate bill that had significantly more bipartisan support, according to Politico.
Also known as H.R. 7008, the bill would allow members of Congress to hold onto stocks they already own, but ban them from making more trades once in office.
If they choose to sell, they would have to issue public notice seven to 14 days in advance. Fines for failing to abide by the rules total either $2,000 or 10% of the trade, whichever is greater.
The bill covers members of Congress, their spouses and dependent children.
Members would still be able to buy mutual funds, ETFs, index funds and commodities while in office.
The Voter ID Act, which is a portion of the SAVE America Act, was also attached to the bill.
Unlike other bills on banning elected officials, this legislation did not include the president or other government officials in the ban.
“What we want to do is make sure we’re not locking out people who come from a successful business,” Sen. Pete Ricketts (R-Neb.) said in an interview. “We don’t want to keep a successful business person from coming to Congress.”
Ricketts highlighted the new rules, significant penalties, and selling notification rules, while acknowledging that members could still own existing holdings.
“You can’t buy any more once you get here.”
White House Community Note, Bill Ackman Deletes Post
Bills that support the president being banned from trading and don’t include the Voter ID Act have not been brought to a vote, but may have gotten more support from both parties, something lost on the minds of those who used the vote tally as an effort to attack Democrats.
“Breaking: 198 Democrats just voted against the Stop Insider Trading Act, which bans members of Congress from trading stocks while in office. Shameful,” the White House tweeted.
That tweet generated a Community Note for being misleading to social media users.
“The Stop Insider Trading Act was amended to also include voter ID provisions mirroring elements of the SAVE America Act (requiring photo ID for federal elections). Democrats opposed the combined bill, which passed the House 232-198,” the note reads.
Rep. Thomas Massie (R-Ky.) may have predicted this misinformation ahead of the tweet.
“Congress is not serious. We are voting on a stock trading ban for members of Congress…BUT Republicans added voter-ID in the legislation. Not to get Dems to vote for voter-ID, but to get them to vote against the stock trading ban, so they can use it in the Nov. election,” Massie tweeted.
Massie said that Congress should offer “stand alone legislation” on the stock trading ban act to have a chance to pass both the House and the Senate.
Investor Bill Ackman was among the voices questioning how Democrats could vote against the Stop Insider Trading Act. The Nancy Pelosi Tracker account replied to Ackman with the examples of not including President Donald Trump and sneaking in the Voter ID Act. Ackman later deleted his post.
Congress Members Speak Out
“Republicans have corrupted their so-called stock trading bill with a decaying piece of the SAVE American Act corpse,” Rep. Joseph Morelle (D-N.Y.) said during debate on the legislation, as reported by Politico.
Rep. Jim McGovern (D-Mass.) tweeted in response to the White House post.
“Correcting the Record: your shitty, watered-down bill is a bandaid on a bullet hole. It does NOT ban stock trading. It bans Members of Congress from *BUYING* stocks but not *SELLING* them. Nice loophole. Oh and of course it does NOTHING to prevent the corrupt crooks at the @WhiteHouse from cashing in on insider information. We need a REAL ban on stock trading. NOW!” McGovern tweeted.
Rep. James Clyburn (D-S.C.) tweeted that he voted no because the bill doesn’t fully ban trading.
“Members of Congress could still own and sell stocks, and the restrictions don’t apply to the biggest stock trader in our government – the President of the United States,” Clyburn tweeted.
Rep. Sean Casten (D-Ill.) also criticized the bill not including President Trump.
“The bill does not apply to Donald Trump who, in the last year, traded more stocks than ALL MEMBERS OF CONGRESS COMBINED. It is not a serious piece of legislation,” Casten tweeted.
The bill now heads to the Senate where it could face bipartisan opposition over not being a full ban, not including President Trump and for adding the Voter ID Act.
Photo: W. Scott McGill via Shutterstock
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