House set to vote on narrower curb for congressional stock trades
A GOP bill would stop lawmakers from buying individual stocks while in office, but critics say it leaves too many trades untouched.
By Theo Nakamura · Staff Writer
· 3 min read
The House is set to vote Wednesday afternoon on a Republican-led bill that would limit stock trading by members of Congress, a topic that has become a trust issue for many individual investors watching Washington. The proposal would curb new purchases of individual stocks by lawmakers while they serve, but it would not force them to sell shares they already own.
The bill, called the Stop Insider Trading Act, was introduced by Rep. Bryan Steil, R-Wis., according to CNBC. It comes after years of scrutiny from ethics watchdogs and the public over lawmakers’ market activity, especially when trades appear to line up with information Congress may receive before ordinary investors do.
A 2012 federal law already bars members of Congress from trading on inside information, CNBC reported. Inside information means material, nonpublic details that could affect a stock price. The issue, critics argue, is enforcement: CNBC reported that penalties tied to the existing law are weak and rarely, if ever, used.
What the bill would do
Under Steil’s proposal, members of Congress could not buy individual company stocks while holding office. They could keep existing investments, which is one reason some lawmakers and ethics advocates say the bill does not go far enough.
The measure would also allow lawmakers to sell stock from their portfolios if they publicly disclose their intent to sell at least seven days ahead of time, according to CNBC. That disclosure requirement is meant to give the public notice before a transaction happens, rather than only after the fact.
The bill would raise penalties for members who fail to properly report stock sales. CNBC reported that violations would trigger fines of $2,000 or 10% of the transaction’s value, whichever is larger. The current fine for first-time disclosure violations is $200.
Steil defended the measure Wednesday on CNBC’s “Squawk Box,” saying Congress should tell Americans that lawmakers are finished “day-trading stocks.” He said the bill would help remove the appearance that any trade could be based on information obtained in Washington.
Why Democrats are pushing back
Several Democrats are opposing the proposal, including Rep. Seth Magaziner, D-R.I., who has supported a broader bipartisan effort to restrict congressional trading. Magaziner told CNBC he was “very disappointed” and called the measure “a stock trading ban that still allows stock trading.”
The politics became more complicated after House Republicans added a voter-identification provision to the legislation. CNBC reported that the provision reflects President Donald Trump’s demand for Congress to approve the SAVE America Act, which would set voter-ID and proof-of-citizenship requirements for voters across the United States.
The SAVE America Act does not have enough support to clear Congress, according to CNBC. Adding a voter-ID measure to the stock-trading bill makes Democratic votes less likely and could make the overall package harder to pass.
If the House approves the bill, its future in the Senate remains uncertain. Most legislation there needs 60 votes to overcome a filibuster, a procedural hurdle that lets senators delay or block action unless a supermajority agrees to move ahead.
For retail investors, the debate lands on a basic market fairness question: whether elected officials should be able to trade individual stocks while helping shape laws, regulation and spending decisions that can move those same companies’ shares. Wednesday’s vote will show whether the House is ready to move even a narrower version of that idea forward.
This story draws on original reporting from CNBC.
