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It’s Time to Ban ALL Stock Trades for Members of Congress

Can  a Conflict of Interest Be Avoided?

Should members of Congress be prohibited from owning and trading in stocks? This question is receiving a lot of attention on Capitol Hill and in the press. The answer to the question seems to be a no brainer – Yes! The simple reason is because members of Congress may be privy to inside information that is not publicly known, and that knowledge could motivate them to exercise stock trades. A good example is what happened when COVID first hit the U.S.

During the initial stages of the COVID-19 outbreak, Republican and Democratic lawmakers bought and sold stocks hundreds of times throughout the coronavirus pandemic — some of them lucrative moves to invest in industries buoyed by the crisis and divest from sectors like restaurants and hotels that have tanked, according to an analysis by the Campaign Legal Center.

From February 2 to April 8 of 2020, the nonpartisan watchdog group found, 12 senators made a combined 127 purchases or sales, while 37 House representatives made at least 1,358 transactions.

Conflict of Interest

A conflict of interest existed at the time because lawmakers had received closed-door briefings on the pandemic from top health and national security officials. Some lawmakers bought stock in remote-work technology, telemedicine companies, pharmaceutical makers currently developing potential vaccines, car manufacturers that have shifted to making ventilators for coronavirus patients, and alcohol producers that started making hand sanitizer during the coronavirus outbreak.

Currently, lawmakers are barred from trading on nonpublic information derived from their position and must publicly file and disclose any financial transaction involving stocks, bonds, commodities futures and other securities within 45 days.

Lawmakers and their immediate families bought $267.4 million of assets and sold $363.5 million last year, according to Capitol Trades, with both figures down from the prior year. The value of trading in stock options roughly doubled in 2021, to $25.9 million from $12.8 million a year earlier.

While many of these sales may not have qualified technically as insider trading, the transactions do create the appearance of a conflict of interest. Appearances matter. These transactions rightly raise questions in the mind of the public whether those in Congress are getting richer because of their contacts. It could be that they have family members or close friends who are financial advisers and tip them off to market changing activities before they are made public, which is also insider trading.

Failure to Disclose

An outside ethics group filed ethics complaints last September against seven U.S. House lawmakers — four Democrats and three Republicans — over failing to report stock trades.

One of the members of Congress — Democratic Rep. Tom Suozzi of New York — failed to file required reports on approximately 300 transactions, according to the complaint from the Campaign Legal Center. Five of the seven lawmakers sit on the powerful House Financial Services Committee.

It's the latest example of a bipartisan trend that has emerged almost 10 years after Congress overwhelmingly passed a law to provide transparency and show lawmakers aren't profiting from their jobs: Members of Congress are ignoring the disclosure law.


Under the 2012 STOCK Act — Stop Trading on Congressional Knowledge Act — lawmakers must file a report when they buy or sell stock. The form, known as a periodic transaction report, or PTR, must be submitted within 45 days for every trade valued at over $1,000. The PTR is then made public.

The STOCK Act prohibits members of Congress from trading on nonpublic information that they accessed in the course of their official duties. To date most allegations of STOCK Act violations involve members filing months — or in some cases more than a year — after the required window for submitting a report.

Two GOP senators — Richard Burr of North Carolina and Kelly Loeffler of Georgia — have already faced accusations of improper trading, but maintain they did nothing wrong and did not violate the Act.

Overall, the STOCK Act is ineffective as a countermeasure to lawmakers failing to file their trading in a timely manner. Moreover, it relies on disclosure and does not ban trading unless it's based on nonpublic information gained through a member's or staffer's official duties. But what if it's based on inside information not related to official activities or being tipped off to market moving events before they occur?

Last year alone, 54 members violated the STOCK Act rules, according to an analysis by Business Insider published earlier this year.

Is a Blind Trust the Answer?

Is there a fix for the conflict-of-interest ethics problem? Some suggest putting their stock holdings and other investments in a “blind trust.” Blind trusts potentially cure conflicts of interest by transferring assets into a financial instrument controlled by an independent trustee, who may sell or transfer interests without knowledge of the beneficiary. The beneficiary becomes “blind” to the impact of official actions on private interests held in trust, thereby creating a shield against conflicts of interest.

Communications between trustee and beneficiary in a blind trust may be limited to specified subject matters—such as when a public official needs assets from the trust or information relating to tax returns—and conducted only in writing. Beneficiaries should be barred from directing how funds may be invested, although some allow notifying a trustee that an asset placed in the trust should be sold to prevent a conflict.

The problem with blind trusts is you’re still aware of what assets were put in that trust, creating at least the appearance of a conflict of interest.

The Public Interest

The public must trust that their representatives in Congress are acting in their best interests and not using their office for personal gain. That’s the underlying issue in crafting new legislation banning stock sales by members. Congress ethics

House Speaker Nancy Pelosi and Democratic leaders have greenlighted a plan to craft legislation that would prohibit members of Congress from trading stock, after months of resistance to a ban by Pelosi, according to CNBC

At Pelosi’s direction, the House Administration Committee is working on drafting the rules, and the legislation is expected to be put up for a vote this year, likely before the November midterm elections.

In the Senate, several versions of a stock trading ban are under consideration, including one co-authored by progressive Democratic Sen. Elizabeth Warren of Massachusetts and Montana Republican Sen. Steve Daines. According to Warren's team, it would ban the ownership or trading by members of Congress and their spouses of "individual stocks, bonds, commodities, futures, and other securities including an interest in a hedge fund, a derivative, an option or other complex investment vehicle." It would not prohibit investments in broad-based mutual funds such as index funds, Treasury securities and investments held in a government retirement fund. I think thats a mistake and only investments in Treasury securities and investments held in a government retirement fund should be exempt because the plan trustee makes trading decisions in that case.

A recent survey found that 76% of voters believed that lawmakers and their spouses had an “unfair advantage” in the stock market. The same survey, conducted by the Convention of States Action, also found that just 5% of likely voters approved of members of Congress trading stocks.

Unanswered Questions

Many questions remain about what types of investments would be prohibited, what incoming members would be required to do to comply with a new law, and whether family members of lawmakers would also be banned from trading stocks.

Then there is the slippery slope argument. For example, should members be barred from owning real estate that can be bought and sold while, at the same time, a member knows about potential market swings for real estate based on inside information.

In the past, opponents of a ban on stock trading in Congress have claimed it would hamper efforts to recruit the best candidates to run for office. Meanwhile, many of their own families have grown wealthy by investing in the stock market, including Pelosi’s.

Yet in recent months, Pelosi and her top lieutenants have come under growing pressure from rank-and-file members to act and pass a stock trading ban.

These increasingly loud calls for a ban have been spurred in part by growing public support for a prohibition on lawmakers.

Issues to Consider in Crafting a New Law

As previously mentioned, the question at the heart of the stock trading issue is whether members of Congress have an unfair advantage in the stock market because they are privy to information daily that is not available to the public.

Examples of this kind of information include classified briefings about national security issues, advance knowledge of regulatory actions, and nonpublic details about legislation, appropriations and tax policy. Any one of these could create a conflict of interest for a lawmaker who owned and traded shares in a company that would be impacted by this information.

Yet another question up for debate is how violations of any stock trading ban would be handled. Penalties could range from relatively soft ones like a written warning to serious punishments, such as massive fines or a loss of committee assignments.

There is also likely to be resistance from members who feel that a stock trading ban denies them a right to participate in free markets, and effectively punishes them for their decision to enter public service.

This was the sentiment behind Pelosi’s statement to a reporter’s question about whether she would support a stock trading ban for members of Congress.

“We are a free market economy. They should be able to participate in that,” she replied.

But that response quickly backfired, especially given that Pelosi’s husband, Paul Pelosi, is a venture capital investor who holds tens of millions of dollars’ worth of stock. Speaker Pelosi has long insisted that she does not own any stocks herself.

The bottom line is the public does not trust members of Congress, and that’s why yet another law should be passed. In a recent Gallup Poll, only 12 percent rated them high in honesty and ethics, one percent below insurance salespeople and three percent above car salespeople.

Blog posted by Dr. Steven Mintz, The Ethics Sage, on February 14, 2022. You can sign up for his newsletter and learn more about his activities at: Follow him on Facebook at: and on Twitter at: