Long-anticipated legislation that would ban lawmakers and other senior government officials from trading stocks got a boost on Sept. 22, as House Democrats released a legislative framework seeking to close loopholes, cut conflicts of interest, and make penalties for noncompliance more painful.
Rep. Zoe Lofgren (D-Calif.), chair of the Committee on House Administration tasked with reviewing deficiencies in the current financial disclosure system, outlined the framework in a Sept. 22 letter to fellow Democrats.
‘Are Our Public Officials Acting in the Public Interest?’
Pressure has been building for some time to reform the current financial disclosure system after media scrutiny of potential conflicts of interest in trading by U.S. government officials and their families. A recent analysis found that over a three-year span, nearly one-fifth of members of Congress or their family members bought or sold financial assets that showed possible conflicts of interest.“These stories undermine the American people’s faith and trust in the integrity of public officials and our federal government. Members of the public may ask, are our public officials acting in the public interest or their private financial interest?” Lofgren wrote.
The new framework, titled “Combatting Financial Conflicts of Interest and Restoring Public Faith and Trust in Government,” would entail reforming the Stop Trading on Congressional Knowledge Act, or STOCK Act, which was passed in 2012 and allows lawmakers to trade stocks but requires them to disclose such transactions.
One problem with the current disclosure system is paper-based filing that has, at times, seen forms that are practically illegible. The framework addresses that by proposing that all individuals subject to the disclosure requirements would need to file electronically.
The framework also seeks to require officials to provide more detail in the disclosure forms. Current law allows lawmakers to disclose values of trades in broad ranges, such as $1 million to $5 million. Under the new proposal, they would have to provide “more granularity” by providing a rounded value for high-value assets, transactions, and liabilities.
SCOTUS Included in Investment Ban
Notably, the framework also casts the net more widely to include Supreme Court justices under the restrictions, alongside members of Congress and other senior government officials, as well as their spouses and dependent children.Under the framework, government officials and Supreme Court justices, as well as their spouses and dependent children, would be prohibited from trading stocks or holding investments in securities, commodities, futures, and cryptocurrencies.
Both incoming and current officials would be required to divest such holdings or put them in blind trusts.
At the same time, officials would be allowed to invest in holdings that don’t present the same potential for conflicts of interest, such as diversified mutual funds, exchange-traded funds, and U.S. government securities.
The framework also seeks to impose more painful penalties for violations, which under the STOCK Act are a paltry $200 for every 30-day period of noncompliance.
The new proposal seeks to raise the penalty to $1,000, while calling for greater transparency around enforcement by requiring supervising ethics offices to publicly disclose information about compliance by filers.
Lofgren said the legislative text that’s built on the proposed framework would be introduced “soon.”
