In America: Congress Member Forces Vote On Bill Considering Ban Of Congressional Stock Trading
Alesia Kozik
Confronting misuses of power is a universal issue all governments are challenged with. In order for a government to build trust with its citizens, it should, theoretically, take action that represents the morality of the people. Congress represents the people through its law making. Congress members have the ability to create laws that impact the economy. Because of this, these members have the ability to profit from their law making through the stock exchange. Congressional stock trading is widely viewed as corrupt. Even though there is legislation meant as deterrence, there has been suspicious trading and frequent reporting violations. Representative Anna Paulina Luna believes the congressional stock exchange is corrupt and should be banned.
Current Deterrence For Congressional Insider Trading
In 2012, Congress enacted the “Stop Trading on Congressional Knowledge Act” (STOCK Act). This law prohibits Congress members, congressional employees, and executive branch officials from using nonpublic/insider information obtained from their positions to trade stocks, bonds, or other securities. The act also requires individuals to publicly disclose their financial transactions within 45 days of a trade for transparency. This is meant to show that representatives are not using insider information or conflicts of interest for their own gain. Under insider trading laws, violators can be prosecuted with civil fines and criminal prosecution. Civil penalties include the courts imposing penalties of up to three times the profit gained or losses avoided and the possibility of the disgorgement of profits. If criminal penalties are pursued, individuals can face prison sentences and fines for millions of dollars.
The objective of this law was to gain public trust in congress, increase transparency, and punish government representatives for insider trading. Critics argue the STOCK Act isn't effective. Enforcement of the act has been inconsistent and most violations have been penalized with small fines. Despite investigations, like the 2020 COVID-19 trading scandal, no member of Congress has been criminally prosecuted under the act. The most common penalty is for late disclosures ($200). Although the disclosures are public for transparency, they’re difficult to access for monitoring the trades. Watchdog groups argue the law’s deterrent is weak as the profit gained outweighs the penalty costs significantly.
The “Restore Trust In Congress Act”
Florida Congresswoman Paulina Luna has used the power of a discharge petition to force a vote in Congress to decide whether or not the “Restore Trust in Congress Act” should be enacted into law. Through this act, members of Congress, their spouses, and dependents would not be allowed to own or trade stocks while Congress members are in positions of power. This bill currently has 115 cosponsors from members of Congress.
In order to bring the bill to the House floor for a vote, the discharge petition will need 218 signatures of approval. There has been some resistance from both sides of the aisle in moving the bill forward. Some lawmakers have argued that the bill would discourage wealthy candidates that may be qualified from running. Skeptics believe this act has good intentions but could be undermined by the proposed tax benefit for lawmakers, its complex financial provisions, and other potential loopholes. Additionally, these issues could be viewed by the public as Congress sheltering its own interests by providing law makers with financial perks.
The primary issue that hasn’t allowed this bill to move forward is committee leadership. The Restore Trust in Congress Act was introduced in September by Representatives Chip Roy and Seth Magaziner. The bill was then sent to the House Committee on House Administration where the bill has not moved since. This institutional resistance is why Representative Paulina Luna has decided to use the discharge petition to try and move this bill forward.
Public Trust Undermined By Congressional Stock Trading
The Proceedings of the National Academy of Sciences released a study in May focusing on public perception of Congress based on government behavior. Across all party lines, Americans perceived Congress with a lack of legitimacy after learning about congressional stock trading. The study found congressional stock trading corrodes voters' trust in Congress, increasing views of perceiving Congress as corrupt, and reported an increase of unwillingness to follow laws and regulations.
When this authority is seen as self-serving, people question the fairness of the rules and if they are worth following. Should Congress members be allowed to profit from congressional stock trading? How else should Congress fight internal corruption?
