In-Depth: Sen. Jeff Merkley (D-OR) introduced this bill to prohibit members of Congress from abusing their public positions for personal financial gain:
“It’s way past time to end conflicted trading, in which legislators and top staff trade in stocks while making decisions affecting their value. This is scandalous. It undermines both the integrity of governance and the perception of integrity. Let’s end this corruption now!”
Original cosponsor Sen. Sherrod Brown (D-OH) adds that members of Congress have access to nonpublic information, and need to be held accountable for not using that information for their personal gain:
“Members of Congress serve the American people, not their stock portfolios. Elected officials have access to nonpublic information that can affect individual companies and entire industries. There must be more accountability and transparency to prevent members from using this information and abusing their positions for personal gain.”
The Pittsburgh Post-Gazette editorial board strongly supports this bill, which it calls “so commonsense that it is almost hard to believe it is not already law”:
“It is sadly no surprise that some members of Congress, full-time legislators supposedly working for the voters who elected them, leverage their power to expand their pocketbooks. What is surprising is that congressmen are allowed to exploit their position in such a blatant way. But, as it stands, the rules prohibiting such behavior are either thin or non-existent… It is clear that the rules in Congress are too lax, allowing too many congressmen to game the system for their benefit. Efforts to curtail such activities should be applauded and encouraged. Hopefully the Ban Conflicted Trading Act will be a significant step forward.”
Sen. Elizabeth Warren (D-MA) introduced a similar bill in August 2018. Her bill, the Anti-Corruption and Public Integrity Act, would ban members of Congress from owning individual stocks.
Separate from this bill, Federal Trade Commissioner (FTC) Rohit Chopra has called for an independent Public Integrity Protection Agency, which would consolidate enforcement capabilities currently spread around the government and be empowered to investigate and penalize government officials and those seeking influence.
Additionally, House Democrats have prepared a broad anti-corruption bill for 2019 that beefs up some restrictions of members and provides new enforcement powers to the Office of Government Ethics. However, the proposed Democratic bill doesn’t include any provisions on congressional stock trading.
Of Note: At present, the 2012 STOCK Act, which prohibits members and their staffs from exploiting insider information discovered in the course of policy deliberations and requires lawmakers to publicly disclose stock transactions within 45 days after making them public and annually revealing holding as part of their assets and liabilities, is the only current regulation governing members of Congress’ trading and investment activities. Unlike corporate “insiders,” members of Congress aren’t required to establish arms-length trading plans; and the House has not fully cooperated with the Securities and Exchange Commission’s (SEC) attempts to investigate wrongdoing.
The Senate’s ethics rules already ban members and staff from serving as board members of publicly traded companies, but there is no equivalent House rule to the safe effect. Additionally, the Senate and House both permit board membership of tax-exempt organizations.
This bill follows a series of major congressional trading scandals in recent years. In 2018, Rep. Chris Collins (R-NY) was revealed to have bought nearly $1 million in discounted shares from the Australian pharmaceutical Innate Immunotherapeutics. He sat on the company’s board, and he and his family members owned about 20 percent — with a personal investment worth $720,000 of the company. At the same time, Rep. Collins sat on the Health Subcommittee of the Committee on Energy and Commerce. On August 8, 2018 Rep. Collins, along with his son and son’s father-in-law, was arrested by the FBI for wire fraud, conspiracy to commit securities fraud, securities fraud, and lying to the FBI in connection with his activities related to Innate Immuno. Reps. Doug Lamborn (R-CO), Billy Long (R-MO), Mike Conaway (R-TX) and John Culberson (R-TX) also bought shares in Innate Immuno.
Similarly, in January 2017, it was revealed that then-Health and Human Services (HHS) Secretary nominee Tom Price (R-GA), who sat on the Ways and Means Committee and Health Subcommittee during his time in Congress, had made dozens of stock trades in the health industry over a multi-year period while also acting as a top health care policymaker. As a Congressman, Price advocated for the interests of a company he was invested in, Amgen, without disclosing the conflict of interest. And less than a week after purchasing shares in Zimmer Biomet, a medical devices company, Price introduced legislation to delay a Centers for Medicare and Medicaid regulation until 2018—a move that would protect the company’s finances. After introducing the act, Price’s reelection campaign received a donation from Zimmer Biomet’s PAC. In total, Price held stock in more than 40 companies that created conflicts of interest for his position as Secretary of HHS.
Most recently, Sen. James Inhofe (R-OK), who was elevated to chair the Senate Armed Services Committee after Sen. John McCain’s (R-AZ) death, was implicated in an insider trading scandal. A few days after meeting with President Donald Trump and Secretary of Defense Jim Mattis to successfully advocate for a military budget increase, Inhofe purchased between $50,000 and $100,000 of stock in defense contractor Raytheon, which stood to profit from additional defense spending. While Sen. Inhofe claimed that a third-party financial advisor handled his stocks and made the purchase without his knowledge, government ethicists said the incident highlighted the “moral hazard” of lawmakers owning assets in industries affect by legislation they’re in positions to author and shepherd into law.
Summary by Lorelei Yang
(Photo Credit: iStockphoto.com / Nikada)