In 2023 alone, the U.S. Securities and Exchange Commission (“SEC”) has pursued investigations of insider trading involving over sixty parties. (SEC Division of Enforcement Summary). Despite the growth of insider trading prosecution, the rules for insider trading and conflicts of interest remain only loosely enforced for members of Congress (Alicia Parlapiano et al., New York Times). This is problematic because members of Congress are routinely exposed to nonpublic information that can impact stock prices. (Id.). In fact, their trading activities as a whole remain largely unchecked as the existing framework to enforce insider trading and conflicts of interest in Congress is ineffective. (DeChalus et. al., Business Insider) In response, several bills were introduced in the Senate and the House of Representatives. (Congress.gov).  Seventeen different bills were introduced in 2023, and one has already been introduced in 2024. Id. The most comprehensive and notable bills were introduced by Senator Kristin Gillibrand and Representative Katie Porter. (S. 2463, H.R. 6842). These bills (the “Bills”) seek to enhance the “trading bans and disclosure requirements for Congress, senior executive branch officials, and their spouses and dependents.” (S. 2463) Like the numerous other bills introduced in the past few years, the Bills are in the early phases and face an uphill battle to adoption. (Congress.gov).

In 2012, Congress passed the STOCK Act (the “Act”), which “prevents members of Congress from trading stocks based on nonpublic information members gleaned on Capitol Hill.” (STOCK Act Fact Sheet). The Act imposed ethical requirements on members of Congress to mitigate any conflicts of interest and mandated public financial disclosures and trade reporting. (STOCK Act Fact Sheet). However, the Act merely prohibited Congress from personally benefitting based on information learned in the course of their duties but lacked any meaningful penalties. (S. 2463, H.R. 6842). Since the passage of the Act, members of Congress have incurred numerous violations of the Act, with little to no repercussions. (Dave Levinthal & Madison Hall, Business Insider; Kate Kelly et al., New York Times). The banking crisis in early 2023 further highlighted the conflicts of interest within Congress, when at least nine Congressional members, including a member of the House Financial Services Committee, conveniently transacted certain stocks before and after market turmoil. (Madison Darbyshire, Financial Times; Jake Johnson, Common Dreams). The timing of the transactions enabled these individuals to avoid substantial losses as the effects of the banking crisis rippled throughout the industry. (Madison Darbyshire, Financial Times; Jake Johnson, Common Dreams). To date, there have been no actions taken by the Office of Congressional Ethics or the House Ethics Committee to investigate potential violations of the Act by these members of Congress under the STOCK Act. (Congress.gov; House OCE). This example demonstrates the ineffectiveness of the current Act and the unwillingness among those who oversee members of Congress to enforce penalties.  Nevertheless, momentum is building within Congress to address this conflict of interest.

The Bills, collectively referred to as the “STOCK Act 2.0” (the “Act 2.0”), are the most recent and comprehensive bills introduced in the current meeting of the 118th Congress to address conflicts of interest in stock ownership and trading by members of Congress and other governmental officials. (S. 2463, H.R. 6842). The Act 2.0 expressly prohibits trading in stocks and derivatives owned by members of Congress, Senior Executive Branch Officials, and their respective spouses and dependents. (S. 2463, H.R. 6842). The Act 2.0 imposes significant penalties for failure to adhere to the trading requirements, which include monetary fines, disgorgement of profits, and the option for the U.S. Attorney General to bring civil action. (S. 2463, H.R. 6842).  Lastly, under the Act 2.0, the financial penalties increase for violations for failing to file the required stock transactions disclosures. (S. 2463, H.R. 6842).

While the Act 2.0 is one of the more developed bills addressing stock trading and disclosures for Congress, the path to becoming a signed bill is not as clear. Most registered voters support banning stock trading for members of Congress, their families, senior officials and members of the Executive Branch, but such overwhelming support does not always translate to bill adoption. (Morning Consult & Politico; Univ. of Maryland Program for Public Consultation). Despite bipartisan support in both the House and Senate to addressing insider trading by Congress, Congress has repeatedly failed to consider this topic in its legislative or committee sessions. (Congress.gov). With over 450 seats in Congress up for re-election in the coming year and members of Congress focusing their efforts on re-election and averting government shutdowns, these Bills are unlikely to receive the attention and visibility they deserve. (Ballotpedia). Given the present set of factors, and if history serves as evidence, this Congress is unlikely to pass the Bills in this congressional session.  (U.S. Senate). However, the pressure to adopt this legislation is not expected to subside as voters continue to push for increased transparency and accountability of their lawmakers to ensure one’s public office is not being used for private gain. Even though it may take until the next meeting of Congress to adopt meaningful legislation, the Bills are a step toward increasing accountability within Congress and preventing individuals for using their public office for private gain.