Democrats have introduced legislation that would ban senior government officials from owning and trading stocks.
The bill, called the Combating Financial Conflicts of Interest in Government Act, is an attempt to limit conflict of interest for public office holders and their families when it comes to their investments.
The proposed bill is wide reaching. If it’s passed, several people who hold senior public positions won’t be allowed to own or trade securities, commodities, futures, crypto currencies or other digital assets.
It’s no surprise that politicians and senior officials are well-connected people and have the inside track on new legislation that might affect a company or an industry. And while it doesn’t make them clairvoyant, it’s certainly an advantage when it comes to the market.
And the public takes note.
Legislation would limit investing options
The bill would prevent members of Congress, their spouses and dependent children, senior staffers in Congress, Supreme Court justices, federal judges, the president and the vice president, as well as members of the Federal Reserve System’s Board of Governors from taking part in active investing.
Senior officials and others affected by the bill will be required to either sell their holdings when they take their position or put them into a blind trust, where they would have no control over trades.
They would still be able to purchase diversified ETFs, diversified mutual funds, U.S. Treasury bills or bonds, state or municipal government bills or bonds and others.
Critics have been calling for such a bill for years, but the House and Senate have long resisted.
Bill comes on heels of Pelosi controversy
The introduction of the bill comes just weeks after Nancy Pelosi, the speaker of the House, faced harsh criticism when her husband, Paul, a venture capitalist, exercised his call options and purchased shares in Nvidia, a manufacturer of graphics cards.
The timing of his move was widely criticized. It happened soon before the Senate was expected to vote on a bipartisan bill that would see domestic chipmakers get a $52 billion subsidy.
The bill was passed in July and, amid the scrutiny, Paul Pelosi sold his holdings in the semiconductor manufacturer at a six-figure loss.
But months before that summer scandal, as calls for legislation to combat the issue mounted, Nancy Pelosi directed the House Administration Committee to draft a bill back in February.
Conflict bill is a long time coming
The feeling that the well-connected in Congress have a leg up on the market has been growing over the years.
A survey, commissioned by conservative advocacy group Convention of States Action earlier this year, showed that more than 75% of voters believe lawmakers have an unfair advantage when it comes to trading in the stock market.
And those feelings aren’t unfounded.
A recent report from Business Insider revealed that 72 members of Congress didn’t report their financial trades as they are mandated to do by the Stop Trading on Congressional Knowledge Act of 2012.
But it may be a while yet before Congress makes a decision on the bill. The House is in its final week of the legislative session before the midterm elections and lawmakers aren’t scheduled to return until after the elections in November.
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