Halting Ownership and Non-Ethical Stock Transactions (HONEST) Act
The PELOSI Act would amend title 5 of the U.S. Code to prohibit Members of Congress and their spouses from holding, buying, or selling “covered financial instruments” during their terms of service. A covered financial instrument includes certain securities, security futures, commodities, and similarly structured derivative interests (including synthetic exposure via options or warrants). The act creates a wind-down window (180 days) for existing holdings by current members and new members, while allowing certain non-covered investments (e.g., diversified mutual funds/ETFs and U.S. Treasuries). Violations would carry penalties, including disgorgement of profits to the Treasury and civil fines, with enforcement and compliance overseen by the supervising ethics committees of Congress, annual certifications, and public disclosure. An audit by the GAO is required within two years of enactment, and various conforming amendments would update related reporting and lobbying disclosures.
Key Points
- 1Covered financial instruments and exclusions:
- 2- Covered instruments include investments in securities, security futures, commodities, and synthetic interests created through derivatives (e.g., options, warrants).
- 3- Exclusions: diversified mutual funds, diversified ETFs, U.S. Treasury securities, and compensation received by a Member’s spouse or dependent child from their primary occupation.
- 4Prohibition and wind-down:
- 5- Prohibits Members and their spouses from holding, purchasing, or selling covered financial instruments during the Member’s term.
- 6- Sunset provisions: existing holdings may be sold within 180 days of enactment; new Members have 180 days after their first term begins to sell.
- 7Penalties and enforcement:
- 8- Disgorgement: profits from any covered instrument transaction/holding violating the rule must be returned to the Treasury.
- 9- Civil fines: can be imposed by supervising ethics committees for violations; fines may be assessed periodically (10% of the value of any instrument not divested during the penalty period).
- 10- Procedures: prior notice and an opportunity for a hearing before fines are imposed; ongoing noncompliance leads to repeated penalties and public reporting.
- 11- Appeals: fines may be appealed via a privileged floor vote in the relevant chamber.
- 12Certification and transparency:
- 13- Members must certify compliance with the subchapter at least annually.
- 14- Certifications are published on a publicly accessible website.
- 15Oversight and implementation:
- 16- Supervising ethics committees would issue rules, provide divestment extensions when good-faith efforts are being made, publish certifications, and assess fines.
- 17- GAO audit required within two years of enactment to assess compliance and report findings to the ethics committees.
- 18Conforming changes:
- 19- Adds new subchapter IV to chapter 131 of title 5 and updates related cross-references, including definitions of “Member of Congress” and related filing requirements, and amends the Lobbying Disclosure Act to reflect the broader definition of congressional officers/employees.