End Congressional Stock Trading Act
This bill, the End Congressional Stock Trading Act, would prohibit Members of Congress and their spouses and dependent children from owning or trading any stock, bond, commodity, futures, or other security, including investments in hedge funds or other complex vehicles. It requires immediate divestment for current members and their families, with a structured timeline that tightens for new members. The bill provides broad exceptions for certain types of investments (such as widely held, diversified funds and U.S. government securities) and sets up civil penalties for violations. It also makes changes to tax rules to allow (under strict conditions) tax-free treatment of certain reinvestment proceeds, and it directs ethics committees to issue guidance on terms not defined in the statute. Overall, the act aims to reduce potential conflicts of interest by removing most direct ownership of securities from Members of Congress and their immediate family members, while preserving a narrow set of allowed investments under specified conditions.
Key Points
- 1Prohibition and scope: Members of Congress and their spouses and dependent children may not own or trade stock, bonds, commodities, futures, or other securities (including hedge funds, derivatives, or options) unless they complete divestment under the Act.
- 2Divestment timeline:
- 3- Current members and their spouses/dependent children must divest within 180 days of enactment (5 years for certain private, complex investments like hedge funds or venture capital funds).
- 4- New members and their spouses/dependent children must complete divestment within 90 days of taking office (5 years for the same complex assets).
- 5Exceptions: Several investments are allowed if specific conditions are met, including:
- 6- Widely held, diversified investment funds with no conflict of interest.
- 7- U.S. Treasury securities.
- 8- Investments held in government employee retirement plans.
- 9- Interests in small business concerns that do not create conflicts.
- 10- Alaska Native Settlement stocks and related settlement stock definitions.
- 11- Assets received as compensation by the spouse’s primary occupation.
- 12- A spouse or dependent child may trade an asset described in the divestment list if the asset is not owned by the Member and is related to the spouse’s primary occupation.
- 13Civil penalties and enforcement: Violations can trigger civil penalties up to $100,000 per violation, with possible additional remedies under law.
- 14Tax treatment (nonrecognition of gain): The Internal Revenue Code would be amended so that if a member or their spouse/dependent completes a required divestment and then reinvests the proceeds within 60 days into an asset the Act permits, any gain on the divested property can be nonrecognized for tax purposes. The certificate of divestiture must be updated to reflect involvement of the relevant ethics committees.
- 15Compliance and guidance: The bill requires interpretive guidance from the Senate Ethics Committee and the House Ethics Committee on terms not defined in the statute.