Congressional stock trading is a practice that has been criticized by many. It has been reported that at least 72 members of Congress have been accused of violating the STOCK Act, which prohibits insider trading. While some Reps have defended their actions, others have vowed to stop the practice.
Getting elected to Congress is a great investment strategy. Despite the adage, politics aren't always the best investment, and in fact the stock market is not entirely dependent on politicians. It can be a good idea to keep politics out of your portfolio.
While the stock market is not immune to partisan bickering, it is possible to keep political squabbling at bay. The best bet is to compartmentalize your investments and focus on the long-term. The current Congress has its work cut out for it before the holiday break.
As an investor, you don't want to make a hasty move based on the results of this year's midterms. There are too many other factors at play to make a snap decision. The S&P 500 has risen by an average of 14.3% after the midterms, a significant improvement on the 3.1% gain recorded in the same period a year ago. While there will be no major shake-ups in the near future, it's a good idea to keep in mind the long-term ramifications of a change in congressional balance of power.
The S&P 500's best performance was recorded during a period when Republicans gained control of both chambers of Congress. This will likely increase the likelihood of a debt limit standoff in the years ahead. It will also limit the ability of Democrats to push through the most important legislative initiatives, like the passage of the bipartisan SECURE 2.0 plan.
The stock market has been known to show its true colors after a midterm election, especially if you're invested in the blue-chip stocks. The S&P 500 has underperformed the market in the months leading up to the midterms, with the exception of the market's recent rally.
Conflicts between public responsibilities and private finances
Despite the passage of the Stop Trading on Congressional Knowledge Act in 2012, members of Congress are still trading stocks based on inside information. They can use this information to gain a profit in business deals and in real estate and cryptocurrency transactions.
Although the law is meant to restrain members from trading on inside information, dozens of federal lawmakers are still violating the law. The New York Times analyzed 97 lawmakers' financial records and found that at least 3,700 trades could potentially expose members to conflicts of interest.
The STOCK Act was passed to limit the appearance of corruption. It requires public disclosure of all trading in commodity futures, bonds and individual stocks. It also prohibits trades based on positions, jobs and non-public information. But the Office of Congressional Ethics found evidence of violations, including at least 182 top congressional staffers.
A recent report by the Campaign Legal Center showed that most Americans support banning members of Congress from owning individual stocks. However, key details need to be ironed out before a law can be adopted.
A bill to ban congressional stock trading is currently circulating in the House. It would require members of Congress to divest their holdings after 30 days, or face a fine of $1,000. They also would have to donate their investments to a qualified blind trust. These reforms can help solve the problem of perceived and real financial conflicts of interest.
Other proposals include a prohibition on covering assets, requiring qualified blind trusts and amending penalties for non-compliance. These simple changes could help restore public confidence in the government. Currently, congressional ethics rules are not adequate protections for the public. In addition, many lawmakers are paid for their work as officers.
Insider trading is illegal in congressional stock trading
Despite the fact that insider trading is illegal, many members of Congress do not fully comply with the STOCK Act. This law requires lawmakers to make quick and detailed disclosures about financial transactions they conduct while on Capitol Hill. This includes the trade of stocks. However, the law is not well enforced. In addition to making the disclosures, the law also prohibits lawmakers from using non-public information for their personal financial gain.
Although the STOCK Act passed with near-unanimous support, some lawmakers claim that it did not go far enough. They believe that the law should be amended to require members to step back from active control of individual stocks. In other words, if a legislator buys a stock based on a secret job-related information, he or she must step back from the purchase.
The STOCK Act was passed in response to several allegations of insider trading. This was not the first time the issue had been raised in the United States. In 2005, former House Majority Leader Bill Frist was accused of conducting insider trading. He sold more than a million dollars' worth of stocks.
As a result, the STOCK Act expanded the number of disclosures members of Congress must make when they engage in financial transactions. It also required that a legislator's staff and staff of the other branches of government must be informed about the details of their financial transactions. It required lawmakers to file a report about their activities every 30 days or at least once every 45 days. The STOCK Act is one of the last significant pieces of ethics legislation that cleared Congress. However, it has not prevented corruption. Some lawmakers, such as former Speaker of the House Tom DeLay and Health and Human Services Secretary Tom Price, have resigned or been charged with insider trading.
72 members of Congress have violated the STOCK Act
Hundreds of members of Congress have failed to comply with the STOCK Act, the law that bans insider trading among lawmakers. A new investigation by Business Insider has uncovered 72 lawmakers who have violated the law.
The STOCK Act, passed in 2012, requires members to publicly disclose any stock transactions within 45 days. The law has been criticized for not being adequately enforced. Some members of Congress have called for stricter penalties. The STOCK Act does not require lawmakers to divest their holdings, but if they do not, they will be fined an additional 10% of the amount of the stock.
The Office of Congressional Ethics has investigated stock trading violations by several members of Congress, but has found no evidence to suggest that any lawmaker has been formally sanctioned. In some cases, lawmakers have filed late PTRs, while others have been accused of making illegal trades. In the majority of cases, however, lawmakers have been accused of being sloppy with their disclosures.
Some of the most high-profile stock traders on Capitol Hill have been accused of violating the STOCK Act. Senator Richard Burr made millions in stock trades after briefing on a coronavirus. He also sold millions of dollars in Sherill's stock, a pharmaceutical company. Another Democratic lawmaker, Abigail Spanberger, has proposed a bill that would prohibit legislators from trading stocks. The Campaign Legal Center has filed half a dozen ethics complaints against members of Congress. According to the STOCK Act, members of Congress must submit financial disclosure forms online. They must also disclose any stock transactions that exceed $1,000 within 45 days. The law is designed to prevent lawmakers from making insider trades, but in some cases it has been criticized for being toothless.
Reps defend congressional stock trading
Several members of Congress have defended stock trading. However, the debate over whether or not Congress should be able to trade stocks has been ongoing for years. While there have been a few blatant cases of stock trading, such as Senator Richard Burr's insider trading scandal, there have also been more innocuous transactions.
The STOCK Act was passed to help keep politicians accountable, but a Business Insider report found that 54 lawmakers failed to comply last year. The STOCK Act requires that all members of Congress disclose their financial transactions within 45 days of receiving them.
A House ethics committee is looking into a stock trade by Republican Rep. Mike Kelly. His wife purchased shares in a struggling steel maker. The ethics committee has also looked into a number of lawmakers' spouses. A former New York Stock Exchange chairman's wife, Kelly Loeffler, was the wealthiest member of Congress at the time.
A few other legislators have come under scrutiny for accidental stock trades. Representatives Tom Malinowski and Mark Green have traded large amounts of money in the past. The New York Times recently reported that nearly 100 lawmakers reported trading in companies influenced by committees.
The STOCK Act also prevents members of Congress from engaging in insider trading. The law does not address all trades, but it does make it difficult to search through a record of the transactions.
A recent survey conducted by the Convention of States Action found that only 5 percent of likely voters support the idea of lawmakers trading stocks. That's a small percentage, but it does show that Americans want to put a stop to members of Congress enriching themselves with inside information.