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An analysis of a stock trading ban supported by President Donald Trump demonstrates that the bill would do very little to curtail insider trading, essentially rendering the proposal meaningless.
Trump told Congress at his annual State of the Union address that he wanted a bill passed that would ban lawmakers from taking advantage of loopholes that allow for insider trading.
“Let’s ensure that members of Congress cannot corruptly profit from using insider information,” Trump said during his speech.
The president’s statement resulted in a rare bipartisan standing ovation, catching him off guard.
“They stood up for that, I can’t believe it,” Trump said, referring to Democrats who backed the idea.
But a Time magazine analysis of the bill Trump supports shows that it will do very little to limit insider trading among lawmakers.
For starters, the bill, officially titled the Stop Insider Trading Act, bans members of Congress, their spouses, and their dependents from purchasing publicly traded stocks, but allows them to keep stocks they already owned upon entering office, and to sell them off if they give a week’s notice.
By allowing lawmakers to keep stocks they already owned, the bill could enable them to take advantage of their positions in Congress, even if they don’t sell their stocks, by passing or opposing legislation in order to benefit their portfolios.
Lawmakers are also still allowed to buy stocks on behalf of their parents, with the assumption that the dividends their parents receive would be part of their inheritance — creating a system of straw trading.
On top of those concerns, the bill does not regulate stock trading in any other branch of government, meaning individuals within the executive and judicial branches could still engage in insider trading without repercussions.
The title of the bill suggests “that it’s a ban on members of Congress owning stock,” Rep. Joe Morelle (D-New York) told the publication. “But it doesn’t do that. Not at all.”
Other proposals within Congress would go much further than the bill being championed by Trump.
A bipartisan proposal called the Restore Trust in Congress Act bars “Members of Congress, their spouses, dependent children, and their trustees from owning, buying, or selling individual stocks, securities, commodities, or futures” with only limited exceptions. Members would still be allowed to invest in diversified mutual funds and ETFs, for example, as well as buy into U.S. Treasury, state, or municipal bonds. The legislation also allows members to invest in precious metals, such as gold or silver.
While the Stop Insider Trading Act allows many workarounds to allow members of Congress to continue to invest in stocks, the Restore Trust in Congress Act does not contain those same loopholes. However, while stricter in some ways, the latter bill still does not forbid stock trading within other branches of government.
A Democratic-sponsored bill called the No Getting Rich in Congress Act would take many steps that the other proposals do not. That legislation would forbid lawmakers in the legislative branch, as well as the president and vice president, “from buying or selling individual stocks, futures, commodities, and cryptocurrency, with strict reporting and enforcement mechanisms, including penalties for violations.” The bill’s provisions also apply to candidates running for federal office, as well as lawmakers’ spouses and dependents.
In addition to stock bans for members of Congress and the executive branch, the bill extends all gift, travel, and reimbursement rules to spouses and dependents; bars lawmakers and spouses from serving on corporate boards; and requires them to report pre-existing board service.
“The American people deserve leaders who are working for them, not for their stock portfolios, not for corporate board seats, and not for foreign adversaries,” bill co-sponsor Rep. Haley Stevens (D-Michigan) said in a statement.
“The No Getting Rich in Congress Act draws a clear line: public servants must put their communities first, not profit,” she added.
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