The House Should Pass the Combatting Financial Conflicts of Interest Act

Issues
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Over the last decade, the Stop Trading on Congressional Knowledge (STOCK) Act, through its transparency measures, showed us that members of Congress regularly trade stock despite conflicts of interest and allegations of insider trading.

This week, a bill was introduced in the House of Representatives to eliminate these conflicts of interest by prohibiting members of Congress from trading stock

The newly introduced Combatting Financial Conflicts of Interest Act, H.R. 8990, seeks to solve some of the biggest issues revealed over the last 10 years: (1) the appearance of corruption associated with members of Congress trading stock; (2) the lack of compliance with the STOCK Act because of the small and inconsistent fines levied against members who violate the STOCK Act; and (3) the lack of enforcement surrounding STOCK Act violations.

This legislation is an important and necessary step to addressing legitimate public concern regarding conflicts of interest that may arise when an elected official has financial interest tied to an area over which they hold influence.

As elected officials craft laws that directly impact the lives of Americans, voters have a right to know whether their representatives are acting in the public’s interest or for their own financial gain.

One of the clearest examples of why congressional stock trading creates the appearance of corruption occurred at the onset of COVID-19. Dozens of members of Congress from both sides of the aisle traded $150 million worth of stock after receiving confidential information about the looming pandemic.

These trades gave the perception that members of Congress were more focused on their stock portfolios than helping the public through the pandemic. Since the public learned of these trades, a Campaign Legal Center (CLC) commissioned poll found that most Americans are in favor of banning members of Congress from trading individual stocks.

The Combatting Financial Conflicts of Interest Act addresses the public’s concerns by requiring members of Congress, upon taking office, to place their holdings in a qualified blind trust, sell off their holdings or donate their investments. These provisions ban lawmakers from trading individual stock while serving in Congress.

To address the lack of compliance with the STOCK Act, the Combatting Financial Conflicts of Interest Act would fine members of Congress who trade individual stock while in office $1,000.

If, after 30 days, the member of Congress still does not divest their holding, they will receive an additional fine of $1,000 plus an amount equal to 10% of the stock they traded in violation of H.R. 8990.

These penalties are a marked improvement to the small $200 penalty associated with failing to report a financial transaction under the STOCK Act. The diminutive penalty has done little to disincentivize members of Congress from violating the law.

From the beginning of 2021 to now, at least 72 members of Congress have not reported their financial transactions as required by the STOCK Act.

Beyond the low fines, the ethics bodies tasked with enforcing the STOCK Act do not hold members accountable.

In 2022, the Senate Committee on Ethics did not announce any investigation into the complaints of stock trading violations and the House Committee on Ethics dismissed four cases despite Office of Congressional Ethics’ (OCE) investigations finding evidence of violations.

Moreover, when members of Congress are fined under the STOCK Act, no public records exist to indicate whether the fines are paid.

Americans deserve to know that laws created to protect their interests are regularly enforced and punishments for violating those laws should be transparent and reflect the seriousness of the violation.

That is why the Combatting Financial Conflicts of Interest Act requires supervising ethics offices to annually publish a public report describing lawmakers’ compliance with the act’s provisions, as well as what the ethics office has done to ensure compliance.

The Combatting Financial Conflicts of Interest Act represents the culmination of years of work identifying the best methods to ensure the public’s interests come first for members of Congress.

While the act does contain a few provisions that should be improved before the bill becomes law, CLC strongly urges Congress to pass the Combatting Financial Conflicts of Interest Act. 

Danielle is a Legal Counsel on CLC's Ethics team.
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