House to vote on narrower congressional stock-trading curbs

The U.S. House is scheduled to vote Wednesday on legislation that would restrict members of Congress from buying individual company shares while serving in office, a narrower response to years of scrutiny over lawmakers’ market activity. The measure would raise disclosure penalties and impose a prospective ban on new purchases, while leaving existing stock portfolios largely intact.

The bill, called the Stop Insider Trading Act and introduced by Rep. Bryan Steil, a Wisconsin Republican, comes amid broad public backing for stronger limits on congressional trading, according to Public Consultation. Ethics watchdogs and public-interest groups have argued for years that lawmakers’ access to market-moving information creates the risk, or at least the perception, of conflicts when they trade securities.

Under the proposal, members of Congress could no longer buy individual stocks after taking office. They would be permitted to keep shares they already own and could sell holdings if they publicly disclose their intent to sell at least seven days beforehand.

The structure addresses purchases rather than forcing divestment. A divestment rule would require lawmakers to sell restricted assets or place them outside their control, while this bill would allow current ownership to continue and would focus on limiting new stock acquisitions during a term in office.

The legislation would also toughen sanctions for lawmakers who fail to properly report stock sales. Fines would rise to $2,000 or 10% of the transaction’s value, whichever is higher. The current first-time penalty for disclosure violations is $200.

Steil defended the proposal in an appearance on CNBC’s “Squawk Box” before the vote. “I think it’s really important that we tell the American people we’re done allowing members of Congress to be day-trading stocks,” he said. He added that the bill was intended to remove “even the appearance of impropriety” that a trade could be based on information obtained through service in Washington.

Several Democrats and some advocates of a broader ban have criticized the bill as insufficient because it does not require lawmakers to sell existing individual stock holdings. Rep. Seth Magaziner, a Rhode Island Democrat involved in a bipartisan group seeking a stricter ban, told CNBC: “I’m very disappointed in it. It’s a stock trading ban that still allows stock trading. It’s a weak bill.”

The measure’s path has also been complicated by a voter-identification provision added by House Republicans. The provision reflects President Donald Trump’s push for the SAVE America Act, which would set voter-ID and proof-of-citizenship requirements for voters across the United States. CNBC reported that the SAVE America Act lacks sufficient support to pass Congress.

If the House advances the stock-trading measure with the voting provision attached, its outlook in the Senate is uncertain. Most legislation in that chamber needs 60 votes to overcome a filibuster, a threshold that can make bills without bipartisan support difficult to pass.

Congress has already enacted a law aimed at insider trading by lawmakers. The 2012 statute bars members of Congress from trading on nonpublic information, but CNBC reported that the associated penalties are limited and are rarely, if ever, enforced.

This story draws on original reporting from CNBC.