Federal

Prohibit Insider Trading Act

Source: Congress.gov · 1,110 words in original text

What This Bill Does

This bill stops Members of Congress and their spouses from buying, selling or holding certain types of investments while the Member serves in Congress. The bill is called the "Prohibit Insider Trading Act" and changes federal law to add new rules about what financial products Members of Congress can own. ##

Who It Affects

Members of Congress and their spouses are the people directly affected by this bill. The supervising ethics office (the office that oversees ethical conduct) will be responsible for checking that Members follow these new rules. ##

Key Provisions

- Members of Congress and their spouses cannot hold, purchase or sell covered financial instruments during their time in office (Sec. 2(a), Section 13152(a)) - Covered financial instruments include stocks, securities futures (contracts based on future security prices), and commodities (basic goods like oil or wheat), plus any similar economic interests created through synthetic means like derivatives (financial contracts based on the value of something else) (Sec. 2(a), Section 13151) - The ban does not apply to diversified mutual funds, diversified exchange-traded funds, Thrift Savings Plan investments or U.S. Treasury bills, notes or bonds (Sec. 2(a), Section 13151) - Members and spouses can still hold covered financial instruments if those investments are inside a qualified blind trust (a trust arrangement where the Member does not know what the investments are) (Sec. 2(a), Section 13152(b)) - Members must certify in writing to the supervising ethics office within seven days after each Congress begins that they and their spouse follow these rules, and the ethics office must publish these certifications online (Sec. 2(a), Section 13153) - Members who violate the ban must return any profits to the federal government, cannot claim losses as tax deductions, and may face civil fines (Sec. 2(a), Section 13152(c)) ##

What Changes

If this bill becomes law, Members of Congress and their spouses will no longer be allowed to own most stocks, commodity contracts and similar investments. A new supervising ethics office must collect written compliance statements from Members twice yearly and audit their compliance at least every two years. ##

Important Definitions

- A "covered financial instrument" includes stocks, security futures and commodities, plus similar economic interests created through derivatives, options, warrants or comparable methods - "Member of Congress" has the meaning given in existing federal law (Section 13101) - "Qualified blind trust" has the meaning given in existing federal law (Section 13104(f)(3)) ##

Effective Date

The rules begin applying to new Members seven days after their first day of service. For Members already serving, the rules apply starting on the first day of the second session of the 118th Congress (Not specified in bill text when this occurs).

I 118TH CONGRESS 1ST SESSION H. R. 1138 To amend title 5, United States Code, to prohibit transactions involving certain financial instruments by Members of Congress and their spouses, and for other purposes. IN THE HOUSE OF REPRESENTATIVES FEBRUARY 21, 2023 Mr. NUNN of Iowa (for himself and Mr. STANTON) introduced the following bill; which was referred to the Committee on House Administration, and in addition to the Committee on Ways and Means, for a period to be sub- sequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned A BILL To amend title 5, United States Code, to prohibit trans- actions involving certain financial instruments by Mem- bers of Congress and their spouses, and for other pur- poses. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Prohibit Insider Trad- 4 ing Act’’. 5 VerDate Sep 11 2014 03:30 Mar 11, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H1138.IH H1138 kjohnson on DSK79L0C42PROD with BILLS 2 •HR 1138 IH SEC. 2. PROHIBITING TRANSACTIONS AND OWNERSHIP OF 1 CERTAIN FINANCIAL INSTRUMENTS BY MEM- 2 BERS OF CONGRESS AND THEIR SPOUSES. 3 (a) IN GENERAL.—Chapter 131 of title 5, United 4 States Code, is amended by adding after subchapter III 5 the following: 6 ‘‘SUBCHAPTER IV—RESTRICTIONS REGARDING 7 FINANCIAL INSTRUMENTS 8 ‘‘§ 13151. Definitions 9 ‘‘In this subchapter— 10 ‘‘(1) the term ‘covered financial instrument’— 11 ‘‘(A) means— 12 ‘‘(i) any investment in— 13 ‘‘(I) a security (as defined in sec- 14 tion 3(a) of Securities Exchange Act 15 of 1934 (15 U.S.C. 78c(a))); 16 ‘‘(II) a security future (as de- 17 fined in that section); or 18 ‘‘(III) a commodity (as defined in 19 section 1a of the Commodity Ex- 20 change Act (7 U.S.C. 1a)); and 21 ‘‘(ii) any economic interest com- 22 parable to an interest described in sub- 23 clause (I) that is acquired through syn- 24 thetic means, such as the use of a deriva- 25 VerDate Sep 11 2014 03:30 Mar 11, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H1138.IH H1138 kjohnson on DSK79L0C42PROD with BILLS 3 •HR 1138 IH tive, including an option, warrant, or other 1 similar means; and 2 ‘‘(B) does not include— 3 ‘‘(i) a diversified mutual fund; 4 ‘‘(ii) a diversified exchange-traded 5 fund; 6 ‘‘(iii) any investment in the Thrift 7 Savings Plan; or 8 ‘‘(iv) a United States Treasury bill, 9 note, or bond; 10 ‘‘(2) the term ‘Member of Congress’ has the 11 meaning given that term in section 13101; 12 ‘‘(3) the term ‘supervising ethics office’ has the 13 meaning given that term in section 13101; and 14 ‘‘(4) the term ‘qualified blind trust’ has the 15 meaning given that term in section 13104(f)(3). 16 ‘‘§ 13152. Prohibition on certain transactions and 17 holdings involving covered financial in- 18 struments 19 ‘‘(a) PROHIBITION.—Except as provided in sub- 20 section (b), a Member of Congress and the Member’s 21 spouse may not, during the term of service of the Member, 22 hold, purchase, or sell any covered financial instrument. 23 ‘‘(b) EXCEPTIONS.—The prohibition under sub- 24 section (a)— 25 VerDate Sep 11 2014 03:30 Mar 11, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H1138.IH H1138 kjohnson on DSK79L0C42PROD with BILLS 4 •HR 1138 IH ‘‘(1) shall begin to apply with respect to a 1 Member of Congress who commences service as a 2 Member after the date of enactment of this sub- 3 chapter on the date that is seven days after the first 4 date of the initial term of service; and 5 ‘‘(2) does not apply to a covered financial in- 6 strument held in a qualified blind trust operated on 7 behalf of, or for the benefit of, a Member of Con- 8 gress or the Member’s spouse. 9 ‘‘(c) PENALTIES.— 10 ‘‘(1) DISGORGEMENT.—A Member of Congress 11 and the Member’s spouse shall disgorge to the gen- 12 eral fund of the Treasury any profit from a trans- 13 action or holding involving a covered financial in- 14 strument that is conducted in violation of this sec- 15 tion. 16 ‘‘(2) INCOME TAX.—A loss from a transaction 17 or holding involving a covered financial instrument 18 that is conducted in violation of this section may not 19 be deducted from the amount of income tax owed by 20 the applicable Member of Congress or the Member’s 21 spouse. 22 ‘‘(3) FINES.—A Member of Congress who holds 23 or conducts a transaction involving a covered finan- 24 cial instrument in violation of this section may be 25 VerDate Sep 11 2014 03:30 Mar 11, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H1138.IH H1138 kjohnson on DSK79L0C42PROD with BILLS 5 •HR 1138 IH subject to a civil fine as described under section 1 13106(a). 2 ‘‘§ 13153. Supervising ethics office certification of 3 compliance and audit 4 ‘‘(a) CERTIFICATION.— 5 ‘‘(1) IN GENERAL.—Not later than seven days 6 after the beginning of any session of Congress, each 7 Member of Congress shall submit to the supervising 8 ethics office a written certification that the Member 9 and the Member’s spouse has achieved compliance 10 with the requirements of this subchapter. 11 ‘‘(2) PUBLICATION.—The supervising ethics of- 12 fice shall publish each certification submitted under 13 paragraph (1) on a publicly available website. 14 ‘‘(b) AUDIT.—Not less than every two years, the su- 15 pervising ethics office shall conduct an audit of the compli- 16 ance by Members of Congress with the requirements of 17 this subchapter.’’. 18 (b) CLERICAL AMENDMENT.—The table of sections 19 for such chapter 131 is amended by inserting after the 20 item relating to section 13146 the following: 21 ‘‘SUBCHAPTER IV—RESTRICTIONS REGARDING FINANCIAL INSTRUMENTS ‘‘13151. Definitions. ‘‘13152. Prohibition on certain transactions and holdings involving covered fi- nancial instruments. ‘‘13153. Supervising ethics office certification of compliance and audit.’’. VerDate Sep 11 2014 03:30 Mar 11, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6211 E:\BILLS\H1138.IH H1138 kjohnson on DSK79L0C42PROD with BILLS 6 •HR 1138 IH (c) APPLICATION.—The amendments made by sub- 1 section (a) shall begin to apply to Members of Congress 2 and their spouses on the first day of the second session 3 of the One Hundred Eighteenth Congress. 4 Æ VerDate Sep 11 2014 03:30 Mar 11, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6301 E:\BILLS\H1138.IH H1138 kjohnson on DSK79L0C42PROD with BILLS

Important: This plain English summary was generated by AI and is provided for informational purposes only. It is not legal advice. Always consult the official bill text on Congress.gov or a qualified attorney for legal matters.