Ending Trading and Holdings In Congressional Stocks (ETHICS) Act

II Calendar No. 729 118TH CONGRESS 2D SESSION S. 1171 [Report No. 118–309] To amend chapter 131 of title 5, United States Code, to prevent Members of Congress and their spouses and dependent children from trading stocks and owning stocks, and for other purposes. IN THE SENATE OF THE UNITED STATES APRIL 17, 2023 Mr. MERKLEY (for himself, Mr. BROWN, Mrs. GILLIBRAND, Mr. KING, Mr. SANDERS, Ms. STABENOW, Mrs. SHAHEEN, Ms. DUCKWORTH, Mr. CASEY, Mr. WELCH, Mr. LUJA´N, Mr. FETTERMAN, Ms. HIRONO, Ms. CORTEZ MASTO, Ms. BALDWIN, Mr. VAN HOLLEN, Mr. CARDIN, Mr. TESTER, Mr. HEINRICH, Mr. KAINE, Mr. BLUMENTHAL, Mr. SCHATZ, Ms. ROSEN, and Ms. WARREN) introduced the following bill; which was read twice and referred to the Committee on Homeland Security and Governmental Affairs DECEMBER 19 (legislative day, DECEMBER 16), 2024 Reported by Mr. PETERS, with an amendment [Strike out all after the enacting clause and insert the part printed in italic] A BILL To amend chapter 131 of title 5, United States Code, to prevent Members of Congress and their spouses and dependent children from trading stocks and owning stocks, and for other purposes. VerDate Sep 11 2014 08:00 Dec 20, 2024 Jkt 059200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6652 E:\BILLS\S1171.RS S1171 kjohnson on DSK7ZCZBW3PROD with $$_JOB 2 •S 1171 RS Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Ending Trading and 4 Holdings In Congressional Stocks (ETHICS) Act’’. 5 SEC. 2. PLACEMENT OF CERTAIN ASSETS OF MEMBERS OF 6 CONGRESS AND THEIR SPOUSES AND DE- 7 PENDENT CHILDREN IN QUALIFIED BLIND 8 TRUSTS. 9 (a) IN GENERAL.—Chapter 131 of title 5, United 10 States Code, is amended by adding at the end the fol- 11 lowing: 12 ‘‘Subchapter IV—Certain Assets of Members 13 of Congress and Their Spouses and De- 14 pendent Children 15 ‘‘§ 13161. Definitions 16 ‘‘In this title: 17 ‘‘(1) COMMODITY.—The term ‘commodity’ has 18 the meaning given the term in section 1a of the 19 Commodity Exchange Act (7 U.S.C. 1a). 20 ‘‘(2) COVERED INVESTMENT.— 21 ‘‘(A) IN GENERAL.—The term ‘covered in- 22 vestment’ means— 23 ‘‘(i) an investment in— 24 ‘‘(I) a security; 25 VerDate Sep 11 2014 08:00 Dec 20, 2024 Jkt 059200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6401 E:\BILLS\S1171.RS S1171 kjohnson on DSK7ZCZBW3PROD with $$_JOB 3 •S 1171 RS ‘‘(II) a commodity; or 1 ‘‘(III) a future; 2 ‘‘(ii) any economic interest com- 3 parable to an interest described in clause 4 (i) that is acquired through synthetic 5 means, such as the use of a derivative, in- 6 cluding an option, warrant, or other, simi- 7 lar means; or 8 ‘‘(iii) any interest described in clause 9 (i) or (ii) that is held directly, or in which 10 an individual has an indirect, beneficial, or 11 economic interest, through— 12 ‘‘(I) an investment fund or hold- 13 ing company; 14 ‘‘(II) a trust (other than a quali- 15 fied blind trust); 16 ‘‘(III) an employee benefit plan; 17 or 18 ‘‘(IV) a deferred compensation 19 plan, including a carried interest or 20 other agreement tied to the perform- 21 ance of an investment, other than a 22 fixed cash payment. 23 ‘‘(B) EXCLUSIONS.—The term ‘covered in- 24 vestment’ does not include— 25 VerDate Sep 11 2014 08:00 Dec 20, 2024 Jkt 059200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6401 E:\BILLS\S1171.RS S1171 kjohnson on DSK7ZCZBW3PROD with $$_JOB 4 •S 1171 RS ‘‘(i) a diversified mutual fund (includ- 1 ing any holdings of such a fund); 2 ‘‘(ii) a diversified exchange-traded 3 fund (including any holdings of such a 4 fund); 5 ‘‘(iii) a United States Treasury bill, 6 note, or bond; 7 ‘‘(iv) compensation from the primary 8 occupation of the spouse of a Member of 9 Congress, or any security that is issued or 10 paid by an operating business that is the 11 primary employer of such a spouse that is 12 issued or paid to such a spouse; 13 ‘‘(v) holding and acquiring any secu- 14 rity that is issued or paid as compensation 15 from corporate board service by the spouse 16 of a Member of Congress, including the 17 dividend reinvestment in the same security 18 received from the corporate board service 19 by the spouse of a Member of Congress; 20 ‘‘(vi) any covered investment that is 21 traded by the spouse of a Member of Con- 22 gress in the course of performing the pri- 23 mary occupation of such a spouse, pro- 24 VerDate Sep 11 2014 08:00 Dec 20, 2024 Jkt 059200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6401 E:\BILLS\S1171.RS S1171 kjohnson on DSK7ZCZBW3PROD with $$_JOB 5 •S 1171 RS vided the investment is not owned by a 1 covered person; 2 ‘‘(vii) any investment fund held in a 3 Federal, State, or local government em- 4 ployee retirement plan; 5 ‘‘(viii) a tax-free State or municipal 6 bond; 7 ‘‘(ix) an interest in a small business 8 concern, if the supervising ethics office de- 9 termines that the small business concern 10 does not present a conflict of interest, and, 11 in the case of an investment in a family 12 farm or ranch that qualifies as an interest 13 in a small business concern, a future or 14 commodity directly related to the farming 15 activities and products of the farm or 16 ranch; 17 ‘‘(x) holding investment-grade cor- 18 porate bonds, provided that the corporate 19 bonds are held by an individual who is a 20 covered person on the date of enactment of 21 the Ending Trading and Holdings In Con- 22 gressional Stocks (ETHICS) Act; 23 ‘‘(xi) any share of Settlement Com- 24 mon Stock issued under section 7(g)(1)(A) 25 VerDate Sep 11 2014 08:00 Dec 20, 2024 Jkt 059200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6401 E:\BILLS\S1171.RS S1171 kjohnson on DSK7ZCZBW3PROD with $$_JOB 6 •S 1171 RS of the Alaska Native Claims Settlement 1 Act (43 U.S.C. 1606(g)(1)(A)); or 2 ‘‘(xii) any share of Settlement Com- 3 mon Stock, as defined in section 3 of the 4 Alaska Native Claims Settlement Act (43 5 U.S.C. 1602). 6 ‘‘(3) COVERED PERSON.—The term ‘covered 7 person’ means— 8 ‘‘(A) a Member of Congress; and 9 ‘‘(B) a spouse or dependent child of a 10 Member of Congress. 11 ‘‘(4) CUSTODY.—The term ‘custody’ has the 12 meaning given the term in section 275.206(4)–2(d) 13 of title 17, Code of Federal Regulations (as in effect 14 on the date of enactment of the Ending Trading and 15 Holdings In Congressional Stocks (ETHICS) Act or 16 a successor regulation). 17 ‘‘(5) DEPENDENT CHILD.—The term ‘depend- 18 ent child’ means, with respect to any Member of 19 Congress any individual who is— 20 ‘‘(A) under the age of 19; and 21 ‘‘(B) a dependent of the Member of Con- 22 gress within the meaning of section 152 of the 23 Internal Revenue Code of 1986. 24 VerDate Sep 11 2014 08:00 Dec 20, 2024 Jkt 059200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6401 E:\BILLS\S1171.RS S1171 kjohnson on DSK7ZCZBW3PROD with $$_JOB 7 •S 1171 RS ‘‘(6) DIVERSIFIED.—The term ‘diversified’, 1 with respect to a fund, trust, or plan, means that 2 the fund, trust, or plan does not have a stated policy 3 of concentrating its investments in any industry, 4 business, or single country other than the United 5 States. 6 ‘‘(7) FUTURE.—The term ‘future’ means— 7 ‘‘(A) a security future (as defined in sec- 8 tion 3(a) of the Securities Exchange Act of 9 1934 (15 U.S.C. 78c(a))); and 10 ‘‘(B) any other contract for the sale of a 11 commodity for future delivery. 12 ‘‘(8) ILLIQUID INVESTMENT.—The term ‘il- 13 liquid investment’ means an interest in a private 14 fund, as defined in section 202(a)(29) of the Invest- 15 ment Advisers Act of 1940 (15 U.S.C. 80b–2). 16 ‘‘(9) INITIAL PROPERTY.—The term ‘initial 17 property’ means an asset or financial interest trans- 18 ferred to a qualified blind trust by, or on behalf of, 19 an interested party or a relative of an interested 20 party, regardless of whether the asset or financial 21 interest is transferred to the qualified blind trust on 22 or after the date of establishment of the qualified 23 blind trust. 24 VerDate Sep 11 2014 08:00 Dec 20, 2024 Jkt 059200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6401 E:\BILLS\S1171.RS S1171 kjohnson on DSK7ZCZBW3PROD with $$_JOB 8 •S 1171 RS ‘‘(10) INTERESTED PARTY.—The term ‘inter- 1 ested party’ has the meaning given the term in sec- 2 tion 13104(f)(3)(E). 3 ‘‘(11) MEMBER OF CONGRESS; SUPERVISING 4 ETHICS OFFICE.—The terms ‘Member of Congress’ 5 and ‘supervising ethics office’ have the meaning 6 given those terms in section 13101. 7 ‘‘(12) QUALIFIED BLIND TRUST.—The term 8 ‘qualified blind trust’ means a qualified blind trust 9 (as defined in section 13104(f)(3)) that has been ap- 10 proved in writing by the applicable supervising ethics 11 office under section 13104(f)(3)(D). 12 ‘‘(13) SECURITY.—The term ‘security’ has the 13 meaning given the term in section 3(a) of the Secu- 14 rities Exchange Act of 1934 (15 U.S.C. 78c(a)). 15 ‘‘(14) SMALL BUSINESS CONCERN.—The term 16 ‘small business concern’ has the meaning given the 17 term under section 3 of the Small Business Act (15 18 U.S.C. 632). 19 ‘‘§ 13162. Trading covered investments 20 ‘‘(a) BAN ON TRADING.—Except as provided in sub- 21 sections (b) and (c)— 22 ‘‘(1) effective on the date of enactment of the 23 Ending Trading and Holdings In Congressional 24 VerDate Sep 11 2014 08:00 Dec 20, 2024 Jkt 059200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6401 E:\BILLS\S1171.RS S1171 kjohnson on DSK7ZCZBW3PROD with $$_JOB 9 •S 1171 RS Stocks (ETHICS) Act, a Member of Congress shall 1 not purchase any covered investment; 2 ‘‘(2) effective on the date that is 90 days after 3 the date of enactment of the Ending Trading and 4 Holdings In Congressional Stocks (ETHICS) Act, a 5 Member of Congress shall not sell any covered in- 6 vestment, except as provided in section 13163(a)(2); 7 and 8 ‘‘(3) on and after the effective date described in 9 section 13163(k), a covered person that is a spouse 10 or dependent child of a Member of Congress shall 11 not purchase any covered investment or sell any cov- 12 ered investment, except as provided in section 13 13163(a)(2). 14 ‘‘(b) OPTIONAL DIVESTMENT WINDOW.—Notwith- 15 standing subsection (a)— 16 ‘‘(1) a Member of Congress who is sworn as a 17 Member of Congress on or before the date of enact- 18 ment of the Ending Trading and Holdings In Con- 19 gressional Stocks (ETHICS) Act may sell a covered 20 investment within 90 days of the date of enactment 21 of such act, provided that the Member of Congress 22 may not sell any covered investment at any time out- 23 side of that period while the Member of Congress 24 serves the term for which the Member of Congress 25 VerDate Sep 11 2014 08:00 Dec 20, 2024 Jkt 059200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6401 E:\BILLS\S1171.RS S1171 kjohnson on DSK7ZCZBW3PROD with $$_JOB 10 •S 1171 RS was elected or is reelected or appointed as a Member 1 of Congress except as provided in section 2 13163(a)(2); and 3 ‘‘(2) a Member of Congress who is sworn as a 4 Member of Congress after the date of enactment of 5 the Ending Trading and Holdings In Congressional 6 Stocks (ETHICS) Act may sell a covered investment 7 within 90 days of commencing the term of service as 8 a Member of Congress, provided that the Member of 9 Congress may not sell any covered investment at any 10 time outside of that period while the Member of 11 Congress serves the term for which the Member of 12 Congress was elected or is reelected or appointed as 13 a Member of Congress except as provided in section 14 13163(a)(2). 15 ‘‘(c) EXCEPTION.—Notwithstanding subsection (a), a 16 covered person may divest a covered investment as di- 17 rected by the relevant supervising ethics office pursuant 18 to this Act. 19 ‘‘(d) JOINT COVERED INVESTMENT.—Any covered 20 investment reported to the supervising ethics office as 21 jointly owned by a Member of Congress and the spouse 22 of the Member of Congress shall be deemed to be a covered 23 investment of the Member of Congress for purposes of this 24 section. 25 VerDate Sep 11 2014 08:00 Dec 20, 2024 Jkt 059200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6401 E:\BILLS\S1171.RS S1171 kjohnson on DSK7ZCZBW3PROD with $$_JOB 11 •S 1171 RS ‘‘§ 13163. Addressing owned covered investments 1 ‘‘(a) MEMBERS OF CONGRESS.— 2 ‘‘(1) CERTIFICATION.—Not later than 60 days 3 after the applicable effective date described in sub- 4 section (j), a Member of Congress shall submit to 5 the supervising ethics office a certification, which 6 the supervising ethics office shall publish online that 7 certifies that— 8 ‘‘(A) each covered investment owned by, or 9 in the custody of, the Member of Congress, or 10 a spouse or dependent child of the Member of 11 Congress, will, by the applicable deadline under 12 paragraph (2), be— 13 ‘‘(i) divested, as described in para- 14 graph (2)(B); or 15 ‘‘(ii) placed in a qualified blind trust, 16 including through the establishment of a 17 qualified blind trust for that purpose, if 18 necessary, as described in paragraph 19 (2)(A); and 20 ‘‘(B) no spouse or dependent child of the 21 Member of Congress owns, or has custody of, 22 covered investments with a cumulative amount 23 equal to more than $10,000, in accordance with 24 paragraph (6). 25 VerDate Sep 11 2014 08:00 Dec 20, 2024 Jkt 059200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6401 E:\BILLS\S1171.RS S1171 kjohnson on DSK7ZCZBW3PROD with $$_JOB 12 •S 1171 RS ‘‘(2) DIVESTITURE OR PLACEMENT IN QUALI- 1 FIED BLIND TRUST.— 2 ‘‘(A) REQUIREMENT.—Subject to para- 3 graphs (3) and (6) and subsection (b)(2), not 4 later than 120 days after the applicable effec- 5 tive date described in subsection (j), a Member 6 of Congress shall divest, or place in a qualified 7 blind trust (including by establishing a qualified 8 blind trust for that purpose, if necessary), each 9 covered investment owned or in the custody 10 of— 11 ‘‘(i) the Member of Congress; or 12 ‘‘(ii) a spouse or dependent child of 13 the Member of Congress. 14 ‘‘(B) DIVESTITURE.—A covered person 15 shall divest any covered investment owned by or 16 in the custody of the covered person that is not 17 placed in a qualified blind trust not later than 18 the date described in subparagraph (A), subject 19 to any extension granted under paragraph (3). 20 ‘‘(C) QUALIFIED BLIND TRUSTS.— 21 ‘‘(i) MANDATORY SALE OF INITIAL 22 PROPERTY IN QUALIFIED BLIND TRUST.— 23 ‘‘(I) IN GENERAL.—Subject to 24 clause (ii), if a covered person places, 25 VerDate Sep 11 2014 08:00 Dec 20, 2024 Jkt 059200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6401 E:\BILLS\S1171.RS S1171 kjohnson on DSK7ZCZBW3PROD with $$_JOB 13 •S 1171 RS or has placed before the applicable ef- 1 fective date described in subsection 2 (j), 1 or more covered investments in 3 a qualified blind trust, the trustee of 4 the qualified blind trust shall divest 5 any such covered investment not later 6 than the date specified [Text truncated for display. 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