▶ 0:02:11>> the committee on house administration will come to order. The title of today's hearing is taking stock of the stock act. I note that a quorum is present. Without objection, the chair may declare a recess at any time. Also, without objection, the hearing record will remain open for five legislative days, so members may submit any materials they wish to be included therein. Thank you, ranking member morelli, members of the committee and our witnesses for participating in today's hearing. Today's.
▶ 0:02:37Today, the committee on house administration continues our oversight over the legislative branch. Let me be clear from the outset, trading stock on insider information is a serious crime. It must be prosecuted to the fullest extent of the law. As chairman of the committee on house administration, I believe it's critical that we ensure lawmakers, regardless of party, regardless of seniority, are not profiting from insider information they learn while working on capitol hill.
▶ 0:03:03In recent years, social media accounts have generated significant media attention for aggregating the stock trades of members of congress. Understandably, it's fueled public concern that lawmakers may be using their positions of authority to personally benefit themselves. While rules already govern how public officials trade stocks, stronger restrictions may be necessary to restore public trust and ensure officials are not profiting from their positions.
▶ 0:03:32In today's hearing, we'll look at the issue of congressional stock trading at large, including current rules, and evaluate proposed reforms. The current statute governing congressional stock trading, the stop trading on congressional knowledge, or the stock act, was passed over a decade ago in 2012 with bipartisan support. Under the stock act, members of congress, executive branch officials, and other federal employees are prohibited from using nonpublic information for their own financial benefit.
▶ 0:03:59It also requires disclosure of stock trades exceeding $1,000 within 45 days of the transaction. Many americans have been critical of the stock act for not requiring sufficient transparency. For example, the current the current financial disclosures in periodic transaction report requirements are not filed in exact amounts. Because of this, you cannot determine a lawmaker's actual realized profit or loss on a specific trade.
▶ 0:04:27Some potential reforms include updating the stock act, reporting and enforcement requirements, requiring enhanced disclosures, and outright banning of individual ownership of individual stocks. I want to thank a number of our colleagues for proposing various reforms to address this issue. Chip roy seth magaziner. Brian fitzpatrick. Tim burchett mark alford and representative anna paulina luna all come to mind.
▶ 0:04:54They've introduced or co-sponsored pieces of legislation to strengthen the stock act. The bills propose different reforms, but the prevailing theme is significantly restricting or outright banning members, spouses or their dependent children from owning or trading stocks or other securities. I believe we have an opportunity here to make meaningful reforms and restore the public's trust.
▶ 0:05:19The american people should be confident that lawmakers are working for them, not seeking office to financially benefit themselves. I want to thank our witnesses for being here today. I think we have a great opportunity. And again, I'm going to state my goal. My goal is, I think, pretty simple to ensure that no lawmaker is profiting off of insider information while serving in the united states congress. With that, I'll yield to the ranking member, Mr.
▶ 0:05:48Morelli, for his opening statement. >> thank you, Mr. chairman. My good friend, for calling this important hearing. And thank you to our witnesses for appearing before us today. Let me say at the outset, I unequivocally support a ban on members of congress trading individual stocks, and that ban should extend to the co-equal branches of government as well.
▶ 0:06:15The oath we take as members swears fidelity to the constitution and the rule of law over personal gain or financial benefit. The founding fathers recognized the danger of self enrichment by those in power, sick of the unchecked corruption that was a feature of the monarchies of the time, james madison warned against the bias and judgment that can cause the pursuit of personal gain to supersede that of the common good. In this moment, confidence in our government is abysmally low.
▶ 0:06:41Fostering public trust in our institutions is the absolute bedrock of the american experiment. It is what gives our government legitimacy. But that trust must be earned and kept by holding ourselves to the highest standard of conduct possible. Even the mere appearance of impropriety is unacceptable and cannot be tolerated. For years, my dear friend and predecessor, representative louise slaughter, worked tirelessly on the stop trading on congressional knowledge act referenced by my friend the chair.
▶ 0:07:11The stock act was signed into law 13 years ago, and though it enacted much needed reforms to enhance disclosure requirements and explicitly prohibit insider trading by government officials, there is much, much more to do. And my good friend louise would be astonished at the corruption happening today. Regrettable. Those reforms are now just band-aids to a gaping, festering wound. We must find a cure to this ailment. The american people are demanding as much, and many of my colleagues agree.
▶ 0:07:41Look no further than the the panoply of bills introduced this congress alone for evidence of that. So I want to commend those of our colleagues who, in a bicameral and bipartisan fashion, have put an extraordinary amount of thought and work into the very legislative proposals designed to combat this scourge. We need a thoughtful approach to this problem, one that is comprehensive, effective, and, most importantly, enforceable. Americans are struggling with an already high cost of living that's rising each day.
▶ 0:08:10Every day, americans are forced to pay this costs of the corruption in our government. They're being forced into the barbaric choice of paying their rent or their health insurance premiums to decide whether to put food on the table or gas in their cars, to get to work every day. They are paying more and getting less.
▶ 0:08:29It's obscene that any member would take the votes of those very people to get to washington, and once here, use the power of their office not to represent their constituents interests, but to get rich or worse, to vote for a bill that would deny desperately needed relief for suffering people, then turn around and sell a stock that would be devalued by that vote.
▶ 0:08:51Which is exactly what we saw happen after republicans jammed through a draconian cuts to medicaid earlier this year all over washington, from the white house to the supreme court, corruption and self-dealing are a persistent problem.
▶ 0:09:03Later today, chairman style and I will lead an effort to strip from the recent funding bill, a provision that would have allowed a select group of senators to exact from the department of justice millions of dollars because they were reasonably they were reasonable persons of interest in a legitimate investigation by the justice department. The executive and judicial branches are certainly not immune to it. Internal codes of conduct that are at best mere suggestions and at worst blatantly ignored are not enough.
▶ 0:09:32Any policy solution should seek to address the outrageous behavior we are seeing at the supreme court and in the executive branch. It's been 1322 days since this committee looked at this topic. Since then, new opportunities for pernicious behavior have emerged, such as pump and dump schemes on for unregulated meme coins and cryptocurrencies endorsed by federal officials that get them rich and leave others holding the bag.
▶ 0:09:59Shady foreign real estate deals that happen far outside of the watchful eyes of this congress, and incomprehensibly lavish trips and gifts in exchange for favorable and lucrative decisions. The list grows by the day as the enforcement of existing laws and the fundamental principle of checks and balances is eroded. If the legitimacy of our representative government dies on our watch, we'll have only ourselves to blame.
▶ 0:10:26I do hope today's proceedings bring to bear the changes our government needs that our constituents so desperately want. Uh, and frankly, that we owe to them. So I want to again thank the chair and thank my colleagues and certainly thank the witnesses for being here. And I yield back. >> I thank my colleague. Without objection, all other members opening statements will be made part of the hearing record if they're submitted to the committee clerk by 5 p.m. Today. We'll now turn to our witness testimony. We have three witnesses with us today.
▶ 0:10:56Uh, first we have jim copeland. Mr. copeland is the senior fellow and director of legal policy at the manhattan institute. Uh, next we have dan savickas. Uh, Mr. savickas is the vice president of policy and government affairs at the taxpayers alliance. And finally, we have jacob strauss. Mr. strauss is a specialist with the congressional research services. Uh, Mr. copeland will begin with you. You're now recognized for five minutes to provide an opening statement. >> thank you. Chairman steele, ranking member morelli, members of the committee.
▶ 0:11:26Uh, I want to thank all of you for the opportunity to testify today. My name is james copeland, and since 2003, I've been affiliated with the manhattan institute for policy research in new york, a nonprofit public policy think tank where I've long been a senior fellow and directed the institute's legal policy research. Although my comments draw upon such research conducted for my employer, my statement before the committee is solely my own.
▶ 0:11:52Insider trading occurs when someone trades a security using material nonpublic information in violation of a duty of trust or confidence. Over time, federal insider trading law has moved from a concept of equal access to information to one based on fiduciary breach and later misappropriation, which extends to outsiders using confidential information for personal gain.
▶ 0:12:14Uh, historically, uh, neither of these fiduciary breach nor misappropriation theories as traditionally understood, would necessarily have covered all government information, which is why this body, uh, in 2012, enacted the stock stop trading on congressional knowledge act or stock act, uh, which is the subject of this hearing. And that act explicitly clarified that members of congress are not exempt from federal insider trading law.
▶ 0:12:42The act also clarified that members of congress and certain other government officials or employees, trading securities or certain other financial instruments based on nonpublic information gained from their official duties, could constitute an insider trading violation. The act also heightened financial disclosure requirements for members of congress and senior staffers, requiring disclosure of any purchase or sale of securities worth over $1,000 within 45 days of the transaction.
▶ 0:13:08As I outlined in more detail in my written testimony, substantial evidence may suggest that congress may not have been adequately self-policing under the stock act. Um, though I want to emphasize that this is mostly due to a lack of evidence, which is not in itself dispositive evidence.
▶ 0:13:28Um, despite allegations of improper conduct, no member of congress has ever been prosecuted under the act, nor do any public records exist indicating whether officials have ever paid statutory fines for stock act disclosure errors. Multiple legislative proposals have been introduced here in the 119th congress that aim to go beyond the stock, stock act and or to further restrict members of congress from owning or trading securities.
▶ 0:13:56I go into each of these in some detail in my written testimony. At this time, I would just like to emphasize the important questions which arise in addressing these various vehicles for reform, each of which I discussed in more depth in my written submission. Should members of congress be permitted to own or trade in any individual securities or other investment vehicles for which specialized knowledge gained from members public positions might create at least an appearance of insider type benefits.
▶ 0:14:25I want to emphasize that neither lawyers, nor other fiduciaries, nor corporate insiders are expected to have no ownership whatsoever in the securities of corporations to which they owe duties, but congress may be a special case.
▶ 0:14:40Ownership of specific corporations, securities or non-diverse funds may create an appearance of impropriety even if members are not profiting from buy or sell decisions based on insider information, because said securities ownership might be thought to bias members voting decisions and other legislative activity in favor of personal benefit rather than the public interest, is direct ownership enough to trigger concerns, even if a member exercises no control over securities purchases or sales, I.e.
▶ 0:15:10Are blind trusts. Okay, what ownership should be excluded from blanket prohibitions? I.e. Are there exemptions from the types of investments that we may not want to be covered in? Blanket prohibitions? What individuals should fall under the blanket prohibitions? How do we treat spouses, dependent children and others? Do they get the same treatment? What tax treatment should be available or required for members forced to divest from certain securities?
▶ 0:15:39According to new conflict of interest prohibitions? And finally, what enforcement mechanisms should exist? Is self-policing from this body enough? Or do we want the department of justice involved or some other mechanism? I explore most of these questions in more detail in my written testimony, and I'm happy to explore each in more depth here. Today, I encourage members to ask questions which I will endeavor to answer to the best of my ability, and I'm more than willing, of course, to follow up later with members and staff.
▶ 0:16:08Thank you again for your time and your invitation. >> thank you very much, Mr. copeland. Mr. svikis, you are now recognized for five minutes. >> thank you. Chair, ranking member morelli, vice chair lee and members of the committee, thank you for the opportunity to testify today. Uh, regarding efforts to address stock trading by members of congress. My name is dan svikis. I'm vice president of policy and government affairs at the taxpayers protection alliance, or tpa.
▶ 0:16:33Tpa is a nonpartisan, nonprofit organization dedicated to educating the public about the government's effects on the economy, and tpa seeks to hold elected officials accountable for their effects on the size, scope, efficiency and activity of government. As our mission statement suggests, tpa believes members of congress have a unique ability to impact the performance of the american economy and the global stock market.
▶ 0:16:57As such, they are uniquely situated to enrich themselves by voting in accordance with their stock portfolios interests, as opposed to what may be in the best interests of the american people. Alternatively, they have the ability to trade based off of nonpublic information in a way that would land ordinary private citizens in legal hot water. Naturally, this has bred mistrust amongst the american public, which threatens to be destructive.
▶ 0:17:24According to the campaign legal center, 86% of americans support prohibiting members of congress from trading stocks altogether. Further, apps like autopilot allow users to mirror the trading habits of certain members of congress, building the perception that members are at a distinct advantage compared to everyone else, and this is backed up by some data.
▶ 0:17:46According to a 2024 report on data that is available, 46 members of congress, amongst those who trade, outperformed the s&p 500 last year, 14 of those more than doubled that baseline. And per a new york times investigation, 3700 trades between 2019 and 2021 posed a potential conflict of interest based on the members who made trades and given issues before their committees of jurisdiction.
▶ 0:18:13A harvard study this year showed more than 50 members made over 2000 trades earlier this year, involving roughly 700 companies impacted by the administration's recent tariffs. And this is not limited to one political party or another. On average, members of both political parties outperformed the market. Additionally, each party, each party's performance gets a boost when they control more branches of government.
▶ 0:18:40This only lends further credence to the public perception that congressional representatives are using their office for personal gain, rather than public service. The 2012 passage of the stock act was meant to ameliorate some of these concerns. However, the framework has proved sorely lacking. The penalty for a violation is a nominal $200, hardly a useful deterrent given some of the sums available.
▶ 0:19:05Further enforcement is left to the discretion of the executive branch, which at best means enforcement is inconsistent and subjective, and at worst it can be potentially used as a tool for future political retribution rather than real accountability across the board. More sweeping prohibitions and divestiture proposals eliminate some of the ambiguities left by the stock act. The stock act does not prevent conflicted trading by members of congress, but merely requires them to report when and if they do so.
▶ 0:19:34Even then, many members report after the mandated time periods with little to no repercussions. Thus far, the american people are left with almost no recourse. This is why tpa has supported a number of efforts to implement more sweeping proposals on congressional stock trading. Tpa has gone on to endorse specific bills like the restore trust in congress act, as introduced by representative chip roy and a bipartisan coalition of lawmakers this year.
▶ 0:20:00As an organization dedicated to providing accountability for elected officials, tpa looks forward to working with this committee to help secure reforms and provide said accountability. Where previous efforts like the stock act, though admirable, have fallen short. Thank you for the opportunity to provide this testimony today and I look forward to your questions. >> thank you, Mr. savickas. Mr. strauss, you're now recognized for five minutes. >> chairman style ranking member morelli and members of the committee.
▶ 0:20:29On behalf of the congressional research service, thank you for the opportunity to appear today. My testimony focuses on two main areas current financial disclosure and periodic transaction reporting requirements and legislative proposals introduced during the 119th congress to restrict certain financial activities by members of congress and other covered individuals.
▶ 0:20:52Federal government officials, including members of congress, are expected to place loyalty to the constitution, law, and ethical principles above private gain when taking official action. Using this guiding principle, the ethics in government act requires covered officials, including members of congress, to file annual financial disclosure statements.
▶ 0:21:12Further, the stock act requires those same officials to report financial transactions that exceed $1,000 within 45 days of the transaction and affirms that members of congress, congressional employees, and other federal officials are not exempt from insider trading laws. Neither current law nor house or senate rules prohibit members of the house of representatives or senate from owning or trading specific assets.
▶ 0:21:41Members of congress are also not required to divest of assets or holdings upon taking office. For most house and senate staff, with the exception of certain senate committee staff, there are also no specific restrictions. In recent years, dozens of bills and resolutions, including at least 25 in the 119th congress, have been introduced to limit members of congress financial activities.
▶ 0:22:06Broadly, these measures propose to amend the ethics in government act to create new law or to amend house rules in order to prohibit the ownership of, or transactions involving certain assets, required divestment and amend or create penalties for noncompliance with regard to the legislative proposals before congress. Four points are particularly pertinent.
▶ 0:22:30First, each of the legislative proposals would apply to house members, with most extending proposed limitations to members, spouses, and dependents. A lesser number would include other family members. One proposal would also apply to congressional officers and staff. Second, each bill includes a list of covered assets to which its requirements would apply, and most also include a list of excluded assets.
▶ 0:22:55Covered assets commonly include items such as securities, security, futures, and commodities, while commonly excluded assets include items such as widely held investments like diversified mutual funds and us treasury bills, notes and bonds. Covered and excluded assets are discussed in more detail in my written testimony. Third, a number of bills would allow or require a member of congress to place covered assets in a qualified blind trust or sheet.
▶ 0:23:23Some bills would exempt sheets as a covered asset, and others would prohibit the use of a sheet. Qualified blind trusts are specific instruments designed in the ethics and government act that may be used to remediate real or perceived financial conflicts of interest, with permission of an employee supervising ethics office as a house ethics committee for the house of representatives. Fourth, some legislative proposals would create or change available penalties for noncompliance.
▶ 0:23:53Within these proposals, two basic penalty strategies are suggested fining individuals for noncompliance and or publishing the names of individuals who are found in violation of disclosure or divestment requirements on a public web page. In closing, these legislative proposals include a range of options to limit or prohibit certain financial activities.
▶ 0:24:14Policy makers may wish to consider, among other issues, the scope of the proposals, the proposed benefits of a particular action, any potential administrative adjustments that might be necessary to implement a modification to ethics laws, along with the potential costs to comply with the proposed laws. My written testimony raises particular questions that might be considered. Each of these options likely has advantages and disadvantages.
▶ 0:24:41Should congress choose to implement a particular measure as introduced, or incorporate various concepts into another measure. Additionally, congress might decide that requirements under current law are sufficient. Thank you again for the opportunity to testify. I look forward to your questions. >> thank you, Mr. strauss. I thank all of our witnesses for being here today. I'll begin questions and then followed by the ranking member.
▶ 0:25:03Um, and I'll, I want to start today with the clear statement that no member of congress should be utilizing inside information for personal profit. Uh, Mr. savickas, Mr. copeland, do you both agree that we should, at a minimum, update the stock act? Yes. >> yes, certainly. To that effect. >> Mr. vargas. Yes. >> okay. And so then I think one of the questions is, what can we do to accomplish the ultimate goal of making sure that members of congress aren't profiting from inside information?
▶ 0:25:33I sometimes go back and think about the situation that occurred here five years ago. And on february 13th, 2020, as we're heading into the covid pandemic, the chair of the senate intelligence committee called his stockbroker and sold all but one equity in his entire portfolio for a tune of $1.6 million.
▶ 0:25:56If you're the chair of the intelligence committee, almost by definition, you have information that's not available to the public, and at an absolute minimum, that's an appearance of impropriety. The sec and others looked into this. And their challenge, of course, is can you prove this beyond a reasonable doubt, which is a standard for prosecution under insider trading?
▶ 0:26:19And so then we have to look and explore what, what, what reforms need to be made to make sure that this type of action doesn't happen again. Uh, Mr. copeland, in your testimony, um, you stated, um, that no member of congress has ever been prosecuted under the stock act. We just talked about, um, the instance that took place in the senate. Why do you think that's the case? That no prosecutions have come under the stock act?
▶ 0:26:50>> um, partly for the burden of proof you talked about. I mean, reasonable doubt is relatively high. You have to have a requirement or knowledge requirement. Um, also, I, you know, it's the way the stock act structured is, is, is it's a self-policing. In other words, you have your own house and senate committees in charge of this. Now, there may be good reasons for that. Um, you know, conflict among the branches is something you have to worry about.
▶ 0:27:15You have to worry about, you know, an executive branch run by one party going after the members or senators of another party and things like this. There's plenty of time. But, but, but but you know that that's my hypothesis. Um, you know, I wouldn't infer from the lack of prosecutions that nothing bad has happened. Right. >> so I would completely agree with you that from the lack of prosecutions, it's not because nothing bad has happened. It's because the standard for insider trading is incredibly high to prove it happens on occasion.
▶ 0:27:41There are members, uh, that have been charged and convicted of insider trading under the stock act. We're looking for congress to police itself under with without the traditional apparatus, uh, of a judicial process. I want to dive in a little bit into some of the proposals that came before us. Um, the restore trust in congress act is one of the bills that have come before us in that it it picks up things other than just stocks. It picks up commodities and and other other items.
▶ 0:28:10I talked to a couple friends of mine who own farms, uh, and said, if you were to become a member of congress, how would this impact you? Could you operate your family farm, uh, with no trading of commodities whatsoever? You say you raise soybeans, you grow corn. Uh, we don't we want to have people that represent a wide array of backgrounds, whether that's a business background, a military service background, a farming background. Um, is that something? How would how should we think about that, Mr. copeland?
▶ 0:28:37>> yeah, I think it's really important to think about the panoply of things that that may be over included and, and create some pretty obvious safe harbors so that so that we wouldn't exclude people, that we'd want to be able to serve in this body. Agriculture is a good example of that. The commodities business is is complex and needs to be thought about.
▶ 0:28:58There are other, other bills in front of the committee, uh, or in front of the house that, um, talk about other situations where you may have illiquid assets that are hard to divest of quickly, things like venture capital or private equity. Uh, you know, we don't want to create a prophylactic rule that would exclude people who are successful from this body. I mean, from john hancock to george washington, the very beginning of this country. We've had very wealthy people.
▶ 0:29:25>> have benefited from the array of backgrounds that members bring to this institution. Mr. savickas, just taking that one example, do you think that that would would cause a challenge, uh, for somebody who has a family farm? >> uh, as far as I'm aware, the restore trust in congress act has limited family exceptions for occupational related investments. I think to address the problem that you you addressed here. So I think. >> so some nuance and some regulations to say if you have nothing to do with farming, you shouldn't be trading in cattle futures.
▶ 0:29:54But maybe if you have a giant cattle ranch, it may make sense in some regard is we think about profit as is pre disclosure something you've thought about, Mr. copeland on a way to remove the financial incentive of an individual? >> I think disclosure is something that we ought to consider. I mean there there again there may be exceptions.
▶ 0:30:13Uh if someone has a, a large stake in a large enterprise and, uh, you know, they're, they're going to necessarily have to disclose in many cases already, but disclosure could actually create, uh, trading opportunities in the market and things like that if you have someone very wealthy. But, but, but for the vast majority would. >> have flushed out. The case in the senate. Right.
▶ 0:30:34You would have had somebody instead of calling their broker and nobody finding out for 45 days under the stock act, if you had to make a notification, you're going to sell a share in a month from now, uh, the entire american public would be privy to that action. >> in the ordinary. >> cognizant of the time I'm going to I'm going to reclaim the time and yield back, uh, and I'll recognize the ranking member for his five minutes. >> this committee really needs to invest in microphones that just turn on and off. But anyway, um, thank you again. Uh.
▶ 0:31:07Uh, I do thank again the witnesses for their testimony, both written and oral testimony. Uh, Mr. savickas, thank you. Um, I agree with a lot of things that you said in your testimony, as I did with the other, uh, witnesses. I think you're right when you point out that the elected officials ability to trade based off of nonpublic information has eroded public trust. And you point out rightly, I think, that the members of congress have a unique ability to affect, in your words, the performance of the american economy and the global stock market.
▶ 0:31:37Would you agree that the president of the united states has an even greater ability to affect the american economy in the global stock market? >> I would agree it is at least on par. I wouldn't compare the co-equal branches as you mentioned in your opening statement. I think they're on the same level. >> yeah, well that's interesting. I'm not sure that most people would think that the president of united states is on equal par with any single rank and file member of congress. But if that's your testimony. >> sure.
▶ 0:32:06I should have clarified, I think, as congress as a whole. >> gotcha, gotcha, gotcha. >> so, um, I would take your analysis that elected officials ability to enrich themselves according to the interests of their stock portfolio, as opposed to what may be in the best interests of the american people. That risk would extend to the president as well. >> I would agree. >> gotcha. Um, I have an article here, which I do want to ask in just a moment for, um, to be included with a unanimous consent.
▶ 0:32:34But the president invest in media merger. His administration controls it reported that on september 19th, just two months ago, the president bought up to $1 million in warner brothers discovery bonds, giving him a personal financial interest in the company. Several media outlets, including the new york post, uh, which I would argue is a pretty conservative publication report that the president has privately signaled his strong support of paramount's bid to buy warner bros.
▶ 0:33:02Discovery merger that, if successful, would increase the price of the warner brothers bonds and result in a significant profit for the president. Um, this on the back of other corporate bond purchases made by the president, including goldman sachs, jp morgan, boeing and unitedhealth during his presidency. So, Mr. vargas, it it is clear the president has a unique ability to affect the us and global economy. And he has the power to influence these companies bottom lines.
▶ 0:33:31Um, would you say that the american people could view actions like the president's or any other person who was president, not this specific one, who took those as a significant conflict of interest. >> I would agree. >> yeah. Um, and I do want to americans have this perception that washington is completely saturated with corruption. Um, based on reporting like this, it's kind of hard to blame them.
▶ 0:33:58Um, why should the president get to enrich him or herself to rig the rules of the game while everyday americans are struggling with the cost of living, with surging inflation, rising costs? Um, I mean, is that not something we should be equally concerned about as we are with members of congress? >> um, representative, I think anyone should be concerned. Um, the the term public servant is bandied about a lot in this town, but those words actually mean something.
▶ 0:34:28And I think executive branch, legislative branch, the american public should be confident that their elected officials are there to serve them, not themselves. >> very good. Thank you. Um, Mr. strauss, first of all, thanks as well. Um, I did read your testimony with great interest. Both, um, that and the recent crs report that analyzed recently introduced legislation, some of which is is in your testimony.
▶ 0:34:49Um, and I've said this clearly, I support, uh, the members of congress having a, a ban on trading individual stocks. I also it's clear from my questioning, I think that ought to be extended to the executive and judicial branches. Um, so can I ask you, are there bills that have been introduced or faced committee consideration in either the house or senate that would extend a prohibition on security, ownership or trading to any branch of government beyond the legislative branch.
▶ 0:35:19>> uh, thank you for your question, congressman. Uh, as you know, there are currently 25 introduced measures. Four of them would amend house rules. So they discuss a prohibition only for house members. At least eight other measures would include executive branch officials. >> gotcha. >> um, of the various legislative proposals introduced, this congress, um, do they all consider the same list of financial instruments, or is there a variation among the various bills?
▶ 0:35:45>> there are common types of assets that are included in many of the proposals, both as covered and excluded assets. As I testified to before. Um, a full list of those can be found in the report, but there are common assets in both categories among all the proposals. >> and if I might just, um, how many of the bills, uh, include cryptocurrencies or other digital assets, do you know? >> yeah, at least ten of those measures covered in the report and the testimony include digital assets among the covered assets. >> very good.
▶ 0:36:16>> um, and I'm so sorry. We only have five minutes, but let me, um, just if I might ask, unanimous consent to enter into the record five documents, uh, crs report by Mr. strauss titled proposals to limit member of congress financial activities, analysis of introduced legislation in the 119th congress a november 17th, 2025 article headlined trump invest in media merger his administration controls um, a bipartisan letter from our colleagues asking us to take action on this issue, a statement from the record, from
▶ 0:36:48Citizens for responsibility and ethics in government in washington, and a statement for the record from democracy defenders action. >> without objection to the full list. >> thank you, Mr. chair. And, uh, thank you again for this, uh, this opportunity to be here and to call this into question and have this dialog. And I, uh, with that, I yield back. >> the gentleman yields back. Uh, the gentlewoman from florida, miss lee, is recognized for five minutes. >> thank you, Mr. chairman. And welcome to our witnesses.
▶ 0:37:14As elected representatives, we have a duty to serve our constituents. And doing so effectively requires strong public trust and confidence that members of congress are working to serve the american people, not our individual personal gains.
▶ 0:37:31And as you all have described here this morning, over the years, there has been an increase in warranted scrutiny over the stock trading practices of members, which has raised questions on whether our existing regulatory structure is adequate. Mr. copeland, I would like to focus on a couple of the areas that you mentioned in your testimony.
▶ 0:37:53I think there's broad consensus that that we need to seriously consider, uh, outright prohibition on, uh, members of congress, uh, owning trading individual securities. But one of the things that you mentioned is that if we are to adopt new conflict of interest prohibitions that require members to divest individual securities, that we ought to consider, uh, the tax treatment of of that required divestment.
▶ 0:38:24Would you elaborate for us on what you are describing there and why it is important? >> yes. And they're already provisions, conflict of interest type divestment provisions that exist in law in other situations. Um, so it wouldn't be reinventing the wheel. But, you know, anyone who's invested in in markets including mutual funds or anything else, you you get an accrued capital gain. Uh, so if you've held an asset for decades, you're going to have a large capital gain.
▶ 0:38:52And so if you had a rule that forced divestment of your securities, uh, and rolling an individual stock into a diversified mutual fund or what have you, you would have a large tax consequence, which in many cases could dwarf your congressional salary or other things, depending on what sort of individual you are. So I don't think it's reasonable to require divestment without, uh, not requiring that that massive tax, uh, hit to, to serve in the congress. And so what this would do is it would roll that gain over.
▶ 0:39:22So you wouldn't it wouldn't be like a capital gain step up like in an estate. You would roll that over into the new security that you purchased. And assuming you purchased equal for equal that that would reduce the basis in the new security you purchased, so that whenever that was disposed of, the gain would accrue. Um, so is it a perfect solution? No, but it but it's a reasonable one. >> and and one of the reasons, of course, you know, members are very differently situated.
▶ 0:39:48But in the instance where somebody perhaps owned individual securities prior to becoming a candidate or being elected, that would provide a divestment opportunity, uh, for that person who, who owns securities independent of any experience or knowledge they might have in congress. But you touched on something else that is important. That is really the distinction between different types of assets.
▶ 0:40:06And if you would, um, would you describe for us the differences you see in, for example, a member of congress owning individual securities as opposed to being invested in mutual fund? Uh, and why that is something that is substantially different in terms of insider knowledge. >> yeah. Well, I mean, if you're if you're investing in a diversified mutual fund, there's essentially no risk depending on what the fund is or how it's structured.
▶ 0:40:33So if you're, for instance, in a s&p 500 passive index fund tracking the stock market, then you know the only risk there is, well, you know, whatever decision you make might make the stock market go up. But that's that's generally not the sort of risk people are worried about any more than when people were worried about, you know, ross perot running for president. He had a lot of federal government bonds. Well, if if he actually got rid of the deficit, the value of those bonds would go up. But, but but you know, that that people aren't worried about that sort of thing. Right?
▶ 0:41:03So, um, that's very different than, than you own stock in a particular company. And so there's going to be greater scrutiny. And you could have mutual funds that are very targeted or industry specific. And if you're on a committee that oversees, uh, an area where that would have an impact, you know, that also could be something you'd have to worry about a little bit. But, you know, the broader the index, the more diversified it is, the less you'd have to worry about any sort of appearance of impropriety at all.
▶ 0:41:31>> and you also noted a distinction between individual securities and assets that are placed in things like venture capital and private equity. Would you elaborate on why it is that those categories of assets and investments might need to be treated differently? >> yeah, you. The reason is it's hard to divest from very illiquid assets in many cases.
▶ 0:41:52So if you if you had an investment in a startup business or venture capital, a private equity where you have an illiquid security and you had a divestment rule or a conflict of interest that required divestment within 90 days or 180 days, like many of these targets, um, it can be very difficult to, to unwind, uh, that they're not going to be liquid assets. It's not clear who the purchaser is. It's very different than a publicly traded security. If you own walmart or exxon stock, easy to unload that. Um, not going to move the market.
▶ 0:42:22Uh, and then you mainly worry about the tax treatment. If you've got one of those special things. It's it's a little trickier. Um, and, you know, that's why you have ethics offices and things here. It's not that there's no potential conflict with those sorts of holdings, but a prophylactic divestment rule might be problematic. >> thank you, Mr. chairman, I yield back. >> gentleman yields back. Uh, miss sewell is recognized for five minutes. >> thank you, Mr. chairman. I want to thank our witnesses today.
▶ 0:42:48Every elected official makes decisions that impact the quality of life of our constituents and americans broadly. But far too often, bad actors take advantage of sensitive information that is shared in the policy making process to line their own pockets. Time and time again, elected officials have broken the trust of the american people by exploiting their position for personal gain.
▶ 0:43:12This was on full display, as the chairman said, shortly after the covid 19 pandemic, uh, where senators and representatives on both sides of the aisle used privileged information from briefings about the pandemic to trade securities, according to a review of the financial disclosure by the campaign legal center, 12 senators made at least 227 purchases or sales that resulted in $98.3 million in stock profits.
▶ 0:43:40On the house side, there were as many as 1358 transactions by 37 representatives that resulted in $60.5 million in stock benefits. Now, I believe that all of us in this room can agree that we are long overdue for reform. In fact, when I came to congress, I was elected in 2010.
▶ 0:44:03Um, I came after spending almost a decade in new york city working in securities law, uh, for davis, polk and wardwell. I was shocked that we didn't have any insider trading laws on the books, so I was very happy to support the stock act when it came up for a vote, uh, in 2012. I do believe that it's long overdue for reform of that. And I want to press, um, you, Mr. copeland, along the lines of my colleague. Uh, miss lee.
▶ 0:44:32Uh, can you talk about what security, what individuals should, should be in this prohibition? If we prohibit, we prohibit all stocks from being traded. Is it only members of congress or how do we, um, how do we talk about executive members of the executive, the president and others? Um, and then also tell me why it's so important that family members also should be covered. >> yeah. I mean, it's a complicated question.
▶ 0:45:02Uh, obviously we'll take the family members first. I mean, obviously dependent children probably should be included in any of these sorts of situations. I mean, if you've got your kid and you can trade on your kids stock account and not yours, I mean, that that that obviously is something that if you had a rule on, on the member, you'd have a rule on the dependent children. The spouse can be a little bit more complicated because people have professional spouses. They have spouses with means.
▶ 0:45:27You know, we've had people in both parties, for instance, running for president with very well-heeled spouses with major investments. You know, the late senator mccain. Senator kerry. >> I know my time is limited. Talk to me about the executive. I mean, we saw donald trump and his family really benefit a lot from, uh, the the tariffs, uh, you know, the on again, off again nature of the tariffs really yield a lot of profit for people in the executive. So talk to me about the executive being covered and the judiciary for that matter.
▶ 0:45:56>> I think, uh, the easier one is is staff member senior staff members, which are included in some of these bills. When you talk about the other co-equal branches of government, you know, there are matters of, of of comedy there that come into play. I do think this body has some authority there. Um, I think the higher up you go, the more you get to to the, the president or the supreme court. When you get to the actual constitutional officers, it becomes a trickier question. But for for certain other officials, it's it's an easier question. Um, and, you know, ought to be explored.
▶ 0:46:24I think there's nothing wrong with exploring that. >> yeah. Uh, Mr. strauss, I would love to know your thoughts about if we could only do one reform. What reform would that be to the stock act and why? >> uh, thank you, congresswoman. Uh, as you know, cyrus does not take a position on any particular piece of legislation. I'd be happy to discuss any of them with you and your staff, uh, at any point as you're. >> well, since I only have 56 seconds, I'm going to ask Mr. copeland and Mr. cyrus.
▶ 0:46:53What if reform would you do if you had, um, just an opportunity to open up the stack, the stock act and actually make one reform? >> I think something along the lines of, of, of pre disclosure that the chairman was talking about would make sense with, with some caveats. Um, and I think creating easier safe harbors for divestment.
▶ 0:47:15Um, even even if you didn't mandate divestment across the board, safe harbors, including with tax treatment, that would make it easier for members to do that coming into office, I think would obviate a lot of the problem. I don't think most members come here to try to trade stocks. Right. >> got you. What do you think, sir? >> I think forced divestment into diversified mutual funds and etfs to tie members of congress financial success to the overall success of the american economy, rather than.
▶ 0:47:44>> to change the tax treatment in order. I mean, because people would be coming into people who are currently here would have to divest. And as we talked about, um, they may have long term gains, capital gains. >> yes. >> along the lines of what Mr. goblin was discussing, discussing earlier certificates of divestiture to defer the capital gains tax as long as it's reinvested legally. >> thank you, I yield back. >> gentleman yields back. The gentleman from virginia, Mr. griffith, is recognized for five minutes. >> all right. Mr. cevik has helped me out.
▶ 0:48:12Uh, we got all these people who buy and sell stocks. We got a securities expert. I'm none of those. I'm just a poor country lawyer. I started off in a relatively modest, uh, background, but I got questions. So would you think that we should have some kind of a de minimis. And what should that line be? Uh, for ownership?
▶ 0:48:36>> again, I think because of those ambiguities and parsing through some of those questions, tba is not taking a stance on whether or not there should be a de minimis. I think, again, sweeping divestiture into diversified mutual funds and etfs. >> so here's here's my problem and why this is important to me. And it's small potatoes I mean really small. Um I when the stock act came out I decided wasn't worth the paperwork.
▶ 0:49:03So and and this I use this all the time on the stump because I don't come from wealth. So I decided just to sell my entire publicly traded portfolio. And I, to this day, do not know what my wife did with the $6,000. >> she's wearing it around her neck.
▶ 0:49:23>> so what I did do, though, because I was trying to do the right thing in 1990, the swimming pool I grew up with, and I still swim competitively today. Not very fast, but I'm still in there, was in trouble and I led a group to buy it out and we bought it out. And my family owns about 20%.
▶ 0:49:44If we have a mandatory divestiture, the company because the biggest asset and it's it's worth more than you might think. It's not worth a fortune, but it sits on 3.2 acres of prime land. And if I'm forced to divest and my children and at the time, my children didn't own any shares, now they do.
▶ 0:50:08But if I'm forced to divest, the company probably has to fold and sell out because they can't afford they couldn't. It's not a cash flow business. Our idea was to keep the pool open and it is a for profit company. Even though we haven't gotten a dividend in about 15 years. And nobody's upset about that because we're trying to keep the facility open for the community. But we have made money. There was a time in the 90s where we made some pretty good money. Um.
▶ 0:50:34So how do we make sure that we're not throwing out the baby with the bathwater? Because I gotta tell you, this place is important to me. It's important. And we have given a share to my son, uh, of the parts that we own. Because my wife also is blocked from being on the board by virtue of her job. And as soon as he turned 18, we gave him a share so he could be on the board to represent our interest in this major investment.
▶ 0:51:04And it is actually, for us, a major investment, even though it's not worth a fortune. And some of the money we've talked about today is, is small potatoes. But I want to make sure when we talk about we talked about agriculture and if that was your. But I'm not in the profession currently of running swimming pools. I have been a certified pool operator and I have been a lifeguard back in the day. But that's not my profession.
▶ 0:51:29So how do we make sure that we're not eliminating me or making me sell something that that I feel strongly about, because it's been a part of my childhood and part of all my kids childhoods. And by the way, my son helped coach the team last year to the championship, uh, in summer league swimming. So it how do we protect that while curing the ills of people who are trying to do bad things?
▶ 0:51:55>> I think there's room, as I mentioned earlier, to chair styles questions about the agricultural related issues, looking at the exceptions for families on occupational related investitures and the pre disclosures that Mr. copeland was talking about. >> disclosures I'm good with occupational. Nobody in my family is going to be an occupation of operating a pool. I mean that's the problem. We're not going to but but we're invested in time and energy and love in keeping that pool open. >> mhm. >> I'd be happy.
▶ 0:52:24>> to follow up with your office and talk more about that. The specifics of the. >> bill. >> anything you can give me later. Uh, Mr. strauss and Mr. copeland, I appreciate your comments. I would say this when you say that if there's anything that might that congress might affect in a business, and maybe you ought to consider getting out of that or doing something like that, it affects everything. Because I remember before I got to congress, we had the whole swimming pool drain issue that congress was affecting.
▶ 0:52:49So it affects whatever you're doing, even if it's a small community pool that wants to keep competitive swimming going in our part of town. With that, Mr. chairman, I yield back. >> the gentleman yields back. Um, the gentlewoman from california, miss torres, is recognized for. >> five minutes. Thank you, chairman, for. >> organizing this meeting. And thank you to our guests for being here today.
▶ 0:53:11I am greatly concerned and would like to know how many members of congress and how many members of the president trump's cabinet have used their privileged position and information for personal profit? Do any of you know the last report?
▶ 0:53:32Um, between 2019 and 2021, the new york times found that 97 members, or 18% of congress traded stocks, um, in sectors related to their committee work in the 117th congress, 78 violated the stock act by failing to disclose in a timely manner.
▶ 0:53:56We don't know exactly how many people in the administration, um, have these types of conflict. You know, my constituents sent me to washington to address their immediate needs. The high the rising cost of pocket out of pocket costs that are making their lives extremely difficult, and to ensure that their government is working for them.
▶ 0:54:24They certainly didn't send me to enrich myself. And as one of the poorest members in congress, I can say that with my head up. Former 901 dispatcher members of congress, uh, the trump administration and their relatives should not have a blank check to use privileged information to cash in while working families continue to struggle.
▶ 0:54:49I'm particularly concerned about public reports that attorney general pam bondi, the person who leads the department of justice and is supposed to prosecute criminals and uphold our constitution, sold up to $5.5 million in trump media stock on the exact same day, the president announced tariffs that sent that stock plummeting 13%.
▶ 0:55:13As head of the department of justice and a close friend of president trump, she had access to information that working families in my district could never dream of having. And while she was gaming the stock market with special knowledge, families across the country were continuing to struggle with rising costs.
▶ 0:55:36And here we have our top law enforcement officer, potentially using insider information to protect her personal wealth. While regular americans continue to be left behind. On february 11th, two days before president trump announced his tariff plans that sent markets plummeting, secretary duffy sold up to 600,000 worth of stock across 34 companies.
▶ 0:56:02On that day of the announcement, he sold another 50,000. Secretary duffy tweeted. And this is specifically disgusting to me.
▶ 0:56:15On that day, he tweeted that these tariffs are the culmination of his work on tariff policies, his work on tariff policies, having worked directly with trump's trade adviser peter navarro, on reciprocal tariff legislation, this episode exposes a dangerous loophole.
▶ 0:56:37Senior executive branch officials can legally trade individual stocks even when they have access to sensitive market moving policy information or lead the policies themselves.
▶ 0:56:50I'm left wondering what specific legislation reforms ensure that senior officials who shape policies that move markets cannot use technicalities to profit from their privileged access to information, because right now, the message that we are sending hard working taxpayers across america is that government service comes with a stock market advantage
▶ 0:57:20For those in power, but the market crashes for those paying taxes. Mrs. strauss, is disclosure alone enough to make sure the powerful, uh, separate policy making from personal financial gain?
▶ 0:57:37And under current law, what specific mechanisms exist to investigate and prosecute a cabinet official like the attorney general for potential insider trading? >> uh, thank you, congresswoman.
▶ 0:57:54The ethics and government act requires covered executive branch officials to file financial disclosure statements annually with their agencies, and the agencies all have ethics officials that evaluate those for real or perceived conflicts of interest, and then work with the executive branch, employee or secretary, or whoever to resolve any potential conflicts of interest that might exist, you know, in whatever way is appropriate in that setting. >> thank you. I'm going to yield back to the chair. >> the gentleman yields back.
▶ 0:58:25The gentleman from north carolina, doctor murphy, is recognized for five minutes. >> thank you, Mr. chairman. Um, I think that this is a great meeting. This is a bipartisan issue. Um, this is basically what has happened. We have lost the trust of the american people. And there are egregious examples on both sides of the aisle in all branches of how we as members, elected either or in positions of power, have abused the position of authority and privilege. And that's why we're here today.
▶ 0:58:51Um, I'm going to give one example that I think is the most egregious of all of these. And this is not to impugn the individual, but it is to impugn the activity. The washington examiner published the washington examiner published an article stating about the following about miss pelosi trading stocks in 2021. Her husband, paul, bought 1.9 million in tesla call options. The day before biden announced the ev infrastructure plans that sent tesla up 20% in 2023.
▶ 0:59:23He tweeted between 1 and 5 million stocks in semiconductors mere days before congress allocated 52 billion for the industry, and in 2024, he sold 2000 shares of visa stock. A couple months before the doj announced its antitrust lawsuit. Mr. chairman, I'd like to enter that into the record. >> without objection. >> um, when you have someone who comes here with a few million dollars and leaves with close to $300 million, and you see blips and blips and blips and their activity, there is something wrong.
▶ 0:59:52There is something wrong. So there are egregious examples on both sides of the aisle. And I'm glad that this is a bipartisan effort to bring some responsibility here to congress. I'm going to submit something different, because I think we're trying to make this more difficult than it really needs to be. I'm just a dumb surgeon, so we try to make things very, very simple for us. Why would we not say, okay, you come to congress what you did before, leave be why do you have to divest? Why do you have to do all this other stuff?
▶ 1:00:20Why can you not just have then your day in congress, you start here. You cannot have undue influence moving forward because you we create such a massive bureaucratic tax event that's unnecessary. You don't have to change anything you've done in the past. Leave it be. What I personally did, I took everything out and I put them in. Directed by vanguard mutual funds. I don't have anything touched with that. That's me, what I did moving forward. So I would be beyond reproach that no one could ever say I manipulated this.
▶ 1:00:49Why would we not do that? And or sorry, why would we not say, okay, what you've done in the past is what your business. But as a member of congress, you cannot exert anything undue influence. And if you invest anything further, it would be in mutual funds, etc. Why would we create this massive bureaucracy? I'd love to have your answer. >> I would say in principle, I don't actually hate that idea. Um, I think one of the things that I spoke about in my opening statement is the perception of impropriety.
▶ 1:01:16And I think with a proposal that you just put forth freezing everything, don't touch it, leave it be and come back to it. When you're out of office. Leaves open the option that members of congress would come in and vote based on the interests of those preexisting holdings. So I think that's a little bit where divestiture becomes perhaps more wise. But in principle, I don't actually dislike that.
▶ 1:01:42>> I just think if you're if you're asking someone, good lord, if they're ancient, like I am in their 60s and they've spent so many years accumulating different things, and you're asking for such a huge capital gains, um, putting on a ways and means act, such a capital gains event to the point of people making only so much in congress. It's a huge, huge tax load. And good lord, you know, we haven't had raises in years. Fine. Whatever. But why would we not try to simplify this? And I do have another question. Maybe this has been answered before.
▶ 1:02:10How do we monitor the family members of members of congress or the judiciary or whatever branch? How is that done separately from what we do in that? Now this is merely edifying me, I don't understand. I don't know that. Can somebody answer that? >> uh, so the. >> because my son doesn't believe a damn thing I say anyway. And so he hasn't for years and years. And if I ever said anything about stocks, he would just say, dad, shut up.
▶ 1:02:36>> individuals who are required to file financial disclosure reports or periodic transaction reports under the ethics and government act or the stock act, also have to report for their spouse or their dependent children. >> okay. All right. Um, all right. Thanks again. Why do we make the this is a challenge for both of us. This is a bipartisan thing, and I believe it restores, uh, ability, the ability of the american people to trust us at least a little bit in some particular regard. There are egregious examples that we just saw.
▶ 1:03:03One here we talk about on both sides of the aisle. I applaud this effort. I hope our senate colleagues will do the same. Let's make it as simple as possible for so our senators don't, um, try to change things. So I would submit that that would be the best plan. I'll yield back. Thank you, Mr. chairman. >> the gentleman yields back. The gentlewoman from texas. Miss johnson is recognized for five minutes. >> well. Thank you.
▶ 1:03:28Um, I want to echo my support for this discussion and some of the concerns brought around. I think it's important to remember that today's hearing isn't about whether members feel that the rules are transparent. It's about whether the american people feels that the rules are transparent.
▶ 1:03:48And since taking office earlier this year, I've heard from countless constituents who are deeply concerned that members of congress operate under a different set of rules and the people we serve. As has been eloquently outlined today, and the issue isn't about assuming bad intent isn't about pointing fingers. It's about acknowledging the environment we serve in and working to do better.
▶ 1:04:11Congress today faces historically low approval ratings, and if we want to rebuild our constituents trust in the government, we have to address their skepticism because it's real, and we have to show people that we are willing to hold ourselves to the highest standards. We can do everything to make a body as sure as, you know, remove from potential conflicts. But when we appropriate funds for community projects, we certify that no one in our families has any financial interest in those.
▶ 1:04:38We hold each other accountable to the ethics committee, where members face their peers adherence to this conduct. But when it comes to straight stock trading, the rules are very, very lax and they definitely need to be strengthened. I support this effort. This bill would be an important step towards addressing the corruption in washington, and these reforms are not overly burdensome and they're not impossible to achieve. And it's something that is definitely worth pursuing.
▶ 1:05:05Some comments that I've had about just the general discussion today, I absolutely feel that it is imperative that this applies to all branches of government, because the trust deficit that the american people has is with all branches of government, you know, ethics, high integrity of the process should apply to the legislative branch through the judicial branch as well as the executive branch. It needs to be transparent through all of it.
▶ 1:05:34Not one branch should be exempt from appropriate ethics in this case. And I do want to echo chairman style and Mr. griffiths comments and concerns about the small family business, you know, and, and what to do with that. And maybe there's a capitalization limit that we could address. Um, so that you're not talking about your family, businesses, microsoft.
▶ 1:05:58But but your family business is owning a pool, you know, and there's a very large difference in terms of your ability of improper the effects of your service here on that business. Maybe there's a capitalization requirement that we could put out there. Um, one of the issues that I do think the divestment issue is something that is of concern, I've been trying to I'm a new member of congress.
▶ 1:06:23I've been trying to divest my own portfolio, um, as I, as members have said, you know, you want people who've had success in their professional career to come here. You want people who have have been able to be proficient in life. Um, but we have to have a balance of public trust. So one of the questions I have for you guys is, what is a what is a reasonable time to achieve divestment, as when you are a new member of congress? What what is that time period? Is it three months, six months a year?
▶ 1:06:52Is it through the next electoral term? What do you think is the reasonable time period to achieve a full divestment? >> yeah, yeah, yeah. >> I mean I think it depends on the type of investment. Uh, the, the bills here mostly contemplate a 90 or 180 day type window, um, for a, for a publicly traded security, that's liquid. I think that's reasonable. Um, again, the tax treatment really, really matters here.
▶ 1:07:18Uh, but but if, if, if you're able to just roll that gain to, to the future and, and divest where you're taking your shares of exxon and making them shares in the s&p 500 index, then that works just fine. If if you're talking about venture capital, private equity, it becomes much more complicated.
▶ 1:07:35And I think I think there has to be some allowance made there and just, you know, get the ethics office involved in those sorts of cases because because, you know, it's not reasonable to say you have to dump that immediately in those sorts of cases, but it's still something we need to watch. >> do you think that different time periods for divestment should be put in place based on the nature of the investment? Versus a standard? You know, if you're going to come to congress, you need to be divested, um, by x day. >> yeah, I. >> think I can plan for that.
▶ 1:08:07>> I think the context matters. I mean, someone like a pool is a good example where you've got a pool, you know, you can't really sell that. You know, maybe that's got a de minimis. >> exception investment at all because, you know, the, the, the impact of serving in congress on, uh, probably a low capitalized community pool, maybe that's I mean. >> that would that would maybe be a small business exemption, which are, which are in some of these, etc. But but, you know, but let's say, you know, steve ballmer says, oh, well, the la clippers aren't doing so well, I want to go run for senate in california.
▶ 1:08:36And he's got a massive stake in microsoft, for example. How do you handle that? It's it's not a it's not a super clear easy answer on on those sorts of questions. And it's, you know, it's a little complicated, more complicated than the average person who come in to be a member. >> thank you I yield back. >> the gentleman yields back. The gentlewoman from oklahoma, miss bice, is recognized for five minutes. >> thank you, Mr. chairman. I appreciate the opportunity. And thank you for the witnesses for being with us this morning.
▶ 1:09:00I think this topic is incredibly important as stock trades made by members have come under incredible scrutiny over the past few years when multiple senior members of congress and as my colleague doctor murphy mentioned, this is not a partizan issue. But when you have members of congress that are consistently beating out some of the best investors in the country and the s&p 500, there's a problem. Upon my election to congress, I actually divested all of my individual stocks.
▶ 1:09:26I think it is important to be as transparent as possible when working for your constituents and have no other allegiances, as was mentioned by my colleague from texas. Trust in this institution is low and congress can take action to restore trust. And I think this bill is a good first step towards agreeing, regaining the trust that the institution deserves. But frankly, I don't think it goes far enough.
▶ 1:09:50I would also offer up that the rules on the books should actually be enforced, and members who improperly trade should not get a slap on the wrist. With that being said, I do want to hear from the witnesses this morning. Um, and talk a little bit about other alternatives. Let me offer this up.
▶ 1:10:10Many senior executives have to have preclearance trades before placing them to ensure they are in compliance with their employer's code of ethics and not trading nonpublic information. Um, because I don't own any individual stocks. Um, I would wonder if this isn't an option. Would a preclearance process create transparency while still allowing members to lawfully purchase stocks? Um, to address some of the concerns of Mr. copeland, if you want to. You were nodding your head feverishly. I think that, yeah.
▶ 1:10:40>> yeah, I think that's a reasonable approach in many cases here. I mean, this is exactly what happens in certain types of corporate situations, certain types of law firms where you have to get pre-clearance with your, your internal, uh, people that, that, that work on the ethics and the compliance there. And I think something similar could, could, could be put into place. I would say easily it's not easy, but it could be done in a way that, that that's reasonably fair because, you know, even if you didn't require full divestiture, um, people will need to change positions.
▶ 1:11:09You may have companies that have spin offs or mergers or other things, and you need to rebalance the portfolio. You're not working on insider information, but you need to make a move. Um, you know, I think preclearance is there make sense. And it's sort of inherently showing that you're not trading on inside information in those cases. >> right? Either one of you want to respond. >> as well. I think in principle that that's an effective solution. We would want to look at any specific proposal for language on, again, how that is enforced and how that's addressed.
▶ 1:11:39But, you know, my my father has worked in equities trading for, for banks for a number of years. And he has to preclear all his trades as well. And occasionally he tells me about it and complains. >> well. >> um, let me also ask, uh, do you think that we should focus on actions that legitimately restore the trust in government? We should be focusing on actions that restore trust, not erode it. Um, but I also think that maybe this isn't going far enough.
▶ 1:12:08Uh, I think about judges who oversee antitrust cases. I think about senior congressional staff who may actually have as much information and in some cases more than many of us do. Uh, I think about senior executive branch staffers, um, who may have additional information. Um, what would be one addition that you think could be added to the stock act that would make an impact? >> in terms of who's covered?
▶ 1:12:36I, I, I tend to agree that, um, at least for the non constitutional officers, the other branches of government, that you ought to have relatively comparable sorts of protections in there. You're absolutely right. I mean, in the judiciary, it's totally the case. As someone who was a law clerk for a federal judge, it's like, you know, yeah, I knew things that were going on. I knew decisions that were going to be made. Um, and, you know, we had ethics requirements over us, I don't know, with specificity what they were.
▶ 1:13:04I never would have even I couldn't have fathomed trying to trade on that information. Uh, but it's certainly a risk. And so it's something that I think, uh, ought to be swept in with the notion that you want to have some comedy to the other branches. But I think if if you're not talking about the constitutional officers, you could go pretty far. >> yeah. Uh, tva has stopped short of endorsing similar legislation to apply to the judicial branch just because of the nature of lifetime appointments and some of the differences there.
▶ 1:13:31Uh, we have not come out in opposition to it either, but we would want to look look far more deeply at including judicial branch members in these types of prohibitions. >> do you have, Mr. strauss? Okay. Um, well. >> I appreciate the conversation. I think this is an important one. I do believe that we have to do something to restore trust and faith in the institution as it relates to, uh, investments. And so I look forward to continuing this conversation. And with that, chairman, I yield.
▶ 1:14:01>> five minutes to the gentleman. >> the gentleman yields back. The gentleman from ohio, Mr. carey, is recognized for five minutes. >> thank you. I want to thank the chairman. Obviously, I want to thank the ranking member as well as our witnesses for being here today. Um, a lot of questions that, that, that I do have. Um, and I'm going to try to go through some of them, but, uh, we, we know, um, as members of congress, we were sent here on behalf of our constituents and to represent them to our best of our ability.
▶ 1:14:27Recent polling has been outlined by members on both sides, have shown that americans trust in congress is at a five decade low. Incredible. So, um, I'm going to ask a few questions. Um, first, Mr. copeland, um, how would you strengthen the required financial disclosures among members to be, um, effective in deterring corporate trading practices?
▶ 1:14:58>> well, the disclosures right now are reasonable. I mean, $1,000 is is a reasonably low threshold. 45 days is reasonable. I think the question there would be in terms of disclosure, would a disclosure or preclearance be, uh, better prophylactic? And I think you can think about certain exceptions in these outlier cases. If someone's got a a large chunk of stock in a single company, uh, there may need to be certain allowances made, but those are exceptional cases.
▶ 1:15:27And the ordinary case, I think there's no reason why we couldn't have something like that, which I think would deter, uh, you know, it would deter the value of your insider trade, because if it's if it's if it's certainly if it's made public in advance. But even if it was just made in advance to the ethics office, then it's it's something that could raise a red flag. Right. So, um, you'd be ceding some, some control there, but I think if you wanted to stop short of a total divestiture rule, like some of these bills contemplate, you know, that's a reasonable step to to to step up the stock act.
▶ 1:15:57>> okay. So so let me Mr. um, you mentioned, I think, in your testimony that you felt that $200 was not an adequate amount as a fine. What do you think would be a sufficient amount? And a second part of that, what changes would you propose to adequately find those that violate the stock act?
▶ 1:16:21And the reason I say that should define actually be a percentage of the amount involved in the transaction or something, some variation of a theme on that. >> yes. The the bill we've endorsed, the restore trust in congress act would change the fine to the greater of two amounts, either $1,000 or the amount of profit made or loss avoided based on the the trade. That's in violation. And we'd be open to assessing whether that becomes a percentage in follow on proposals.
▶ 1:16:51But we think the balance struck in the restore trust in congress act, $1,000 or the profit made, whichever is larger. >> okay. So, so so the profit made. So but as a percentage, is there anything that you think in a percentage wise? >> not not specific numbers open to looking at any and all? I think I believe it's 100% of the profit made. And as the text of the restore trust in congress as I read. >> it.
▶ 1:17:21>> and I'm going to open this up for either for any of you, quite frankly, what happens in the situation, um, and many of you spent some time on the hill and, and you look at, uh, many of us around here, we all have family. What happens in the instance where, you know, unfortunately, somebody passes and you inherit, um, whether it's land, whether it's some type of stock ownership of a company, how how do we address that? And I would open that up to any of you.
▶ 1:17:49Uh, thankfully, I've not had to go through that, but. >> to some degree, that's easier unless you're talking about closely held businesses, family businesses, farms. I mean, if because the capital basis, the capital gains basis would step up in the estate, right? So so it would be easy to dispose of a publicly traded security in that case, uh, you know, without anything else, you could easily divest such things.
▶ 1:18:11Um, again, there are exceptional cases out there, and a lot of times that's what we are most worried about, are the cases where you've got a swimming pool, you've got a farm or something like that that's not easily disposed of. Um, but, but but otherwise, you know, that sort of event, most of these bills, if you, if you come into it, you know, it would just have a similar window of time to dispose of. And in the ordinary case, that'd be pretty simple. >> okay. Anybody else with that? Okay. Well, I want to thank you all for being here today.
▶ 1:18:39And again, I want to thank the chairman. With that I'll yield back. >> the gentleman yields back. The gentlewoman from illinois, miss miller, is recognized for five minutes. >> thank you, Mr. chairman, for convening this hearing on the issue of stock trading in congress and to our witnesses for being here. Appreciate it. As a member of congress, we should be held to a higher standard of personal and professional behavior.
▶ 1:19:03And I was just thinking about the lack of a the fear of god among members. It is appointed unto man once to die and then the judgment. And we are not going to take a pile of money. To hell with us. And people that are wantonly treacherous, that are us, that are disloyal to their constituents, to our country, to future generations, should be held accountable. They should be put to shame.
▶ 1:19:32The actions of this body do have a direct impact on the public's faith in this institution, and our constituents must be able to trust that their elected representatives are using their positions to serve the american people and not ourselves. When the stock portfolios of members of congress regularly beat the s&p 500 and members leave the office with vastly higher net worths than when they arrived, the public is right to be alarmed. So, Mr.
▶ 1:20:01Copeland, do you believe that the current law regulating stock trading by members and key employees provides for adequate deterrence of wrongdoing and sufficient enforcement when members or staff fail to comply? And they they don't fear god, they they are disloyal to the country and their constituents. This is disgraceful.
▶ 1:20:26>> the short answer to that is no, I don't think the adequate law, the current law, is adequate. >> so so when we talked about fines and basically a flick on the cheek, um, they need to be adequate. So a dollar amount, uh, percentage, amount of a fine would be better right, than a dollar amount. >> I have no problem with the disgorgement. I mean, again, that's that's that's for a violation of a reporting rule under the current rule. But but the current law.
▶ 1:20:55But I, I have no problem with the disgorgement. Um, and if it's a big trade, you'd, you'd be really, really careful with it if it's a small trade. Okay. But but and that's really not what we're as much worried about. >> okay. When examining the numerous proposals, Mr. copeland, uh, to restrict member stock trading, how do we ensure that enforcement is a partial and evenly applied to all members? >> yeah, that that's sort of the rub there.
▶ 1:21:23I mean, part of the problem is the enforcement mechanism. And we've reserved the stock act, reserves it to, uh, your own bodies, your own ethics offices or independent committees set up, uh, under your own body. If you transfer that to the executive branch, uh, you know, there's always the concern of partizanship, but, you know, that could apply to this body as well. Um, so, so the enforcement mechanisms really do matter there. And, you know, you've got to take that into account.
▶ 1:21:47But I think it's it's important I think there's there's some evidence to suggest the self-policing isn't working well now. Right. And so, um, some of that may be substantive rules and some of that may be process in terms of how you actually handle it. And so I think carefully about that process. I'm happy to work with the members on it. >> okay. Thank you. So, Mr.
▶ 1:22:10Savickas, I asked the same question as I believe it's critical that all members are held to the same standard, whether they are first term member or a certain former speaker of the house who, I would note, has not been mentioned once by the democrat members of this committee, despite making over $100 million from her time in public service.
▶ 1:22:32So would you in in light of, uh, restrict restricting stock trading, how do we make sure that, um, enforcement is impartial and evenly applied to all members? >> yeah, I think it has to be far less subjective. And how that looks up to interpretation, whether it's an independent commission remains to be seen.
▶ 1:22:59But I think the executive branch enforcement can be subjective and politicized, and the self-policing regime has not worked. >> so would you support enforcement being led by an independent entity that would operate without interference from the legislative or executive branches? >> yeah. In principle, yes. Reserving the right to look at any specific proposal. >> right. Thank you so much. And I yield back. >> the gentleman yields back.
▶ 1:23:25Without objection, I'd like to enter the testimony into the record of our colleague, representative mark alford. Without objection. So ordered. Uh, I think we learned a lot today. Uh, I will say I did not know Mr. griffith had a pool. Um, but I did also learn that there is a woman in the audience in a professional capacity that was the beneficiary of that pool. Uh, who's here with us today? Which is, uh, unique and special as well. Um, I do think there is a lot of important topics and a complexity to this issue.
▶ 1:23:54So I'd like to thank all of our members for joining us today, all of our witnesses for appearing before us as well. The members of the committee may have some additional questions for you, and we ask that you please respond to those questions in writing without objections. Each member will have five legislative days to insert additional material into the record, or to revise and extend their remarks. If there's no further business, I want to thank the members for their participation, and without objection, the committee stands adjourned.