H.R. 7008: Stop Insider Trading Act

Today, Members of Congress can buy and sell individual stocks as long as they report the trades within 45 days under the STOCK Act. H.R. 7008, the Stop Insider Trading Act, replaces that after-the-fact model for purchases with a flat prohibition.

Once the law takes effect, a Member, a Member's spouse, and a Member's dependent children could not buy shares of any publicly traded company. The ban also reaches options, warrants, and other derivatives that mimic owning a stock, so a family can't get the same exposure through a side door.

The bill does not force anyone to sell what they already own. Existing holdings can stay in the portfolio, and reinvested dividends from those holdings are still allowed.

Selling becomes a public event: the Member has to post a notice 7 to 14 days before any sale, listing the date, the stock, and the number of shares. The House Clerk or Secretary of the Senate puts it online on receipt. If the Member changes their mind, the notice has to be withdrawn.

Several kinds of investments sit outside the ban entirely: diversified mutual funds and similar pooled funds, funds concentrated in U.S. or home-state companies, stakes in small businesses, and blind-style trusts that no family member controls or runs. A spouse or child trading for an employer, for someone else, or as part of their paycheck is also exempt.

Violations carry a fee equal to $2,000 or 10% of the trade, whichever is larger, plus any net gain on the investment. On a $100,000 purchase that later gained $15,000, that's $10,000 plus $15,000, or $25,000, and the shares must be sold. The fee can't come out of office budgets or campaign money, and a Member who leaves Congress without paying can be referred to the Justice Department.

The rules take effect 180 days after the bill becomes law.