In a bipartisan effort, a group of Senators has introduced a new proposal known as the "ETHICS Act" (Ending Trading and Holdings in Congressional Stocks), aimed at banning members of Congress, their spouses, and dependent children from trading individual stocks. Senators Jeff Merkley of Oregon, Gary Peters of Michigan, Jon Ossoff of Georgia, and Josh Hawley of Missouri are leading the charge on this new version of the measure.

Senator Peters, who chairs the Senate Homeland Security and Governmental Affairs committee, is expected to bring the bill before his committee later this month. The proposed legislation seeks to address concerns over lawmakers' financial interests conflicting with their duty to serve the people.

In an exclusive interview with NPR, Senator Merkley emphasized the necessity of prohibiting stock trading by members of Congress, stating that public sentiment strongly supports such a ban. Citing a University of Maryland poll indicating that 85% of the public favors such a restriction, Merkley argued that the issue transcends party lines.

Currently, lawmakers are required to disclose their individual stock trades. However, critics allege that enforcement is inconsistent and inadequate. The STOCK (Stop Trading on Congressional Knowledge) Act, enacted in 2012, mandates the disclosure of trades exceeding $1,000 within 45 days. Nonetheless, questions arose about lawmakers potentially profiting from inside information following profitable trades made before the 2009 financial crisis.

The proposed ETHICS Act would prohibit lawmakers from purchasing new individual stocks immediately and mandate the divestment of all individual assets at the beginning of the next congressional session in 2027. Unlike previous reform proposals that suggested the use of blind trusts, this bill specifically mentions mutual funds as an acceptable investment option. It is important to note that congressional staff members are not covered by this proposal.

Numerous bipartisan efforts to reform the law have emerged in recent years, but none have advanced enough to be considered by committees. Former House Speaker Nancy Pelosi, whose husband is an active trader, initially opposed new reforms but has now signaled openness to passing legislation around the 2022 midterms. Amendments in the Senate have been unsuccessful, and no panel has taken action to address concerns since the passage of the STOCK Act.

To strengthen enforcement, the Senate proposal would expand penalties for non-compliance. Under this plan, the failure to divest would result in fines equal to either the value of a lawmaker's monthly salary or 10% of the value of each asset in violation of the law, whichever is greater. Senator Merkley emphasized the impactful nature of these penalties and their monthly assessment.

If passed, the new proposal would require all current and incoming lawmakers to adjust their portfolios by March 31, 2027, with a 120-day period provided for divestment. Additionally, a provision in the bill would mandate a certificate of divestiture for both the President and the vice president. Furthermore, a 90-day "cooling off" period would be imposed for lawmakers leaving public service, during which they would be prohibited from investing in individual stocks.

The proposed legislation also seeks to increase the penalty for non-reporting to $500 and requires that all disclosures be included in a searchable public database. The current system of disclosures has prompted financial services companies to create investment products modeled after lawmakers' portfolios. These funds consistently outperform the market, further eroding public trust in elected officials.

Senator Merkley acknowledged that passing the proposal as a standalone bill might be challenging; therefore, his aim is to attach it to another must-pass legislation this year. He acknowledged the difficulties surrounding laws that directly affect lawmakers' financial portfolios, noting that concerns arise when their families are included in these regulations.