Senators strike bipartisan deal for ban on stock trading by members of Congress(cnbc.com)
cnbc.com
Senators strike bipartisan deal for ban on stock trading by members of Congress
https://www.cnbc.com/2024/07/10/senators-strike-bipartisan-deal-for-a-ban-on-stock-trading-by-members-of-congress.html
55 comments
I have always wondered how this would perform. The caveat in my mind has been that there is a (significant?) lag between when the trade is made, and when it must be reported. If there is a strong buy/sell signal, I have assumed it would be cold by the time I had access to that information. Also thought a limitation of the STOCK act was that partners (?) did not have to report their data, so a savvy representative could hide their trades through direct family.
It would be fun to compare the two parties portfolios. Are there ideological companies which are helping/hurting the overall performance? One group is better at timing?
It would be fun to compare the two parties portfolios. Are there ideological companies which are helping/hurting the overall performance? One group is better at timing?
There can be a lag, but not always. Sometimes it’s just a day or so between trade and reporting. Seems like one way to derisk would be to evaluate the time between trade and reporting plus whether anything significant has happened in that timeframe.
For example, Senator buys a stock, stock jumps and plateaus a week later, buy is reported a month later would mean don’t add this to ETF.
For example, Senator buys a stock, stock jumps and plateaus a week later, buy is reported a month later would mean don’t add this to ETF.
That layers on a lot of complexity onto the idea of “mimic Congress stock trades”.
Now I have to decide if their hot tip hit or not. Was it a long term play? Does the committee decision get published in five weeks, so they wanted to move now?
I am sure there is signal worth exploiting, but an index fund still seems the more appropriate strategy without significant development on how to follow their moves.
Now I have to decide if their hot tip hit or not. Was it a long term play? Does the committee decision get published in five weeks, so they wanted to move now?
I am sure there is signal worth exploiting, but an index fund still seems the more appropriate strategy without significant development on how to follow their moves.
I thought they have 60 days to report trades [1] and there are a bunch of stock-based investments that explicitly don't require reporting (EIF's)? Sure, if somebody decides to voluntarily file on day 1, or buy stock "raw" that's cool, but in general there should be quite significant lag or gaps (to the point where short/medium-term there's no signal basically).
[1] https://ethics.house.gov/sites/ethics.house.gov/files/docume...
[1] https://ethics.house.gov/sites/ethics.house.gov/files/docume...
You’re right that 60 is the limit, but many people file them much sooner.
18 months is nothing though, a true statistical analysis would look at all of the stocks held by Congress members for decades, if that data is even available.
As a counter-point, $QQQ is also up 23% YTD and seems to track a similar up and down as $NANC. People primarily investing in tech are getting tech returns.
Most of the returns for both are from $NVDA, which is up 172% YTD.
Most of the returns for both are from $NVDA, which is up 172% YTD.
If one party is doing worse and the other is doing better that could be a sign that there's not much to it. They're generally going to have access to similar information/groups/etc. Otherwise a theory that one party is "better at corruption" vs "if you grab subsets of people at random some of the sets will be above-average" is dubiously-supported.
https://www.fa-mag.com/news/how-to-invest-like-members-of-co... Per this, KRUZ is lagging the S&P 500 YTD.
And in fact the case it makes is actually less convincing? "In total, 37 members of Congress beat the S&P 500 in 2023, according to stock and options data company Unusual Whales." 37 members of congress is a small subset.
https://www.fa-mag.com/news/how-to-invest-like-members-of-co... Per this, KRUZ is lagging the S&P 500 YTD.
And in fact the case it makes is actually less convincing? "In total, 37 members of Congress beat the S&P 500 in 2023, according to stock and options data company Unusual Whales." 37 members of congress is a small subset.
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NANC so far is tracking the NASDAQ very closely. I wonder if it's just overweighted by Pelosi's holdings (really her husband who's a sophisticated investor).
Edit: It might just be better to buy a NASDAQ index fund. NANC expense ratio is 0.75%, double that of most index funds. Then again NANC doesn't have as much history.
Edit: It might just be better to buy a NASDAQ index fund. NANC expense ratio is 0.75%, double that of most index funds. Then again NANC doesn't have as much history.
> really her husband who's a sophisticated investor
It's not hard to be a sophisticated investor when your spouse is one of the decision-makers influencing major stock movements - a la CHIPS Act.
It would be naïve to believe spouses never discuss pending legislation that might financially benefit them both.
It's not hard to be a sophisticated investor when your spouse is one of the decision-makers influencing major stock movements - a la CHIPS Act.
It would be naïve to believe spouses never discuss pending legislation that might financially benefit them both.
An interesting corollary to outperforming the market long term being difficult is that underperforming the market (ignoring transaction costs) is also difficult. If you could consistently pick bad stocks then buying everything else would outperform the market.
So sophisticated on its own doesn’t imply consistently outperforming the market. It does imply variance and thus windows where they will outperform the market even if they preform poorly long term.
So sophisticated on its own doesn’t imply consistently outperforming the market. It does imply variance and thus windows where they will outperform the market even if they preform poorly long term.
Yeah, Warren Buffett compared to the Pelosis. Nancy Pelosi does this as a part-time job and kills it while simultaneously fulfilling her primary duties. We should be grateful that she didn't decide to get into managing a fund.
This is hilarious, thank you for brightening my day with your humor.
I never understood the obsession with Nancy Pelosi specifically (not by you, but by the people who named that ETF and all of the news headlines) in the context of senate trading.
Her recent returns are high, but they’re right up there with several other Republican and Democrat lawmakers: https://x.com/unusual_whales/status/1742207287966777673
It’s even stranger that inception date of the $NANC ETF was after she announced she was stepping down as Democratic Party leader.
I guess the name triggers controversy, so the people pushing these products use whatever sells.
Her recent returns are high, but they’re right up there with several other Republican and Democrat lawmakers: https://x.com/unusual_whales/status/1742207287966777673
It’s even stranger that inception date of the $NANC ETF was after she announced she was stepping down as Democratic Party leader.
I guess the name triggers controversy, so the people pushing these products use whatever sells.
It's due to her specific comments as Speaker of the House when leading a vote to dismantle prohibitions established during the Obama admin.
> when asked whether lawmakers and their spouses should be prohibited from trading stock while in Congress, Pelosi said, “No,” adding that “this is a free market.”
https://apnews.com/article/business-nancy-pelosi-congress-86...
It's also because her family profits disproportionately:
> Pelosi's husband, investor Paul Pelosi, frequently trades significant numbers of stocks. With her husband's assets considered, Pelosi ranks among the wealthiest members of Congress, an Insider analysis found.
https://www.businessinsider.com/we-are-free-market-economy-p...
> when asked whether lawmakers and their spouses should be prohibited from trading stock while in Congress, Pelosi said, “No,” adding that “this is a free market.”
https://apnews.com/article/business-nancy-pelosi-congress-86...
It's also because her family profits disproportionately:
> Pelosi's husband, investor Paul Pelosi, frequently trades significant numbers of stocks. With her husband's assets considered, Pelosi ranks among the wealthiest members of Congress, an Insider analysis found.
https://www.businessinsider.com/we-are-free-market-economy-p...
I assumed it was because she was speaker at the time at least when this popped off recently.
Yeah, collecting fees is easy money.
Ok, so there’s not a ton of info in the article about the actual bill itself. Only the caption on the image lists the name: the ETHICS Act.
If you check S.1171 you can see it is in the Committee on Homeland Security and Government Affairs. It may die there if nothing else happens.
If you think this is an important bill, you can contact the members of this committee. They are listed here: https://www.hsgac.senate.gov/about/committee-members/
You should inform them that this is important to you, and if they don’t take action on this you will not vote for them or donate to their campaigns, and will support their opponent instead.
This last bit is controversial but important. Politicians care about staying in office. If you will be supporting a candidate regardless, your opinion doesn’t matter to them. So you need to tie their election to something that matters to you.
If you check S.1171 you can see it is in the Committee on Homeland Security and Government Affairs. It may die there if nothing else happens.
If you think this is an important bill, you can contact the members of this committee. They are listed here: https://www.hsgac.senate.gov/about/committee-members/
You should inform them that this is important to you, and if they don’t take action on this you will not vote for them or donate to their campaigns, and will support their opponent instead.
This last bit is controversial but important. Politicians care about staying in office. If you will be supporting a candidate regardless, your opinion doesn’t matter to them. So you need to tie their election to something that matters to you.
Reposting from a child comment:
I don't know why anyone is talking about insider trading. I don't give a shit if the congresspeople do insider trading.
What I care about is that if congresspeople can trade at all, they have a conflict of interest in doing their legislative duties. They are incentivized to pass laws that will benefit corporations and make the stock market rise. That's what is unacceptable about Congress trading.
Banning trading totally is the only thing that matters.
I don't know why anyone is talking about insider trading. I don't give a shit if the congresspeople do insider trading.
What I care about is that if congresspeople can trade at all, they have a conflict of interest in doing their legislative duties. They are incentivized to pass laws that will benefit corporations and make the stock market rise. That's what is unacceptable about Congress trading.
Banning trading totally is the only thing that matters.
I'd suspect there's loopholes here, the trading will instead be done by a hedge fund on behalf of the congress member(s)
A hedge fund isn't granted immunity from insider trading charges like Senators are.
This law isn't classifying anyone as insiders. I don't think there's an intention in the bill to ban trading by doing so.
Won't stop lobbyists, spouses, their financial advisors, or them from taking gold bars. 95% are still crooks, or campaign finance reform would've passed years ago. This is a performative ruse.
usually when I see the phrase “strike bipartisan deal” I assume it is something nefarious
this headline sounds nice
where’s the nefarious angle?
this headline sounds nice
where’s the nefarious angle?
The nefarious angle is that this isn't actually going to pass. It's already July. Congress basically doesn't work at all in August or October, and there are a bunch of "state work periods" on top of that. And then there's the election.
This "bipartisan deal" is a bunch of Senators. It still hasn't passed the Senate, much less gone to the House, much-much-less gotten wrangled in reconciliation.
There's a possibility it'll be picked up and actually worked on during the "lame duck" session after the election. But most likely, this is the last you'll ever hear of it. Unless you live in one of their states, and you go to a campaign rally, where they tell you about the great thing they're working on.
This "bipartisan deal" is a bunch of Senators. It still hasn't passed the Senate, much less gone to the House, much-much-less gotten wrangled in reconciliation.
There's a possibility it'll be picked up and actually worked on during the "lame duck" session after the election. But most likely, this is the last you'll ever hear of it. Unless you live in one of their states, and you go to a campaign rally, where they tell you about the great thing they're working on.
That makes sense, thanks for contextualizing
It's about time.
Can't they still be prosecuted by the SEC for insider trading? /s
The SEC can pursue civil action for insider trading, but insider trading is also a criminal offense prosecuted by the various Attorneys General and investigate by law enforcement.
I'm not aware of any successful prosecutions for insider trading for members of Congress; the article does mention the FBI's investigations in the wake of COVID-19 that ended with prosecutors declining to make any charges.
I'm not aware of any successful prosecutions for insider trading for members of Congress; the article does mention the FBI's investigations in the wake of COVID-19 that ended with prosecutors declining to make any charges.
I know you said /s, but are members of Congress legally "insiders" for companies? I'd think the simplest solution would be to write a law stating that they are, for any company they are writing laws about, considering writing laws about, etc.
I think they're insiders if they know something's about to happen the general public isn't privy to that will affect the market. I don't think you need to be part of a company to be an insider. For instance, you could be part of a regulatory board knowing you were about to open up restrictions on something that would enable a company to make money in a sector it was previously outlawed from and it would be only natural to invest in that company before the regulatory change went public.
Anyone who uses material non-public information to trade stocks is guilty of insider trading under current interpretations. If a member of Congress does so then they are also guilty. The question becomes whether you can prove this and whether a jury will convict on it; to date law enforcement has generally declined to prosecute these cases (as mentioned at the end of the article about COVID trading)
The SEC also requires that "insiders" make certain filings well in advance of trading stocks, but that is a separate issue.
The SEC also requires that "insiders" make certain filings well in advance of trading stocks, but that is a separate issue.
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Any effort by Congress to police itself is really just political theater for consumption by the unsuspecting voter.
How to sidestep this ban? Setup an anonymous trust or holding company in Wyoming or overseas.
How to sidestep this ban? Setup an anonymous trust or holding company in Wyoming or overseas.
> Any effort by Congress to police itself is really just political theater for consumption by the unsuspecting voter.
I heard an interesting proposal to have a bill that grandfathers in sitting members of congress. That way they get credit for changing the system but they don't lose the benefits themselves. It's ugly but it's more likely to eventually get the job done.
I heard an interesting proposal to have a bill that grandfathers in sitting members of congress. That way they get credit for changing the system but they don't lose the benefits themselves. It's ugly but it's more likely to eventually get the job done.
Nothing stopping the next congress from reversing it.
It's the same deal with supreme court. They call the shots in between the lines.
It's the same deal with supreme court. They call the shots in between the lines.
I am curious why it would work this time. The STOCK act was written a decade ago.
https://en.m.wikipedia.org/wiki/STOCK_Act
https://en.m.wikipedia.org/wiki/STOCK_Act
Because this will remove intent and knowledge from consideration. Under the STOCK act, you have to prove they're trading based on non-public information. Under the new bill, they just can't trade stocks, period. Any trading is immediately an offense.
I don't know why anyone is talking about insider trading. I don't give a shit if the congresspeople do insider trading.
What I care about is that if congresspeople can trade at all, they have a conflict of interest in doing their legislative duties. They are incentivized to pass laws that will benefit corporations and make the stock market rise. That's what is unacceptable about Congress trading.
Banning trading totally is the only thing that matters.
What I care about is that if congresspeople can trade at all, they have a conflict of interest in doing their legislative duties. They are incentivized to pass laws that will benefit corporations and make the stock market rise. That's what is unacceptable about Congress trading.
Banning trading totally is the only thing that matters.
I thought there was a recent law in the past few years that required any entity holding securities to provide entity ownership data to the SEC.
The entity in this case won't necessarily be a typical securities "holding" company. Legally, it may be the owner of the securities.
It's possible to make it very difficult to prove who ultimately controls the company.
It's possible to make it very difficult to prove who ultimately controls the company.
Sure, people can lie and commit fraud regardless of the law. The corporate transparency act requires certain reporting of "beneficial ownership".
The corporate transparency act doesn't apply outside the country. Anyone in the world can legally buy US securities.
Obscuring ownership and control can be done perfectly legal.
Obscuring ownership and control can be done perfectly legal.
"Anyone in the world can legally buy US securities."
Assuming you aren't sanctioned.
"Obscuring ownership and control can be done perfectly legal."
Exception the tax fraud part...
Assuming you aren't sanctioned.
"Obscuring ownership and control can be done perfectly legal."
Exception the tax fraud part...
Ideally the legislation would be about the same as for company insiders, no?
I'm doubtful -- this is like saying you can sidestep the law against murder by not getting caught.
Obviously some of this will depend on how the legislation is drafted, but there's a difference between whether those actions shield you from prosecution or if they just make it harder to detect.
Most likely those sidesteps will be seen for what they are, and when prosecutors become aware of them they will still investigate and prosecute for violating the statute. Under current law there are members of Congress that have been plainly guilty of insider trading and yet prosecutors have declined to prosecute (the article mentions this explicitly for COVID-19 insider trading). It is entirely possible that there will be a lack of prosecutorial enthusiasm, but hopefully this will have a chilling effect on some of the most flagrant cases (cough Pelosi).
Obviously some of this will depend on how the legislation is drafted, but there's a difference between whether those actions shield you from prosecution or if they just make it harder to detect.
Most likely those sidesteps will be seen for what they are, and when prosecutors become aware of them they will still investigate and prosecute for violating the statute. Under current law there are members of Congress that have been plainly guilty of insider trading and yet prosecutors have declined to prosecute (the article mentions this explicitly for COVID-19 insider trading). It is entirely possible that there will be a lack of prosecutorial enthusiasm, but hopefully this will have a chilling effect on some of the most flagrant cases (cough Pelosi).
Or speculate on real estate or non-covered securities of which I am sure there are many. Or buy crypto, or Art, or ...
All of those are fine. It's not to prevent them from investing, but to prevent some form of insider trading (does that name still apply for people who know about policy / funding changes ahead of time?)
I wouldn't really put real estate in the group of investments that's OK, depending on details.
There's plenty of stories of well-connected people frontrunning government endeavors that require lots of land. Sometimes that has positive results: civic minded person buys up land without raising eyebrows, then sells it to government for a song; sometimes it's negative: less civic minded person buys up land and then sells it to government or others for much more than they purchased it for, in large part because of official decisions they participated in.
I know some states have part time legislatures, so the members often have other jobs, but a federal office is a full time job, year round, regardless of recesses. I don't think it's unreasonable to demand that office holders avoid potential conflicts of interest by avoiding any sort of investment outside of personal residences and well diversified mutual funds (and well diversified ETFs). Plus or minus rental housing owned prior to office.
It's not that big of an imposition, unless your spouse is an active stock trader (for work or hobby), but in that case... Sometimes you have to make sacrifices for a spouse's career.
There's plenty of stories of well-connected people frontrunning government endeavors that require lots of land. Sometimes that has positive results: civic minded person buys up land without raising eyebrows, then sells it to government for a song; sometimes it's negative: less civic minded person buys up land and then sells it to government or others for much more than they purchased it for, in large part because of official decisions they participated in.
I know some states have part time legislatures, so the members often have other jobs, but a federal office is a full time job, year round, regardless of recesses. I don't think it's unreasonable to demand that office holders avoid potential conflicts of interest by avoiding any sort of investment outside of personal residences and well diversified mutual funds (and well diversified ETFs). Plus or minus rental housing owned prior to office.
It's not that big of an imposition, unless your spouse is an active stock trader (for work or hobby), but in that case... Sometimes you have to make sacrifices for a spouse's career.
If they are in a position to have inside information about the future performance of those assett classes it's arguably not "fine."
Let's say the buy up a lot of houses before passing new regulation that specifically makes those properties increase dramatically in value. I'd argue that is insider trading in spirit, despite those properties not being covered securities. Similar for policy that might substantially impact crypto, Art, etc... There are endless ways to leverege their power and inside knowledge for personal gain. With securities trading it's at least possible for retail investors to ride along, buying up $NANC or mimic'ing specific traders and trades.
Let's say the buy up a lot of houses before passing new regulation that specifically makes those properties increase dramatically in value. I'd argue that is insider trading in spirit, despite those properties not being covered securities. Similar for policy that might substantially impact crypto, Art, etc... There are endless ways to leverege their power and inside knowledge for personal gain. With securities trading it's at least possible for retail investors to ride along, buying up $NANC or mimic'ing specific traders and trades.
The headline says "bipartisan deal for BAN on stock trading" doesn't it?
Inside trading is already notionally illegal, isn't it?
Why would this law be trying to re-make insider trading illegal?
Inside trading is already notionally illegal, isn't it?
Why would this law be trying to re-make insider trading illegal?
Because we have a good idea of many people abusing the position, just haven't caught anyone red handed. It's a bit like "why have traffic rules that differ for specific places and people if we already made killing others illegal?".
What I meant was, insider trading is already illegal. This is allegedly going to make trading itself illegal. What was your point about insider trading?
As an aside: this post is not meant as a partisan criticism. I don't invest in the Republican equivalent $KRUZ because last time I checked it wasn't doing as well as $NANC.
[1] https://www.subversiveetfs.com/nanc