Effort to Ban Stock Trading Among Executive Branch Officials Renewed

“Senior members of the executive branch—who have access to privileged information—shouldn’t be using it to get rich,” Mr. Hawley said. “While prohibitions already exist in federal law to prevent conflicts of interest, these laws are difficult to enforce and frankly, insufficient.”

Efforts to pass a stock-trading ban for the executive branch, Congress or both briefly gained momentum last fall before stalling out. Lawmakers in both parties have pushed in recent months to move forward on such legislation, but have so far made little headway.

Mr. Hawley in January 2022 introduced a bill that would ban lawmakers and their spouses from owning or trading individual stocks. The bill didn’t move forward but Mr. Hawley reintroduced it in January. 

Opponents of banning stock trading in the federal government say it would deter people from public service, and some lawmakers have argued that a prohibition on stock trading would divorce them from the economic interests of their constituents. Lawmakers are also divided on what a potential ban should look like. 

Federal law bars officials from working on matters in which they have a substantial financial interest. Beyond that, a few agencies impose strict rules on what stocks employees are allowed to own or how often they are allowed to trade. But most agencies allow officials to freely trade stocks as long as they aren’t substantially involved in matters that could affect those stocks.

Proponents of tougher stock-trading restrictions say current rules don’t do enough to address potential conflicts of interest or potential trading on access to nonpublic information.

Ethics lawyers often don’t know what an official is working on, making it difficult to identify when an official is working on a matter that affects their finances. Ethics lawyers also don’t typically look to identify instances when officials could have information about a policy or investigation that could affect their holdings, even if the officials aren’t working on that matter. 

Mr. Hawley’s bill, reviewed by The Wall Street Journal, would require senior executive-branch officials—defined as career and political officials above a certain pay grade—to divest their and their spouses’ stocks or place them in a blind trust within six months of starting their job. The ban wouldn’t apply to diversified mutual funds. 

The legislation comes after the Journal reported last month that ethics officials had warned one-third of the Energy Department’s senior officials that they or their families owned stocks related to the agency’s work. Most held on to the stocks. 

The Journal published a series of stories last fall that analyzed 31,000 financial-disclosure forms for about 12,000 senior career employees, political staff and presidential appointees at 50 agencies, and found that more than one in five disclosed stock investments in companies that were lobbying their agencies for favorable policies.

Last week, Sen.

Elizabeth Warren

(D., Mass.) and Rep.

Pramila Jayapal

(D., Wash.) called on internal investigators at eight federal agencies, including the Treasury Department and the Pentagon, to launch probes into conflicts of interest and review the effectiveness of their ethics rules. They said those investigations would inform the stock ban legislation they previously introduced.

Several agencies, including the Federal Deposit Insurance Corp. and the Commerce Department, are already investigating the stock investments of officials identified by the Journal. Some agencies are also looking to tighten their ethics rules. 

Write to Andrew Ackerman at [email protected] and Rebecca Ballhaus at [email protected]