WASHINGTON - The Committee on House Administration held a Full Committee Hearing titled, "Taking Stock of the STOCK Act."

Witnesses:
  • Mr. Dan Savickas, Taxpayers Protection Alliance Vice President of Policy and Government Affairs
  • Mr. James R. Copland, Manhattan Institute Senior Fellow and Director of Legal Policy
  • Mr. Jacob Straus, Congressional Research Service Specialist on the Congress
In case you missed it, here are the top takeaways:
1. What Can We do to Accomplish the Ultimate Goal of Making Sure That Members of Congress Aren't Profiting from Inside Information?

Chairman Bryan Steil (WI-01): I want to start today with the clear statement that no Member of Congress should be utilizing inside information for personal profit. Mr. Savickas, Mr. Copeland, do you both agree that we should, at a minimum, update the STOCK Act? 

Mr. Copland: Yes, certainly to that effect.

Chairman Bryan Steil (WI-01): Mr. Savickas?

Mr. Savickas: Yes.

Chairman Bryan Steil (WI-01): 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? I sometimes go back and think about the situation that occurred here five years ago. 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. If you're the Chair of the Intelligence Committee, almost by definition, you have information that's not available to the public. 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. And so then we have to look and explore what reforms need to be made to make sure that this type of action doesn't happen again. Mr. Copeland, in your testimony you stated that no Member of Congress has ever been prosecuted under the STOCK Act. We just talked about the instance that took place in the Senate. Why do you think that's the case?

Mr. Copland: Partly, for the burden of proof you talked about. I mean, reasonable doubt is relatively high. You have to have a scienter requirement or knowledge requirement. Also, you know, it's the way the STOCK Act structured is 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, you know, conflict among the branches is something you have to worry about. You have to worry about, an Executive Branch run by one party going after the Members or Senators of another party and things like this.

Chairman Bryan Steil (WI-01): We've seen that plenty of times.

Mr. Copland: You know that that's my hypothesis. I wouldn't infer from the lack of prosecutions that nothing bad has happened.

Chairman Bryan Steil (WI-01): 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. 
Click the image or here to view Chairman Steil's Q&A. 
2. Difference Between Members Owning Individual Securities and Mutual Funds

Vice Chair Laurel Lee (FL-15): You touched on something else that is important. That is really the distinction between different types of assets. And if you 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 and why that is something that is substantially different in terms of insider knowledge?

Mr. Copland: Well, 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. So if you're, for instance, in a S&P 500 passive index fund tracking the stock market, then 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 anymore than when people were worried about, you know, Ross Perot running for president. He had a lot of federal government bonds. Well, if he had actually got rid of the deficit, the value of those bonds would go up. But, people aren't worried about that sort of thing, right? So, that's very different 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 an area where that would have an impact, that also could be something you'd have to worry about a little bit. But, 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.
Click the image or here to view Vice Chair Lee's Q&A. 
3. Examples of Member Stock Trading

Dr. Greg Murphy (NC-03): This is a bipartisan issue. 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. 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 an article stating 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, he traded between 1 and 5 million stocks in semiconductors mere days before Congress allocated 52 billion for the industry. In 2024, he sold 2,000 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.

Chairman Bryan Steil (WI-01): Without objection.

Dr. Greg Murphy (NC-03): 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. There 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. 
Click the image or here to view Dr. Murphy's Q&A. 
4. Inheriting Stocks from a Family Member

Rep. Mike Carey (OH-15): Many of you spent some time on the Hill and, and you look at many of us around here, we all have family. What happens in the instance where, you know, unfortunately, somebody passes and you inherit, whether it's land, whether it's some type of stock ownership of a company, how do we address that? And I would open that up to any of you. Thankfully, I've not had to go through that.

Mr. Copland: To some degree that's easier, unless you're talking about closely held businesses, family businesses, farms because the capital gains basis would step up in the estate, right? So it would be easy to dispose of a publicly traded security in that case without anything else, you could easily divest such things. 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. Otherwise, that sort of event, most of these bills, if you come into it, it would just have a similar window of time to dispose of. And in the ordinary case, that'd be pretty simple. 
Click the image or here to view Rep. Carey's Q&A.