Insider Accountability: Assessing the Effectiveness of the STOCK Act & Its Ability to Combat Congressional Insider Trading

By Mason Elston  Edited by Peyton Hennig

Vol. 1, Issue 2. — July 2025

I n the currently polarized state of United States politics, finding any policy that receives unanimous support

among constituents is extremely difficult. According to a 2023 University of Maryland study, over 90% of US nationals agree that members of Congress and "live-in" family members should not be able to hold stocks while in office [1]. Recently, a bipartisan group of Senators pressed such a ban. Tagged the 'End Trading and Holdings in Congressional Stocks Act,' or 'ETHICS Act,' the bill proposed by Senators Jeff Merkley, Gary Peters, Jon Ossoff, and Josh Hawley aims to end congressional stock trading by 2027 [2]. This motion begs the question: what happened to the STOCK Act, which was intended to restore public trust after the 2008 scandal involving Democratic Whip Dick Durbin, who sold stocks based on private information allegedly provided by Federal Reserve Chair Ben Bernanke [3]? Now, with a majority of U.S. citizens in favor of stricter stock trading restrictions for lawmakers, another question arises: are they right?

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[1] University of Maryland School of Public Policy. (2023).

[2] S.1171, 118th Cong. (2023).

[3] Grace Wyler, Here’s How Congressmen Gamed the Financial Crisis to Make Big Bucks in the Stock Market,BUS. INSIDER (Nov. 14, 2011), https://www.businessinsider.com/heres-how-congressmen-gamed-the-financial-crisis-to-make-big-bucks-in-the-stock-market-2011-11#sen-dick-durbin-d-il-1

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The STOCK Act

In 2012, the STOCK Act was passed. The act forces legislators to report trades they make within 45 days while

also banning trading on insider information, subject to the Securities Exchange Act of 1934 and Rule 10b-5 [4]. Many scholars, such as Jeanne L Schroeder, claim the STOCK Act, sponsored by Independent Senator Joseph Lieberman, was not written for the sake of limiting insider trading by Congress. They believe that it was a Public Relations stunt that gave a brief sense of closure for voters [5]. Fast forward 13 years, and the same distrust in Congress still occurs. From 2023-2024, the large majority of Congress members outperformed the market, with Representative David Rouzer leading congresspeople, returning 149% in 2023-24 [6]. While it is not a crime to outperform the market, the STOCK Act intends for all congresspeople to trade based on public information. 126 STAT. 292 Sec. 4. (a) Affirmation of NON EXEMPTION- “Members of Congress and employees of Congress are not exempt from the insider trading prohibitions arising under the securities laws [7].” However, Congress continues to outperform the market, which causes the public to speculate that this may be due to insider trading based on the public information given to them while serving in a position of trust.

For example, on February 13th 2020, Senator Richard Burr sat in on a briefing during his time as member of

Senate intelligence and health committee. Very soon after, Sen Burr called his stockbroker and asked to sell 1.65 million dollars worth of stock, amounting to 33 transactions in a single day. Before this large dump of stock, Sen Burr’s Agent had purchased nearly $1.9 million US Treasury Cash Reserve Funds “to hedge against a potential market downturn.” Shortly afterward, Senator Burr called his brother-in-law, Gerald Fauth, a former chairman of the National Mediation Board, who then contacted two stockbrokers and directed them to sell his wife's assets. Fauth assets that were worth ~$100,000-$280,000 plummeted in the following weeks, which caused the perfectly timed trades to come to light [8]. Democratic congresswoman Alexandria Ocasio-Cortez and Republican Fox News host both called for Senator Burr to step down, ultimately leading him to resign from his position as chair of the Intelligence Committee [9]. Although this publicized incident sparked some momentum for stronger legislation restricting congressional stock trading, the push for reform was overshadowed by the emerging coverage of the COVID-19 pandemic.

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[4] STOCK Act, Pub. L. No. 112-105 § 4, 126 Stat. 291, 292 (2012).

[5] Jeanne L. Schroeder, Taking Stock: Insider and Outsider Trading by Congress, 5 WM. & MARY BUS. L. REV. 165 (2014)

[6] Tobias Burns, Dozens of Lawmakers Bear Stock Market in 2024: Report, THE HILL (Apr. 17, 2024), https://thehill.com/business/5072670-dozens-of-lawmakers-beat-stock-market-in-2024-report/

[7] STOCK Act, supra 4 

[8] Chris Young, Judge Orders partial Unsealing of Search Warrant for Sen. Richard Burr’s Phone, RCFP (Sept. 9, 2022), https://www.rcfp.org/sen-burr-search-warrant-unsealing/

[9] Robert Faturechi, Burr’s Brother-in-Law Dumped Stock After Getting Coronavirus Briefing, PROPUBLICA (Sept. 7, 2022), https://www.propublica.org/article/burr-stocks-shares-covid-crash

Structural Conflict with Legal Action

The scandal highlights the fact that Senator Burr was never found guilty under the Stock Act or any of the insider

trading statutes it references. Under the STOCK Act, those responsible for enforcing the legislation are appointed by some of the very individuals they would be tasked with regulating. Agencies such as the Securities and Exchange Commission (SEC) and the Internal Revenue Service (IRS), [10] heads of both agencies are appointed by the head of the executive branch [11] [12]. This is frequently named a conflict of interest.

The recent turbulence in the market, caused directly by international policy implemented by the current

administration, along with public concern that this was artificially manufactured to generate wealth, may not be investigated. With that being said, Senators Elizabeth Warren and Chuck Schumer have now called upon the SEC to launch an investigation into the current administration for possible stock manipulation [13]. A possible reason for this is that these newly appointed chairs will not want to make their mark investigating those who had just recently appointed them. Overall, this conflict of interest from legislators and “independent” agencies can be one of the many reasons that the Act isn’t enforced effectively. 

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[10] Nick Walter, Congress’s Insider Trading Loophole, 30 YALE L. & POL’Y REV. 369 (2012), https://yalelawandpolicy.org/sites/default/files/YLPR/walter_30.pdf

[11] Previous IRS Commissioners, INTERNAL REVENUE SERV., https://www.irs.gov/about-irs/previous-irs-commissioners#:~:text=Commissioners%20are%20nominated%20by%20the,employees%20are%20career%20civil%20servants.

[12] U.S. Sec. & Exch. Comm’n, SEC Charges Congressional Staffer with Insider Trading, SEC (Apr. 17, 2025), https://www.sec.gov/newsroom/press-releases/2025-68

[13] U.S Senate Comm. on Banking, Hous. & Urban Aff., Minority Members, Warren, Schumer, Senate Colleagues Call on SEC to Launch Investigation into Possible Trump Tariff market Manipulation, Insider Trading, U.S SENATE (Apr. 10, 2024), https://www.banking.senate.gov/newsroom/minority/warren-schumer-senate-colleagues-call-on-sec-to-launch-investigation-into-possible-trump-tariff-market-manipulation-insider-trading

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Political Conflict with Legal Action

Another reason it is difficult to generate momentum for pursuing legal action against fellow legislators is that

doing so could amount to political suicide. If legislators from either side of the aisle begin to advocate for a trial, it could lead to the public's dissatisfaction and lack of confidence in government, causing polling to fall. A common theme in many hearings against lawmakers and staffers is that, if anything notable comes out against them, the party will often retaliate against the initial instigator. This is paired with the fact that the monetary and judicial penalties if found guilty don’t make a dent in the possible earnings on trading on inside information [14]. The penalty for failing to report trades on time is a weak $200 slap on the wrist.

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[14] Part 2: The STOCK Act - A Failed Effort to Stop Insider Trading in Congress, CAMPAIGN LEGAL CTR. (Apr. 5, 2023), https://campaignlegal.org/update/part-2-stock-act-failed-effort-stop-insider-trading-congress

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Conflict of Personal Interest with Legal Action

            Lastly, any further legislation will be extremely difficult to come by because it would be acting against the legislator's interest by taking away the ability to trade equities while in office. Bipartisan bills such as the “No Corruption in Government Act” and the “TRUST in Congress Act” have been introduced in the past couple of years, not including some less notable ones, neither of which has built any traction [15][16].

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[15] H.R 358, 119th Cong. (2025).

[16] H.R. 345, 118th Cong. (2023).

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Conclusion         

Overall, the ability for legislators to be able to trade stock will most likely not be changing anytime soon, and the

ineffectiveness of the STOCK Act will allow these legislators to continue trading private information, which may allow them to sway policy into their pocket. Conflicts of politics, weak penalties, and poor law enforcement all play a large part in the failure that has been the STOCK Act of 2012.