New Ethics Bill Bans Senior Federal Employees from Trading Individual Stocks: Compliance Starts in 12 Months

The "Dismantling Investments in Violation of Ethical Standards through Trusts Act" (DIVEST Act) aims to tighten ethics rules for senior federal employees, their spouses, and dependent children by restricting their ability to own or trade certain financial assets. The core goal is to reduce potential conflicts of interest where officials might use insider information for personal financial gain. The bill comes into full effect 12 months after enactment.

Trading Blackout

This bill directly prohibits senior federal employees and their immediate families from holding, buying, or selling what it calls "covered financial instruments." Think individual stocks, bonds, commodities, and even things like futures contracts. Basically, if it's a direct investment that could be influenced by policy decisions, it's off-limits. For example, a senior official working on energy policy could no longer buy or sell stock in individual oil companies. However, the bill makes exceptions for diversified mutual funds, ETFs, U.S. Treasury securities, and any income a spouse or dependent child earns from their regular job. Existing holdings can be sold off within 180 days of the bill's enactment or the start of federal service, and assets placed in qualified blind trusts are also exempt (Section 2).

Show Your Work

The DIVEST Act isn't playing around with enforcement. If someone violates these rules, they'll have to hand over any profits to the U.S. Treasury. And if you thought about taking a tax deduction on losses from these now-prohibited trades? Forget it – the bill specifically blocks that (Section 2). Beyond losing profits, violators face fines: the greater of $1,000, or 10% of the highest value of the financial instrument while it was illegally held. So, if you held onto a stock worth $50,000 at its peak, you're potentially looking at a $5,000 fine, even if you later sold it for less. Each individual's supervising ethics office will handle these penalties, and they have to give written notice and a chance for a hearing before imposing a fine. All fines are public record, adding another layer of accountability. Employees have to certify, in writing, every year that they're following the rules, and those certifications get posted publicly (Section 2).

Oversight Overhaul

Within two years, the Government Accountability Office (GAO) is required to audit how well everyone is complying (Section 2). The Office of Government Ethics (OGE) gets a boost, too. They can hire up to 100 new employees to handle the increased workload of enforcing these rules, and the Office of Management and Budget is authorized to shift funds from other, potentially redundant, executive branch programs to the OGE for five years to cover these costs (Section 2). This signals a serious commitment to making these rules stick, but also raises a flag. Where those funds are pulled from will matter, and could indirectly impact other government services. While the bill is designed to increase transparency and accountability, it could also make it harder for some federal employees to manage their personal finances. The restrictions on investments could be seen as a downside to public service, potentially making it harder to attract or retain top talent, especially those with significant financial expertise.