New Ethics Bill Forces Congress and Family to Dump Stock Holdings Within 180 Days

The “Restore Trust in Government Act” is exactly what it sounds like: a major attempt to clean up potential conflicts of interest among Washington’s top brass. This bill essentially bans senior federal officials—Members of Congress, the President, the Vice President, their spouses, and their dependent children—from owning or trading individual stocks, bonds, commodities, and futures.

The Great Divestment: Who Has to Sell What?

If you’re a “Covered Individual” under this law, you have to sell your individual investments, collectively called “Covered Investments.” If you’re already in office when the law passes, you get 180 days to sell everything off at fair market value. If you get elected or appointed later, you only get 90 days from your start date. This is a tight deadline, especially for those holding illiquid assets.

What’s off-limits is broad: pretty much any individual stock or derivative. But here’s the good news for retirement planners: the bill makes some crucial exceptions. You can still hold diversified mutual funds, U.S. Treasury bills, and state/municipal bonds. So, your 401(k) filled with broad index funds is safe. Also exempted? Interests in a family farm or ranch, a small business, or the LLC holding your personal home. This shows the bill is aimed squarely at preventing conflicts from specific market bets, not punishing officials for basic wealth management.

The Tax Break and the Big Stick

Recognizing that forcing someone to sell a profitable asset quickly can result in a huge capital gains tax bill, the law offers a special incentive: covered individuals can use the “certificate of divestiture” program (Section 1043 of the IRS code). This lets them defer capital gains taxes on the required sales. It’s a smart move that removes a major financial hurdle to compliance.

However, if you break the rules, the penalties are swift and painful. Any official caught violating the trading or ownership rules must pay a fee equal to 10 percent of the value of the investment involved. On top of that, they have to disgorge (give up) all profits from the illegal transaction, sending that money straight to the U.S. Treasury. And just in case anyone thought about getting clever, Members of Congress are explicitly banned from paying these fines with taxpayer-funded office budgets or campaign money. The ethics office must then publicly post the description and result of every fine assessed, adding transparency to the enforcement process.

The Family Exception and the Fine Print

One area that requires close attention is the family provisions. While spouses and dependents are generally restricted, the law includes an “Occupational Exception.” If the spouse or dependent child trades covered investments as part of their primary job—say, they work as a stockbroker or portfolio manager—they can continue doing so, provided the covered individual doesn't own the assets. This is a practical nod to two-income families, but it opens the door to potential complications and requires strict oversight to ensure the official isn't indirectly benefiting or influencing those trades.

Overall, this bill is a heavy-handed but direct approach to tackling the perception—and reality—of insider trading in D.C. It sets clear boundaries and backs them up with serious financial consequences and public disclosure, forcing officials to choose between public service and speculative investing.