New Ethics Bill Forces Congress to Divest Stocks and Securities Within 180 Days

The Preventing Elected Leaders from Owning Securities and Investments (PELOSI) Act is pretty straightforward: it bans Members of Congress and their spouses from trading individual stocks, security futures, commodities, and other complex financial products while the Member is in office. Essentially, if you’re making the laws, you can’t also be playing the market based on non-public info.

This isn't just about selling off a few shares. The ban covers a broad range of "covered financial instruments," including derivatives, options, and warrants. However, the bill carves out some important exceptions, recognizing that people need to save for retirement. You can still hold diversified mutual funds, exchange-traded funds (ETFs), and U.S. Treasury bonds. Also, if a spouse earns income from their regular job—say, as a doctor or software engineer—that income source isn't covered by the ban. This is a significant move toward eliminating the appearance, and reality, of insider trading in the halls of power.

The 180-Day Deadline: Clean Up Your Portfolio

For current Members of Congress, the clock starts ticking the moment this bill becomes law. They and their spouses have 180 days to sell off any prohibited assets. If you’re elected after the law passes, you get 180 days from your first day in office to comply. Think of it as a mandatory, high-stakes financial spring cleaning. This deadline is the immediate, real-world impact for the 535 people (plus their spouses) currently holding office who might have significant portfolios.

What Happens If They Don't Comply?

This is where the bill gets teeth. If a Member or their spouse makes a prohibited trade, they must turn over any profit from that trade directly to the U.S. Treasury. But the penalties don't stop there. The House and Senate Ethics Committees are given the power to enforce these rules. If a Member is notified of a violation and still refuses to divest, they face a steep continuing civil penalty: 10 percent of the value of the non-divested asset, charged every 30 days until they comply. The ethics committees must also publicly post details about any fines, ensuring transparency.

Public Oversight and Accountability

To ensure this isn't just a law on paper, the bill builds in several layers of public accountability. First, Members must certify in writing annually that they are following the rules, and these certifications must be posted publicly online by the ethics committees. Second, two years after the law is enacted, the Government Accountability Office (GAO) is required to conduct a full audit of how well Members are complying and report the findings back to Congress. This mandated audit ensures that the enforcement mechanisms themselves are working as intended.

While the bill is clear about the ban, it grants the ethics committees significant discretion. They can issue rules defining what counts as a 'covered financial instrument' and, if a Member is trying in good faith to divest, the committee can grant “reasonable extensions” past the 180-day deadline. This flexibility is a double-edged sword: it allows for practical application in complex financial situations but also introduces a potential loophole if those extensions aren't managed carefully. Overall, this legislation aims to remove a major conflict of interest, making it harder for lawmakers to profit personally from the laws they are writing, which is a win for public trust.