Bill Would Prohibit Some Federal Employees From Owning Stocks

Recently introduced legislation would prohibit some federal employees and their spouses from owning individual stocks while working for the government.

Recently introduced legislation would prohibit some federal employees and their spouses from owning individual stocks.

The Dismantling Investments in Violation of Ethical Standards through Trusts (DIVEST) Act (H.R. 8754) was introduced by Congressmen Michael Cloud (R-TX) and Jared Golden (D-ME).

It would prohibit federal employees in the Senior Executive Service (SES), their spouses, and dependent children from holding or trading individual stocks while working in the Executive Branch. It is important to note, however, that this prohibition would not apply to mutual funds, exchange traded funds (ETFs) and U.S. Treasury bonds.

As currently written, the legislation proposes potentially levying fines against federal employees who are found in violation if the bill were to become law. It says that fines would be either $1,000 or 10% of the largest value of the stock holdings in the time period that they were held while in violation, whichever is greater.

The Congressmen said that the purpose of the legislation is about raising standards for public servants.

“A great disservice is done to our nation when public servants are able to profit off access to sensitive information while working on behalf of the American people,” Cloud said. “We must do all we can to ensure government officials are serving Americans, not their own stock portfolio. I’m delighted to work with Congressman Golden in leading the DIVEST Act to raise the standard of service and accountability from our executive branch.”

Golden added, “No matter what party is in power, we should have no doubt that our government officials are working for the American people, not trying to make a quick buck for themselves. I’m glad to work with Congressman Cloud to lead the bipartisan DIVEST Act, which would explicitly ban the president, vice president, and other senior federal officials from trading stocks while in office. While we continue to push for a ban on Members of Congress trading stocks, we also need legislation like the DIVEST Act to address the potential for corruption in the executive branch.”

The Congressmen noted in a press release about the bill that several bills have been introduced in Congress that would limit the ability of Members of Congress as well as their spouses and dependents to actively buy and sell stocks, primarily by placing certain financial assets in a blind trust.

However, they also pointed out that it is not just lawmakers in Congress who have access to sensitive information influencing stock trades and creating conflicts of interest in policy making. As such, they said that scrutiny must be applied to high level officials and employees in the Executive Branch as well, such as federal employees under SES, since access to this information “could lead to a conflict of interest in crafting industry rules and regulations, or an unfair advantage in stock performance.”

An article in the Daily Caller noted that some social media users have begun tracking stock trades among Members of Congress in an effort to outperform the broader stock market. According to the article, 35 lawmakers in Congress have outperformed the SPDR S&P 500 ETF Trust, an index fund that tracks the 500 most valuable stocks in the world, according to a chart that was distributed on social media.

About the Author

Ian Smith is one of the co-founders of He has over 20 years of combined experience in media and government services, having worked at two government contracting firms and an online news and web development company prior to his current role at FedSmith.