Should Politicians Own Stocks?

Should Politicians Be Allowed to Own Stocks? Does Stock Ownership Represent a Conflict of Interest & How Can You Find Out What Stock Politicians Own?

Should politicians own stocks is a hot topic in the USA, with many arguing it should be illegal as it represents a conflict of interest. Currently, politicians can own stocks, and if they are caught trading on insider information, they are subject to a small fine under the STOCK Act.

Should Politicians Own Stocks?
Should Politicians Own Stocks?

Politicians’ stock ownership has become a hot issue in the United States. Many Americans became outraged at politicians’ stock trading because of revelations about US Speaker of the House Nancy Pelosi (D-California) and her husband.

The Speaker’s husband, Paul Pelosi, bought $2.9 million worth of Apple (AAPL), PayPal (PYPL), Disney (DIS), and American Express (AXP) in January 2022 Business Insider alleges. The Pelosis had a trading volume of $66.315 million worth of stocks on April 21, 2022, House Stock Watcher estimates.

Pelosi’s stock trading is so well-known investors established a TikTok community to follow her trades. There is even an exchange-traded fund called the Insider Portfolio that claims to mimic Pelosi’s stock trades, The New York Post reports.

Investors follow Paul Pelosi’s trades because they suspect the Speaker gives her husband inside information about federal contracts and laws. For example, knowledge of which companies are about to receive large federal contracts. Or new laws that could increase or lower companies’ value, such as environmental regulations.

Politicians’ Stock Holdings

The public is closely scrutinizing politicians’ stock holdings because politicians may have insider knowledge of government contracts or congressional decisions that might impact stock prices.

A key concern is that a politician’s stock ownership might influence political decision-making, which might not be in the best interest of US citizens.

Many members of Congress and their families own large amounts of stock. Some members of Congress and their spouses are also heavy stock traders.

The largest Congressional Stock Trader was US Senator Rick Scott (R-Florida). Scott’s Total Trade Volume was $156.866 million on April 21, 2022. The second-largest Congressional Stock Trader was US Senator Susan M.Collins (R-Maine). Collins’ Total Trade Volume was $81.627 million, Senate Stock Trader estimated on April 21, 2022.

The third-largest Congressional Stock Trader was US Senator John H. Hoeven III (R-North Dakota). Senate Stock Trader estimates Hoeven had a Total Trade Volume of $53.247 million on April 21, 2022. US Senator Mark. A. Warner (D-Virginia) had a Total Trade Volume of $32.761 million on April 21, 2022, Senate Stock Tracker estimates.

Another large Congressional stock trader was US Representative Greg Gianforte (R-Montana). House Stock Watcher estimates Gianforte had a stock trading volume of $25.380 million on April 21, 2022. Another heavy trader is US Senator Thomas R. Carper (D-Delaware). Senate Stock Trader estimates Carper’s trade volume at $12.379 million on April 21, 2022.

Politicians’ Stock Trades

At least 59 members of Congress violated the Stop Trading on Congressional Knowledge Act of 2012 (STOCK Act), Business Insider alleges. The STOCK Act makes it illegal for members of Congress to use insider knowledge for investment and speculation.

Congressional stock trading is now so controversial that legislation to ban it is under consideration. US Senators Jon Ossoff (D-Georgia) and Mark Kelly (D-Arizona) have proposed a law that requires members of Congress and their families to put all investments in a blind trust while they are in office.

Other proposals require members of Congress to sell all their stocks. There are also proposals to ban individual stock trading by members of Congress and their families and staff.

Some Congressional leaders, including US House Minority Leader Kevin McCarthy (R-California), claim they support legislation banning members of Congress from owning stocks while in office. A group of 27 representatives sent Pelosi and McCarthy a letter urging the two to support a Congressional stock ownership ban.

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Can Politicians Buy Stocks?

Under current US law, politicians can buy stocks, including elected federal officials, US Senators, Representatives, and the President. Politicians can buy and sell as much stock as they want as long they report their trades.

The Stop Trading on Congressional Knowledge Act of 2012 (STOCK Act) requires members of Congress to report their stock holdings. The STOCK Act also requires members of Congress to report stock trades of over $1,000 within 45 days.

Officials can fine Congress members who violate the STOCK Act. The standard penalty for violating the STOCK ACT is a $200 fine, Business Insider reports.

It is illegal for members of Congress to use insider information for stock trades under the Stock Act. Critics allege the Act is not enforced, and the penalties it mandates are too small to deter Congressional insider trading.

There is no law removing Congressional stock traders from office or preventing them from seeking reelection.  Similarly, there is no law barring the President or Vice President from owning and trading stocks.

How to See What Stocks Politicians are Buying

You see what stocks politicians are buying because all stock trades must be reported within 45 days of trading. The House Stock Watcher and Senate Stock Watcher websites provide information on politicians’ stock trades.

It can be difficult to find current information about politicians’ stocks because some websites have data for people who are no longer in office.

The House Stock Watcher website tracks STOCK Act disclosures of trades by members of the US House of Representatives and their spouses. Information on the website is not current because the STOCK Act gives politicians 45 days to report transactions.

The Senate Stock Watcher website tracks STOCK Act Disclosures of trades by US Senators and their spouses. Senate Stock Watcher information is not current because of the 45-day reporting requirement. Both House Stock Watcher and Senate Stock Watcher disclose individual stock trades by Senators and US Representatives.

News outlets such as Politico, The Wall Street Journal, Business Insider, The New York Times, and The Washington Post often run exposes on politicians’ finances. Such exposes are not always comprehensive, but they can provide valuable insights.

Investors need to examine politicians’ stock ownership because many politicians are major stock buyers.

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