Momentum is growing to restrict stock trading by members of Congress and their spouses, as retail traders have been tracking politician trades and their performance.
On Wednesday, Senators Jon Ossoff (D-GA) and Mark Kelly (D-AZ) introduced a bill, barring members of Congress and their immediate families from trading while in office. On the same day, Senator Sen. Josh Hawley (R-MO) announced he is introducing a similar measure.
"It's awesome to see Republicans and Democrats on both sides starting to to push laws and make this more fair for everyday people," Christopher Josephs, cofounder of Iris, a social investing app which allow users to track portfolios of friends, influencers and professionals.
Currently, stock trades made by lawmakers or spouses are required to be disclosed within 45 days of execution. The compliance is widely criticized as a recent investigation by Insider found 54 members of Congress have failed to properly report their trades.
"A lot of them don't file those trades within the 45 days, and the fine for that is only a $200 fine," said Josephs. "$200 for these people is chump change ... it's ludicrous, it hypocritical."
The new bill, called the Ban Congressional Stock Trading Act, would require all members of Congress, their spouses and children to put certain investments into a blind trust. Penalties would amount to the Congress member's salary.
Poll: Should members of Congress and their spouses be allowed to actively trade stocks?
— Yahoo Finance (@YahooFinance) January 13, 2022
House Speaker Nancy Pelosi garners most of the attention among retail traders. Although Pelosi herself doesn't trade stocks, her husband does. That's enough for some retail traders, who see his trades as hers.
"In 2020 she started making some solid bets, and then some of the laws following those bets. It started with Tesla (TSLA) and then started moving to Apple (AAPL) and big tech, NVDIA (NVDA) recently with some government contracts," said Josephs.
"[We] retail investors, we thought, if this is happening in front of us, there literally cannot be a reason why we cannot only track these things, but also buy them when she buys them," said Josephs.
An earlier statement from Pelosi's office emphasizes that the congresswoman does not own any stocks:
"As you can see from the required disclosures, with which the Speaker fully cooperates, these transactions are marked “SP” for Spouse. The Speaker has no prior knowledge or subsequent involvement in any transactions."
UnusualWhales.com, an options focused service for retail traders, lists the names of politicians which beat the S&P 500 last year. A Nancy Pelosi ETF tracks her husband's picks, with stock performance since 2020, showing a 44% increase.
Proposed similar legislation in the past has been met with “little fanfare,” the founder of Unusualwhales.com told Yahoo Finance.
“What does seem materially different this time around is that due to public demand, outrage, and data (not only from me!), it truly seems like a bipartisan issue. That makes me optimistic," he added.
In response to Senator Ossoff's bill, the Speaker's chief of staff Drew Hammill told Yahoo Finance, "The Speaker believes that sunlight is the best disinfectant and has asked Committee on House Administration Chair Zoe Lofgren to examine the issue of Members’ unacceptable noncompliance with the reporting requirements in the STOCK Act, including the possibility of stiffening penalties."
Whether legislation ultimately gets passed, is anyone's guess. In the meantime, retailer traders appear to be increasingly inclined to keep following trades made by members of Congress.
"We're a lot better than people think," said Josephs. "We've been called dumb money forever. I think the times are changing and we're excited to see what the future holds for retail."
Ines is a markets reporter covering stocks from the floor of the New York Stock Exchange. Follow her on Twitter at @ines_ferre