IE 11 is not supported. For an optimal experience visit our site on another browser.

The hottest new issue on the campaign trail: Lawmakers' stock trades

As momentum builds around legislation that would prevent members of Congress from trading individual stocks, the debate is dogging incumbents in competitive districts.
Image: Tom Malinowski
Rep. Tom Malinowski, a New Jersey Democrat in a tight House race, has come out for bipartisan legislation that would prohibit members of Congress from owning individual stocks. Here, he attends a House Foreign Affairs Committee hearing in Washington, D.C., on Sept. 16, 2020.Stefani Reynolds / Pool via Getty Images file

In a fight for his political life in one of 2022's most competitive House races, Rep. Tom Malinowski, a New Jersey Democrat, has come out strongly against lawmakers trading individual stocks, urging swift bipartisan action to ban the practice

It's a position that Malinowski, under fire from his opponent and national Republican groups seeking to unseat him over his more than $3 million in stock trades since early 2020 that were not properly disclosed, says he regrets not taking action sooner.

"I wish I'd come to this conclusion the day I was sworn in," Malinowski said in an interview with NBC News. 

There's no suggestion that he acted on inside information, and Malinowski says the trades were made by a broker without his involvement. Still, roughly $1 million of the transactions were in medical and tech companies with a stake in the pandemic response, as The Associated Press reported last year.  

Malinowski has now said that he has put his holdings in a blind trust and is pushing for legislation that would force others to do the same.

"We should take every possible step to eliminate the perception that those decisions are being made with our own financial interests in mind," he said.

Malinowski is not the only candidate in a competitive race taking heat over his stock trading and and lack of disclosure. As bipartisan pressure mounts in Washington to pass legislation that would prevent members and their spouses from trading or holding individual stocks, the debate has followed a number of lawmakers back home on the campaign trail.

The issue first caught on in early 2020 after it was revealed that some members of Congress had made trades early in the pandemic before the broader public knew the full scale of the upheaval in store. In the two Senate runoff races in Georgia early last year, former Republican Sens. David Perdue and Kelly Loeffler were skewered by their opponents over their pandemic-related trading.

Sen. Jon Ossoff, the Democrat who who beat Perdue in the Georgia race, has led an effort to prevent congressional stock trading, partnering with Sen. Mark Kelly, an Arizona Democrat, who faces a difficult re-election race this fall.

In a sign of how popular the issue is, Republicans are now trying to take credit for elevating it. Matt Gorman, a GOP strategist, said his party "grabbed the issue right out from under their noses" after Speaker Nancy Pelosi, a California Democrat, initially resisted the idea in December.

The campaign arm of House Republicans — the National Republican Congressional Committee — has targeted a half dozen vulnerable House Democrats, including Malinowski and Democratic Rep. Sean Patrick Maloney of New York and chair of the Democratic Congressional Campaign Committee, over trades and lack of timely disclosure. (Maloney said this week he believes there is "merit to a bunch" of the proposals to slap new rules on members' stock trading.)

The Congressional Leadership Fund, a GOP-leadership aligned PAC, has taken aim at others, such as Reps. Cindy Axne, an Iowa Democrat, and Elaine Luria, a Virginia Democrat, over trades and disclosure issues. 

Some competitive races also feature members who are now at the forefront of the debate in Congress, either pushing for reforms or advocating against a ban.

"We saw the stock trading attacks have a devastating effect against people like Kelly Loeffler and David Perdue," a national GOP strategist working on House campaigns told NBC News. "And there's no reason that those attacks can't translate into attacking Democratic candidates as well. It's a very toxic issue with independent voters. Republicans and Democrats view the stock trades as very corrupt."

Polls show strong support for banning lawmakers from stock trading. A Morning Consult/Politico poll last month showed that 63 percent of voters believe members should be banned from trading. A survey from the progressive polling firm Data for Progress found that 67 percent of voters agree with the bans.

Malinowski agreed the Georgia races were "a key factor" in elevating this issue both in Congress and on the campaign trail.

"The result of that has been a lot of media scrutiny into members who are invested in the stock market," he said. "We have disclosure requirements. But they're incredibly complicated. Virtually everybody trips up, which has also led to greater suspicion and scrutiny."

Disclosures are mandated by the Stop Trading on Congressional Knowledge Act, known as the STOCK Act. But a typical violation amounts to a fine of only a few hundred dollars, and some lawmakers have expressed a desire to revise the law, enhancing penalties and clarifying requirements. Last year, Insider identified 55 congressional lawmakers, including members of both parties, who failed to properly report their stock transactions.

"So I came to the conclusion, through my own experience, that the only real solution to this is the simple one — prohibiting members from being actively involved in the stock market," Malinowski said.

Tom Kean Jr., a Republican challenging Malinowski, called him "a poster boy for why reform is necessary in the House of Representatives," adding the congressman's "investment strategy included betting on individual American companies to fail over the course of the last two years."

Kean has himself been criticized by Democrats for his own stock trades, which included selling at least $175,000 in Johnson & Johnson stock in 2020, reported. The company is one of the makers of a coronavirus vaccine.

"If my opposition makes an issue of this, I think they'll be inviting a lot of scrutiny of themselves," Malinowski said.

In an interview with NBC News, Kean said he too would put his assets in a blind trust, adding he would support the Trust in Congress Act and Ban Conflicted Trading Act — bipartisan pieces of legislation that Malinowski has co-sponsored. 

On the opposite coast, Christy Smith, a Democrat locked in another competitive race with Republican Rep. Mike Garcia of California, has taken aim at the congressman for not disclosing some of his 2020 stock trades until after his narrow re-election — well after he was mandated to report them — tweeting that he "jumped right into the deep end of the swamp." A Smith spokesperson told NBC News she supports banning lawmakers from trading. The Garcia campaign did not respond to requests for comment.

In Iowa, the issue has taken center stage in GOP efforts to unseat Axne, who has drawn scrutiny for trades she failed to properly report — which drew a complaint from the Campaign Legal Center, a government watchdog group. The trades, her office has said, were done by a broker without her involvement. They involved her family's retirement accounts and an investment account set up for her kids' college savings.   

In a statement to NBC News, Axne said she is "strongly in favor of tougher and clearer guardrails for public officials."

"I have never personally executed or directed stock trades while in Congress, and I believe there should be a ban on public officials directing trades on individual stocks," she said in a statement. "I am having conversations with my colleagues to explore how we can institute that prohibition without creating the unintended consequence of forcing the liquidation of retirement or college savings accounts that aren't actively managed in order to be a member of Congress."

Iowa state Sen. Zach Nunn, a Republican seeking to unseat Axne, has criticized her for the transactions and disclosure issues.

"There's bipartisan frustration on this that both Republicans and Democrats at the federal level have done this on more than one occasion, and now they're getting caught," he told NBC News. "People are demanding some accountability."

The issue is also playing out in primaries, where many candidates are embracing reform as a populist signal to voters. In the Pennsylvania Democratic Senate primary, Lt. Gov. John Fetterman last month championed a ban on congressional lawmakers, spouses and senior staffers holding or trading individual stocks, calling it "a clear conflict of interest." His rival, Democratic Rep. Conor Lamb, quickly chimed in to note that he was already co-sponsoring the Ban Conflicted Trading Act.

But the details point to a split between the two Pennsylvania rivals. The Lamb-backed bill would not extend the ban to spouses. Fetterman's campaign said he supports a separate bill proposed by Ossoff and Kelly that would cover spouses.

Other lawmakers, including some vulnerable House members, see no need for the changes — and some are outright rooting against them. Luria told Punchbowl this week that the potential reforms were "bulls---." And Republican Sen. Tommy Tuberville of Alabama told the Independent this week that the changes proposed are "ridiculous."

"You can't do anything," Tuberville, who has made more than 100 transactions since September and is one of the biggest violators of the STOCK Act's disclosure requirements, added. "I think it would really cut back on the amount of people that would want to come up here and serve, I really do."

The growing scrutiny has prompted some lawmakers to get rid of their individual stocks.

"The few that I have — stocks — I just sold," said Democratic Rep. Bill Pascrell of New Jersey.