No Shorting America Act
- Bill Number
- H.R. 4036
- Origin Chamber
- House
- Congress
- 119th Congress, Session 1
- Policy Area
- Congress
- Status
- Introduced
- Latest Action
- 2025-06-17: Referred to the House Committee on House Administration.
- Last Updated
- 2025-07-22T12:22:51Z
AI-Generated Summary
Purpose
The "No Shorting America Act" (H.R. 4036) aims to prevent conflicts of interest in Congress by prohibiting Members of Congress, their spouses, and dependents from engaging in short selling—a financial strategy where an investor borrows and sells a security expecting its price to drop, then buys it back cheaper to profit. The goal is to ensure that congressional actions do not appear influenced by personal financial gains from betting against the economy or companies.
Key Provisions
- Definitions:
- Covered financial instrument: Includes securities (like stocks), security futures, commodities, or similar interests obtained through derivatives (financial contracts deriving value from underlying assets, such as options or warrants).
- Covered individual: A Member of Congress, their spouse, or dependent (a person financially supported by the Member, as defined in existing ethics rules).
- Short sale: Selling a borrowed security with the intent to buy it back later at a lower price, as defined by federal regulations.
- Supervising ethics office: The entity overseeing congressional ethics, such as the House or Senate Ethics Committee.
- Prohibition on Short Selling (Section 13152):
- Covered individuals cannot conduct short sales of any covered financial instrument issued by a business entity listed on a national stock exchange (e.g., NYSE or NASDAQ).
- Losses from illegal short sales cannot be deducted from the individual's income taxes.
- Compliance Requirements (Section 13152(c)):
- Members of Congress must submit a pledge of compliance to the supervising ethics office and provide requested documents to prove adherence.
- Compliant Members receive a certificate from the ethics office, which is published on a public website for transparency.
- Enforcement (Section 13153):
- The supervising ethics office refers suspected willful violations to the Attorney General (the top federal law enforcement official).
- The Attorney General can file a civil lawsuit in federal court against violators, imposing penalties up to $50,000.
- Penalties cannot be paid using official congressional funds (like office budgets) or political campaign funds.
Significant Changes to Existing Law
This bill amends Chapter 131 of Title 5, United States Code (which covers ethics in government), by adding a new Subchapter IV specifically banning short selling for covered individuals. Previously, ethics rules required financial disclosures and restricted some insider trading, but they did not explicitly prohibit short sales. This introduces a targeted ban, new compliance pledges and public certificates, tax disallowances for violations, and civil enforcement mechanisms not previously detailed for this activity.
Potential Impacts
- On Government Agencies: Supervising ethics offices gain new responsibilities for verifying compliance, issuing certificates, and referring cases, potentially increasing their workload. The Attorney General's office may handle more civil enforcement actions related to congressional ethics.
- On Citizens: Enhances public trust in Congress by reducing opportunities for perceived self-dealing, where lawmakers might profit from legislation harming companies or the economy. Public access to compliance certificates promotes transparency without directly affecting everyday citizens' finances.
- On International Relations: No direct impacts, as the bill focuses on domestic financial ethics for U.S. lawmakers.
Main Stakeholders Affected
- Members of Congress and Their Families: Directly restricted from short selling, which could limit their investment strategies but aligns with public service ethics.
- Supervising Ethics Offices: Responsible for oversight, compliance verification, and public reporting.
- Attorney General and Federal Courts: Involved in investigating and penalizing violations.
- The Public and Taxpayers: Benefit from increased accountability and transparency in government, potentially reducing perceptions of corruption.
Notable Legal, Constitutional, or Political Implications
- Legal Implications: Establishes clear, enforceable rules with civil penalties, integrating with existing ethics frameworks (e.g., STOCK Act disclosures). The tax disallowance adds a financial deterrent, while barring official funds for penalties prevents misuse of public resources.
- Constitutional Implications: Aligns with Congress's authority to regulate its members' ethics under Article I (powers of Congress), but could raise questions about restrictions on property rights or free speech if challenged as overly broad. It appears constitutional as a reasonable ethics measure, similar to bans on other conflicts of interest.
- Political Implications: Addresses public concerns about congressional stock trading amid economic events, potentially boosting bipartisan support for ethics reforms. However, it may face debate over enforcement feasibility or unintended limits on legitimate investments, without altering broader securities laws.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (1)
Recent Actions
- 2025-06-17: Referred to the House Committee on House Administration.
- 2025-06-17: Introduced in House
- 2025-06-17: Introduced in House
Bill Versions
- No Shorting America Act — issued 2025-06-17 — PDF (5 pages)