Halting Ownership and Non-Ethical Stock Transactions (HONEST) Act
- Bill Number
- S. 1498
- Origin Chamber
- Senate
- Congress
- 119th Congress, Session 1
- Policy Area
- Congress
- Status
- Introduced
- Latest Action
- 2025-12-10: Placed on Senate Legislative Calendar under General Orders. Calendar No. 294.
- Last Updated
- 2026-04-29T11:03:32Z
AI-Generated Summary
Purpose of the Legislation
The Halting Ownership and Non-Ethical Stock Transactions (HONEST) Act aims to prevent conflicts of interest and potential insider trading by prohibiting Members of Congress, the President, the Vice President (referred to as "covered persons"), and their spouses and dependent children from owning, buying, or selling certain financial investments during their service. It promotes ethical standards in government by requiring divestment of such assets and enhancing transparency through better reporting and public access to financial disclosures.
Key Provisions
- Definitions:
- "Covered investment" includes stocks (securities), commodities, futures, digital assets (like cryptocurrencies), and similar economic interests acquired directly or indirectly (e.g., through trusts or derivatives). Exclusions apply to diversified mutual funds or exchange-traded funds (broadly spread investments not focused on one industry or country), U.S. Treasury securities, spousal compensation from primary jobs, government retirement plans, tax-free municipal bonds, small business interests (if no conflict), certain corporate bonds held before enactment, and specific Alaska Native settlement stocks.
- "Covered person" includes Members of Congress, the President, and the Vice President.
- "Dependent child" means a child under 19 who qualifies as a dependent under tax law.
- Other terms like "qualified blind trust" (a trust where the owner has no knowledge or control of assets to avoid conflicts) and "illiquid investment" (hard-to-sell private fund interests) are defined for compliance purposes.
- Ban on Trading:
- Effective immediately upon enactment: Covered persons cannot purchase any covered investment.
- 90 days after enactment: Covered persons cannot sell covered investments (except as allowed for divestment).
- Spouses and dependent children face the same restrictions starting from the covered person's term start date.
- Jointly owned investments count as the covered person's assets.
- No new acquisitions allowed during service, except inheritances (which must be divested within 120 days, with possible extensions up to 150 days total).
- Divestment Requirements:
- Existing covered persons (in office before enactment) must divest all covered investments (including those of spouses and dependents) by the start of their next term, with extensions possible for good-faith efforts or illiquid assets (up to 90 additional days after sellable).
- New covered persons must divest within 90 days of starting service.
- Qualified blind trusts must sell covered investments and dissolve within 180 days of the effective date (with 90-day extensions for complex cases); covered persons can direct timing but not specifics.
- Exception: Dependent children can hold up to $10,000 in covered investments via a legal guardian.
- Family trusts are exempt only if the covered person has no control or contribution.
- Enforcement and Penalties:
- Supervising ethics offices (Senate Ethics Committee, House Ethics Committee, or equivalent for executive branch) oversee compliance, issue rules, grant extensions, and impose civil penalties.
- Penalties for noncompliance: After notice and 30 days to comply, fines equal to the greater of the covered person's monthly salary or 10% of the undivested investment's value, assessed every 30 days until fixed.
- Annual certifications of compliance required; all notices, extensions, penalties, and trust dissolutions published online.
- 90-day "cooling-off" period after leaving office before regaining control of covered investments.
- Government Accountability Office audit required within 2 years (though this was in the original bill; the amended version focuses on ethics offices).
- Tax Treatment:
- Amends the Internal Revenue Code to allow covered persons to defer capital gains taxes on divestitures by reinvesting in approved diversified funds, similar to rules for other federal employees.
- Reporting and Transparency:
- Adds $500 fines for failing to file STOCK Act transaction reports (effective March 31, 2027).
- Requires electronic filing and online public access to financial disclosures for Congress and candidates, searchable by name, asset, transaction type, etc., with API access and accessibility standards (effective 18 months after enactment).
- Covered persons must report any federal payments (e.g., grants, loans) received by themselves, spouses, dependents, or their businesses within 30-45 days.
- Other:
- Applies a 90-day grace period for sales upon enactment.
- Includes severability clause: If any part is ruled unconstitutional, the rest remains in effect.
- Makes technical updates to ethics laws, the Lobbying Disclosure Act, and the Securities Exchange Act.
Significant Changes to Existing Law
- Expands Scope: Builds on the Ethics in Government Act (chapter 131 of title 5, U.S. Code) and STOCK Act (2012 law requiring financial disclosures) by adding a new subchapter banning specific investments for covered persons and families, unlike prior laws that only required disclosures without outright prohibitions.
- Includes Executive Branch: Original introduced version (PELOSI Act) applied only to Congress; amended version extends to President and Vice President.
- Stricter Divestment and Penalties: Introduces mandatory timelines for divestment (e.g., 90-180 days), dissolution of blind trusts, and escalating fines tied to asset value or salary—stronger than existing disclosure-based rules.
- Enhanced Transparency: Mandates searchable online databases and fines for reporting delays, improving on STOCK Act's electronic filing requirements.
- Tax Code Amendment: Broadens tax deferral benefits under Section 1043 for divestitures to include covered persons reinvesting in mutual or exchange-traded funds.
- Conforming Edits: Removes outdated references in ethics and lobbying laws to align with new definitions.
Potential Impacts
- On Government Agencies: Ethics offices gain enforcement powers (e.g., fines, audits, rule-making), increasing workload and requiring new procedures within 1 year. The executive branch may need guidance for the President and Vice President.
- On Citizens: Boosts public trust by reducing perceived insider trading risks; easier online access to disclosures could aid watchdog groups and voters in monitoring officials. No direct impact on average citizens' investments.
- On International Relations: Minimal direct effect, though it could enhance U.S. credibility on anti-corruption globally by demonstrating internal reforms.
- Broader Economy: May influence stock markets if high-profile divestitures occur, but exclusions for diversified funds limit widespread selling pressure.
Main Stakeholders Affected
- Covered Persons and Families: Members of Congress (535 individuals), the President, Vice President, their spouses, and dependent children—must divest potentially valuable assets, facing penalties for noncompliance.
- Ethics Oversight Bodies: Senate and House Ethics Committees (and executive equivalents) responsible for implementation, enforcement, and public reporting.
- Public and Watchdogs: Gain better access to financial data for transparency and accountability.
- Financial Institutions: Trustees of blind trusts and investment advisors affected by divestment mandates and tax rules.
- Federal Government: Treasury receives disgorged profits/fines; IRS handles tax deferrals.
Notable Legal, Constitutional, or Political Implications
- Legal: Strengthens anti-corruption framework under the STOCK Act but relies on self-certification and ethics committees for enforcement, potentially leading to disputes over "covered investment" definitions (e.g., what qualifies as a digital asset). Civil penalties are administrative, not criminal, reducing due process burdens.
- Constitutional: Could face challenges under the Fifth Amendment (property takedings without compensation), as it forces divestment of private assets; however, tax deferrals and exceptions mitigate this, and the severability clause protects the law's core. No First Amendment issues apparent, as it targets conduct, not speech.
- Political: Bipartisan sponsors (original introducers included Republicans and Democrats) signal broad support for ethics reform, potentially increasing public confidence in elected officials amid scandals. May deter stock trading by politicians but could complicate recruitment for office due to asset restrictions; politically neutral in text, focusing on equity across branches.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (5)
Sen. Moreno, Bernie [R-OH], Sen. Ossoff, Jon [D-GA], Sen. Peters, Gary C. [D-MI], Sen. Merkley, Jeff [D-OR], Sen. Cortez Masto, Catherine [D-NV]
Recent Actions
- 2025-12-10: Placed on Senate Legislative Calendar under General Orders. Calendar No. 294.
- 2025-12-10: Committee on Homeland Security and Governmental Affairs. Reported by Senator Paul with an amendment in the nature of a substitute. Without written report.
- 2025-12-10: Committee on Homeland Security and Governmental Affairs. Reported by Senator Paul with an amendment in the nature of a substitute. Without written report.
- 2025-07-30: Committee on Homeland Security and Governmental Affairs. Ordered to be reported with an amendment in the nature of a substitute favorably.
- 2025-04-28: Read twice and referred to the Committee on Homeland Security and Governmental Affairs.
- 2025-04-28: Introduced in Senate
Bill Versions
- Preventing Elected Leaders from Owning Securities and Investments (PELOSI) Act — issued 2025-04-28 — PDF (10 pages)
- Halting Ownership and Non-Ethical Stock Transactions (HONEST) Act — issued 2025-12-10 — PDF (40 pages)