US ban on stock trading act bill proposal of 2025

Kuwait Times

18-06-2025

US ban on stock trading act bill proposal of 2025
By Abdullah Alkayat
Insider trading is still an everyday issue in the United States, the first country in the world to define what constitutes inside information and make it illegal in 1934, after Congress enacted the Securities Exchange Act of 1934 following what is known as the 'Great Crash' of 1929, during which the stock market lost 89 percent of its value. Since that day, insider trading has been taken seriously by the public, and the SEC has pursued full enforcement.
However, practice has shown that there are some loopholes—particularly for elected members of the US Congress—who have access to inside information due to their roles. There have been insider trading investigations in which some Congress members were found to have violated the Securities Exchange Act of 1934 by trading based on non-public information while in office, making profits or avoiding losses prior to any public announcements, at which point it is too late for the general public to participate and benefit.
To make the rules more strict for congressional trading and combat insider trading, President Obama signed the 'Stop Trading on Congressional Knowledge (STOCK) Act of 2012' into law. This law prohibited members of Congress from trading on non-public information obtained during their work and required public disclosure of their stock trades within 45 days. The law also applies to the spouses of Congress members. Nevertheless, the law seemed like a paper tiger—it has not prevented insider trading from occurring. In fact, the 2020 congressional insider trading scandal showed that such practices were still happening.
The 2020 congressional insider trading scandal erupted after several US Senators were accused of selling large amounts of stock following a private Senate briefing about the emerging COVID-19 pandemic, weeks before the public fully grasped its severity. Among those scrutinized was Senator Burr, then-chair of the Senate Intelligence Committee, who drew particular attention after reports revealed he sold between $600,000 and $1.7 million in stocks shortly after the briefing. Critics argued that these lawmakers may have used non-public information for personal financial gain while downplaying the threat of the virus publicly.
Although the Department of Justice and the Securities and Exchange Commission launched investigations, most were eventually closed without charges. Nevertheless, the scandal fueled public outrage, intensified scrutiny of the STOCK Act of 2012, and revived calls for stronger laws to prevent elected officials from trading individual stocks while in office. To make insider trading laws more strict, the Ban Congressional Stock Trading Act of 2025 bill is being introduced in the US Congress to address growing public concern over lawmakers
using non-public information for personal financial gain. Although the STOCK Act of 2012 requires members of Congress to disclose trades within 45 days and prohibits insider trading, it has proven inadequate due to weak enforcement and delayed or incomplete disclosures. The new bill seeks to close these loopholes by completely prohibiting members of Congress, their spouses, and dependent children from owning or trading individual stocks while in office. Instead, they must divest or place assets into blind trusts, removing the temptation to act on confidential information.
This reform is seen as essential to restoring public trust, enhancing transparency, and preventing conflicts of interest that undermine democratic accountability. With recent scandals and reports showing that some lawmakers' portfolios have outperformed the market, public demand for stronger ethical standards has intensified. The bill aims to eliminate both real and perceived corruption, simplify compliance and enforcement, and ensure that legislators focus solely on serving the public—not enriching themselves.
In Kuwait, the likelihood of introducing a bill similar to the US Ban Congressional Stock Trading Act is relatively low, primarily due to the unique characteristics of the Kuwaiti political and financial landscape. Kuwait has a much smaller and less complex capital market compared to the United States, and the number of elected officials in the National Assembly is limited to just 50 members—significantly fewer than the hundreds of legislators in the US Congress. This smaller scale reduces the systemic risk and public concern associated with insider trading by lawmakers.
Moreover, the overlap between legislative activity and private market influence is less pronounced in Kuwait, where political influence often centers around public-sector employment and budgetary matters rather than corporate regulation or securities. While ethical oversight and financial transparency remain important, the perceived urgency for legislation banning stock trading by elected officials has not gained the same traction, in part because the infrastructure and market depth necessary to facilitate such trading at a concerning scale are simply not present.
More importantly, under Kuwaiti law, the definition of an insider as presented in the glossary of the Capital Markets Authority (CMA) and codified in the CMA Law encompasses any person in a position that grants them access to material, non-public information concerning a listed company. This broad definition clearly includes members of the National Assembly of Kuwait. Therefore, if a member of Parliament exploits insider information in violation of the CMA Law, they are subject to immediate prosecution by the Capital Markets Authority.