SUMMARY

Financial Ethics in Government Act of 2011- Limits real and apparent conflicts between the financial interests of members of
Congress and the exercise of their legislative powers, and provides options for addressing potential conflicts. The Act
strengthens House Ethics Rules aimed at preventing the sale, purchase or trade of stocks, bonds or commodities futures based on
nonpublic information concerning pending legislation or actions, and creates new safeguards against the use of such nonpublic
information for private profit.

(1) Amends Public Law 87-849 (18 U.S.C. 208), which restricts members of the executive branch from making decisions based
on financial interests, to include members and employees of the Legislative Branch. Members of Congress and staff who believe
that a hearing, vote proceeding, application, request for a ruling or other determination, or other particular matter may constitute
a financial conflict of interest, shall notify the Committee on Standards of Official Conduct or the Select Committee on Ethics of
the nature and circumstances. Such members of Congress or staff may receive a written finding from the Committee on
Standards of Official Conduct or the Select Committee on Ethics indicating that such a financial interest is too small as to
constitute a conflict of interests.

(2) Amends the Rules of the House of Representatives in order to oblige all members of Congress and staff to place their
portfolio of stocks and bonds in either a qualified blind trust (as defined in section 102 of the Ethics in Government Act of 1978)
or a publicly traded mutual fund before taking office or beginning work. Incumbent members of Congress and continuing
employees shall comply with the provisions of this act between November 7th 2012, the date this Act shall take effect, and the
start of the 113th Congress.

Amends section 501 of the Ethics in Government Act of 1978 in order to require all members of Congress and staff to place such
assets in a qualified blind trust or publicly traded mutual fund by classifying the ownership of such assets as ‘outside earned
income,’ and forbids members of Congress and staff from acquiring such assets during their tenure. If a member of Congress or
staff member acquires such assets through actions or events beyond their control, such as through inheritance, they will be
required to dispose of such assets either through sale or through placement in either a qualified blind trust or a publicly traded
mutual fund.

(3) Amends the Securities Exchange Act of 1934 to preclude members of Congress or staff from using nonpublic information
obtained through their official functions for the purpose of investing in securities or entering into a securities-based swap
agreement. Individuals are also restricted from using such information obtained from a member of Congress or staff member for
investment purposes.

Amends the Commodities Exchange Act of 1936 to prohibit members of Congress or staff from engaging in commodities
futures trading if such decisions are based on nonpublic information obtained by reason of such person being a member or
employee of the United States Congress. Individuals are also restricted from using such information obtained ex parte for the
purposes of sale, purchase or trade of stocks, bonds or commodities futures.

Amends the Rules of the House of Representatives to restrict the dissemination of nonpublic information by members of
Congress or staff if such person has reason to believe that the information would be used in connection with the sale or purchase
of securities or in the sale or purchase of a commodity for future delivery.
Financial Ethics in Government Act of 2011 (Introduced in House)
HR ****

112th CONGRESS
1st Session

H. R. ****

To limit real and apparent conflicts between the financial interests of members of Congress and the exercise of their legislative
powers.

IN THE HOUSE OF REPRESENTATIVES

January 3, 2011
Ms. SAUJANI will introduce the following bill; which will be referred to the Committee on Standards of Official Conduct, and
in addition to the Committees on Financial Services, House Administration, the Judiciary, and Agriculture, for a period to be
subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the
committee concerned.

A BILL

To limit real and apparent conflicts between the financial interests of members of Congress and the exercise of their legislative
powers.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SEC. 1. SHORT TITLE.

This Act may be cited as the ‘Financial Ethics in Government Act’.

SEC. 2. FINDINGS AND PURPOSE.

(a) FINDINGS— THE CONGRESS FINDS—

(1) Real and apparent conflicts arise between the financial interests of members of Congress and the exercise
of their legislative powers.

(2) Such financial conflicts of interest impede the ability of members of Congress to effectively execute their
constitutional responsibilities.

(b) PURPOSE— IT IS THE PURPOSE OF THE ACT TO—

(1) Prevent members of Congress exercising their constitutional powers in a matter in which they have a
financial interest.

(2) Require members of Congress to place their securities' investments in a qualified blind trust or in publicly
traded mutual funds.

(3) Eliminate trading on material nonpublic information relating to any pending or prospective legislative
action.

SEC. 3. Acts Affecting a Financial Interest.

(a) Subsection (a) of section 208 of Public Law 87-849 is amended--

(1) by inserting ‘or a member or employee of the legislative branch of the United States Government’ after ‘an officer
or employee of the executive branch of the United States Government’; and

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 (2) by inserting ‘a committee hearing, a legislative vote’ after ‘the rendering of advice’.

(b) Subsection (b) of section 208 of Public Law 87-849 is amended by adding at the end the following new paragraphs:

‘(5) if the member or employee of Congress first advises the Committee on Standards of Official Conduct or
the Select Committee on Ethics of the nature and circumstances of the hearing, vote, proceeding, application,
request for a ruling or other determination, or other particular matter and makes full disclosure of the financial
interest and receives in advance a written determination made by the Committee on Standards of Official
Conduct or the Select Committee on Ethics that the interest is not so substantial as to be deemed likely to
affect the integrity of Congress; or

‘(6) if, by general guidance issued by the Committee on Standards of Official Conduct or by the Select
Committee on Ethics, applicable to all or a portion of the members or employees of Congress covered by this
section, the financial interest has been exempted from the requirements of subsection (a) as being too remote
or too inconsequential to affect the integrity of Congress to which the general guidance applies.’

SEC. 4. Qualified Blind Trusts or Publicly Traded Mutual Funds.

(a) Rule XXIII (known as the ‘Code of Official Conduct’) of the Rules of the House of Representatives is amended by
redesignating clause 18 as clause 19 and by inserting after clause 17 the following new clause:

‘18. A Member, Delegate, Resident Commissioner, officer, or employee of the House shall, before taking the
oath of office and until they leave office, place all of his or her personal investments of stocks and bonds into
publicly traded mutual funds or into a qualified blind trust as defined in section 102 of the Ethics in
Government Act of 1978, subject to the following rules:

‘(a) during a Member’s, Delegate’s, Resident Commissioner’s, officer’s, or employee of the House’s
term of office or employment, he or she may not voluntarily acquire any personal investment in a
stock or bond except in the form of publicly traded mutual funds;

‘(b) if a Member, Delegate, Resident Commissioner, officer, or employee of the House acquires a
financial interest in the stock or bond of a business entity during their term of office or employment
due to events or actions beyond their control, they shall immediately sell the financial interest or place
the financial interest in a publicly traded mutual fund; and

‘(c) if a Member, Delegate, Resident Commissioner, officer, or employee of the House is appointed to
their position, or if they are elected to their position by special election, then they shall have 60 days
from the date of such appointment or special election to place all of his or her personal investments of
stocks and bonds into a publicly traded mutual fund or qualified blind trust.’

(b) Section 501(a) of the Ethics in Government Act of 1978 (5 App. U.S.C. 501(a)) is amended by adding at the end the
following new paragraph:

‘(3) A Member, Delegate, Resident Commissioner, officer, or employee of Congress shall, before taking the
oath of office and until they leave office, place all of his or her personal investments of stocks and bonds into a
publicly traded mutual fund or a qualified blind trust as defined in section 102 of the Ethics in Government Act
of 1978, subject to the following rules:

‘(1) During a Member’s, Delegate’s, Resident Commissioner’s, officer’s, or employee of Congress’s

term of office or employment, he or she may not voluntarily acquire any personal investment in a
stock or bond except in the form of publicly traded mutual funds; and

‘(2) if a Member, Delegate, Resident Commissioner, officer, or employee of Congress acquires a

financial interest in the stock or bond of a business entity during their term of office or employment
due to events or actions beyond their control, they shall immediately sell the financial interest or place
the financial interest in a publicly traded mutual fund.’

(c) Section 102(f)(3)(C) of the Ethics in Government Act of 1978 (5 App. U.S.C. 102(f)(3)(C)) is amended--

(1) in subsection (iii)--

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 (i) by striking ‘when the holdings of any particular asset transferred to the trust by any interested
party are disposed of’; and

(2) in subsection (vi)--

(i) by striking subsection (III).

SEC. 5. Use of Material Nonpublic Legislative Information for Security or Commodity

Trading.
(a) Section 10 of the Securities Exchange Act of 1934 (15 U.S.C. 78j) is amended by adding at the end the following
new paragraph:

‘(c) To use or employ, in connection with the purchase or sale of any security registered on a national
securities exchange or any security not so registered, or any securities-based swap agreement (as defined in
section 206B of the Gramm-Leach-Bliley Act), any material nonpublic information, as defined by the
Commission, relating to any pending or prospective legislative action relating to such issuer if--

‘(1) such information was obtained by reason of such person being a Member, Delegate, Resident
Commissioner, officer, or employee of Congress; or

‘(2) such information was obtained from a Member, Delegate, Resident Commissioner, officer, or
employee of Congress, and such person knows that the information was so obtained.’

(b) Section 6c(a) of the Commodities Exchange Act (7 U.S.C. 6c(a)) is amended by adding at the end the following new
paragraph:

‘(3) It shall be unlawful for a Member, Delegate, Resident Commissioner, officer, or employee of Congress to
enter into, or confirm the execution of a transaction described in paragraph (2) involving the purchase or sale
of any commodity for future delivery (or any option on such a transaction or option on a commodity) if such
person is in possession of material nonpublic information, as defined by the Commission, relating to any
pending or prospective legislation action relating to such commodity if--

‘(A) such information was obtained by reason of such person being a Member, Delegate, Resident
Commissioner, officer, or employee of Congress; or

‘(B) such information was obtained from a Member, Delegate, Resident Commissioner, officer, or
employee of Congress, and such person knows that the information was so obtained.’

(c) Rule XXIII (known as the ‘Code of Official Conduct’) of the Rules of the House of Representatives is amended by
redesignating clause 18 as clause 19 and by inserting after clause 17 the following new clause:

‘18. A Member, Delegate, Resident Commissioner, officer, or employee of the House shall not--

‘(a) disclose material nonpublic information relating to any pending or prospective legislative action
relating to a company registered on a national securities exchange if that Member, Delegate, Resident
Commissioner, officer, or employee of the House has reason to believe that such information will be
used in connection with the purchase or sale of registered securities of such company; or

‘(b) disclose material nonpublic information relating to any pending or prospective legislative action
relating to any commodity if that Member, Delegate, Resident Commissioner, officer, or employee of
the House has reason to believe that such information will be used in connection with the purchase or
sale for future delivery of such commodity.’

SEC. 6. Date to Take Effect.

(a) This Act and the amendments made by this Act shall take effect on November 7, 2012.


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