Just a decade ago, lawmakers in Congress had few restrictions when it came to trading stocks while they were in office — they could even technically use insider information.

Then-President Barack Obama signed the Stop Trading on Congressional Knowledge Act in 2012 to finally add some limits by banning lawmakers and their aides from trading based on information obtained in private briefings. It also required public disclosure of trades within 45 days.

But a parade of recent headlines on lawmakers who have made profitable trades after closed-door meetings shows just how porous the system is.

Those headlines may actually spur Congress to pass a new law with more teeth than the STOCK Act.

“I think we have a very good, real chance of getting [new] legislation passed,” Craig Holman told Yahoo Finance Live this week. He is Public Citizen’s Capitol Hill lobbyist on ethics, lobbying, and campaign finance rules who was closely involved in passage of the original STOCK Act.

“We're ready to go a step further — the STOCK Act was good but it isn't enough,” Holman says of the prospects for reform in Congress.

'A stock-picking legend'

Scrutiny over lawmakers' trading ramped up in 2020. That year, high-profile lawmakers Sens. Kelly Loeffler (R-GA) and Richard Burr (R-NC) sat in a closed door briefing on the emerging threat of COVID-19 and then allegedly used that information to sell stocks before the wider public knew of the virus' dangers and the market tumbled, as The New York Times reported.

Loeffler lost her seat to a Democrat, Rev. Raphael Warnock. Burr, one of three no votes on the original STOCK Act, remains in the Senate after the Justice Department ended its inquiry into his trades without charges.

More recently, an investigation by Insider found 54 members of Congress have violated the transparency provisions in the STOCK Act by failing to properly report their trades.

The transgressions have gotten so brazen that popular sites now track lawmaker trades for tips. Social stock market app Iris says House Speaker Nancy Pelosi "has quickly become a stock picking legend,” though it's actually her husband who is the one trading stocks.

Before Congress, three flavors of reform

The most aggressive idea to combat the problem, reportedly set to be unveiled this week, comes from Sen. Jon Ossoff (D-GA), who wants to bar members of Congress and their immediate families from any trading while in office. A related idea comes from Representative Abigail Spanberger who wants to require all members of Congress — as well as their spouses and dependent children — to put certain investment assets into a qualified blind trust while they're in office.

A slightly less aggressive approach comes from Sen. Jeff Merkley (D-OR) and Rep. Raja Krishnamoorthi (D-IL), who are heading up a bill called the Ban Conflicted Trading Act, which would bar members of Congress and senior staff from trading. Their immediate families could still trade.

Meanwhile, Senator Kirsten Gillibrand (D-NY) is pushing a bill dubbed STOCK Act 2.0, which doesn’t ban trading but strengthens transparency provisions. One provision would require officials to disclose any time they or a family member receive a benefit of value from the federal government like, say, an SBA loan for their business.

In another Yahoo Finance appearance Monday, Senator Jon Tester (D-MT) offered his support and hopes that some version would pass.

“I don't know that people need to get rid of all their stocks when they get in public office,” he said. “But they certainly shouldn't be trading them once they get in public office so what you came in with is what you're going out with.”

But he added “we need to do more” and promised to consider all three options.

Another development this week is that, according to Punchbowl News, House Minority Leader Kevin McCarthy is considering an outright ban on lawmakers holding and trading stocks if Republicans take control of the lower chamber later this year.

One roadblock for this year could be House Speaker Nancy Pelosi. She has spoken out about barring individual stock trades and reports show her husband is a regular trader.

"We are a free-market economy,” she said during a press conference in December, adding that lawmakers “should be able to participate in that."

For his part, Holman says he was disappointed by Pelosi's remarks. “I'm hoping she will change her tune as we go along because, quite frankly," he added, "this legislation just to ban stock trading activity, it's going to happen, with or without her.”

Ben Werschkul is a writer and producer for Yahoo Finance in Washington, DC.

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