Dismantling Investments in Violation of Ethical Standards through Trusts Act

Subjects: Government Operations and Politics, Accounting and auditing, Civil actions and liability, Family relationships, Federal officials, Financial services and investments, Government employee pay, benefits, personnel management, Government ethics and transparency, public corruption, Government information and archives, Income tax deductions, Securities

Summary:  <p><strong>Dismantling Investments in Violation of Ethical Standards through Trusts Act</strong></p> <p>This bill prohibits a senior federal employee, his or her spouse, or dependent children from holding, purchasing, or selling certain financial instruments during the employee's term of service.</p> <p>Any profit made in violation of the prohibition must be disgorged to the Treasury and may subject the individual to a civil fine. The bill also requires the submission of an annual certification of compliance and requires the Government Accountability Office to conduct a compliance audit.</p> <p> A loss from a transaction or holding involving a covered financial instrument that is conducted in violation of this bill may not be deducted from the amount of income tax owed by the applicable senior federal employee, spouse, or dependent child.</p> <p>A senior federal employee who holds or conducts a transaction involving a covered financial instrument in violation of this bill may be subject to a civil fine assessed by the supervising ethics office.</p>

<html><body><pre>[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 310 Introduced in House (IH)]

&lt;DOC&gt;






118th CONGRESS
  1st Session
                                H. R. 310

    To amend title 5, United States Code, to prohibit transactions 
 involving certain financial instruments by senior Federal employees, 
     their spouses, or dependent children, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            January 12, 2023

    Mr. Cloud (for himself and Mr. Golden of Maine) introduced the 
 following bill; which was referred to the Committee on Oversight and 
Accountability, and in addition to the Committee on Ways and Means, 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 amend title 5, United States Code, to prohibit transactions 
 involving certain financial instruments by senior Federal employees, 
     their spouses, or dependent children, and for other purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Dismantling Investments in Violation 
of Ethical Standards through Trusts Act''.

SEC. 2. PROHIBITING TRANSACTIONS AND OWNERSHIP OF CERTAIN FINANCIAL 
              INSTRUMENTS BY SENIOR FEDERAL EMPLOYEES, THEIR SPOUSES, 
              OR DEPENDENT CHILDREN.

    (a) In General.--Chapter 13 of title 5, United States Code, is 
amended by adding after subchapter III the following:

     ``SUBCHAPTER IV--RESTRICTIONS REGARDING FINANCIAL INSTRUMENTS

``Sec. 13151. Definitions
    ``In this subchapter:
            ``(1) Covered financial instrument.--
                    ``(A) In general.--The term `covered financial 
                instrument' means--
                            ``(i) any investment in--
                                    ``(I) a security (as defined in 
                                section 3(a) of Securities Exchange Act 
                                of 1934 (15 U.S.C. 78c(a)));
                                    ``(II) a security future (as 
                                defined in that section); or
                                    ``(III) a commodity (as defined in 
                                section 1a of the Commodity Exchange 
                                Act (7 U.S.C. 1a)); and
                            ``(ii) any economic interest comparable to 
                        an interest described in clause (i) that is 
                        acquired through synthetic means, such as the 
                        use of a derivative, including an option, 
                        warrant, or other similar means.
                    ``(B) Exclusions.--The term `covered financial 
                instrument' does not include--
                            ``(i) a diversified mutual fund;
                            ``(ii) a diversified exchange-traded fund;
                            ``(iii) a United States Treasury bill, 
                        note, or bond; or
                            ``(iv) compensation from the primary 
                        occupation of a spouse or dependent child of a 
                        senior Federal employee.
            ``(2) Qualified blind trust.--The term `qualified blind 
        trust' has the meaning given the term in section 13104.
            ``(3) Senior federal employee.--The term `senior Federal 
        employee' means any individual occupying a Senior Executive 
        Service position (as that term is defined in section 3132).
            ``(4) Supervising ethics office.--The term `supervising 
        ethics office' has the meaning given the term in section 13101.
``Sec. 13152. Prohibition on certain transactions and holdings 
              involving covered financial instruments
    ``(a) Prohibition.--Except as provided in subsection (b), a senior 
Federal employee, their spouse, or their dependent children may not, 
during the term of service of the employee, hold, purchase, or sell any 
covered financial instrument.
    ``(b) Exceptions.--The prohibition under subsection (a) does not 
apply to--
            ``(1) a sale by a senior Federal employee, their spouse, or 
        their dependent child that is completed by the date that is--
                    ``(A) for an employee serving on the date of 
                enactment of this title, 180 days after that date of 
                enactment; and
                    ``(B) for any employee who commences service as an 
                employee after the date of enactment of this title, 180 
                days after the first date of the initial term of 
                service;
            ``(2) a covered financial instrument held in a qualified 
        blind trust operated on behalf of, or for the benefit of, a 
        senior Federal employee, their spouse, or their dependent 
        child; or
            ``(3) a covered financial instrument exempted from coverage 
        under section 208 of title 18 pursuant to section 2640.202 of 
        title 5, Code of Federal Regulations (or any successor 
        regulation).
    ``(c) Application of Certificate of Divestiture Program.--For 
purposes of section 1043 of the Internal Revenue Code of 1986--
            ``(1) this section shall be treated as a Federal conflict 
        of interest statute; and
            ``(2) any person required to dispose of any property by 
        reason of this section shall be treated as an eligible person.
    ``(d) Penalties.--
            ``(1) Disgorgement.--A senior Federal employee, their 
        spouse, or their dependent child shall disgorge to the general 
        fund of the Treasury any profit from a transaction or holding 
        involving a covered financial instrument that is conducted in 
        violation of this section.
            ``(2) Income tax.--A loss from a transaction or holding 
        involving a covered financial instrument that is conducted in 
        violation of this section may not be deducted from the amount 
        of income tax owed by the applicable senior Federal employee, 
        their spouse, or their dependent child.
            ``(3) Fines.--A senior Federal employee who holds or 
        conducts a transaction involving a covered financial instrument 
        in violation of this section may be subject to a civil fine 
        assessed by the supervising ethics office under section 13153.
``Sec. 13153. Certification of compliance
    ``(a) In General.--Not less frequently than annually, each senior 
Federal employee shall submit to the supervising ethics office a 
written certification that the employee, their spouse, or their 
dependent child has achieved compliance with the requirements of this 
title.
    ``(b) Publication.--The supervising ethics office shall publish 
each certification submitted under subsection (a) on a publicly 
available website.
``Sec. 13154. Authority of supervising ethics office
    ``(a) In General.--The supervising ethics office may implement and 
enforce the requirements of this subchapter, including by--
            ``(1) issuing--
                    ``(A) for applicable senior Federal employees--
                            ``(i) rules governing that implementation; 
                        and
                            ``(ii) 1 or more reasonable extensions to 
                        achieve compliance with this subchapter, if the 
                        supervising ethics office determines that an 
                        employee is making a good faith effort to 
                        divest any covered financial instruments; and
                    ``(B) guidance relating to covered financial 
                instruments;
            ``(2) publishing on the internet certifications submitted 
        by senior Federal employees under section 13153(a); and
            ``(3) assessing civil fines against any senior Federal 
        employee who is in violation of this subchapter, subject to 
        subsection (b).
    ``(b) Requirements for Civil Fines.--
            ``(1) Amount.--A fine imposed under this section against a 
        senior Federal employee shall be equal to the greater of--
                    ``(A) $1,000, or
                    ``(B) an amount equal to 10 percent of the greatest 
                dollar value of the applicable covered financial 
                instrument during any period that such instrument was 
                held by the applicable senior Federal employee or their 
                spouse or dependent child (as the case may be).
            ``(2) In general.--Before imposing a fine pursuant to this 
        section, the supervising ethics office shall provide to the 
        applicable senior Federal employee--
                    ``(A) a written notice describing each covered 
                financial instrument transaction for which a fine will 
                be assessed; and
                    ``(B) an opportunity, with respect to each such 
                covered financial instrument transaction--
                            ``(i) for a hearing; and
                            ``(ii) to achieve compliance with the 
                        requirements of this subchapter.
            ``(3) Publication.--The supervising ethics office shall 
        publish on a publicly available website a description of--
                    ``(A) each fine assessed pursuant to this section;
                    ``(B) the reasons why each such fine was assessed; 
                and
                    ``(C) the result of each assessment, including any 
                hearing under paragraph (2)(B)(i) relating to the 
                assessment.
            ``(4) Appeal.--A senior Federal employee may appeal to the 
        supervising ethics office a fine assessed under this section 
        during the 30-day period beginning on the date the fine is so 
        assessed.
``Sec. 13155. Audit by Government Accountability Office
    ``Not later than 2 years after the date of enactment of this 
subchapter, the Comptroller General of the United States shall--
            ``(1) conduct an audit of the compliance by senior Federal 
        employees with the requirements of this subchapter; and
            ``(2) submit to each supervising ethics office a report 
        describing the results of the audit conducted under paragraph 
        (1).''.
    (b) Application.--The amendments made by subsection (a) shall apply 
to individuals described in section 13152(a) of title 5, United States 
Code, (as added by subsection (a)) beginning on the date that is 12 
months following the date of enactment of this Act.
    (c) Additional Employees.--Section 13121(c)(1) of title 5, United 
States Code, is amended by inserting ``up to 100'' after ``appoint''.
    (d) Funding.--The Director of the Office of Management and Budget 
may transfer such funds as the Director considers appropriate, to be 
derived from unobligated amounts available for executive branch 
programs identified by the Director to be duplicative, to the Office of 
Government Ethics for the purpose of carrying out this Act, to remain 
available until the date that is 5 years following the date of the 
enactment of this Act.
                                 &lt;all&gt;
</pre></body></html>