A former federal ethics official warns it would authorize “fake blind trusts in every branch of government.”

By Donald Shaw, Sludge

Democratic House leaders have unveiled the text of their bill to ban congressional stock trading. While the bill appears strong on many levels—it would force divestiture and it would apply not only to members of Congress but also their spouses and dependent children, among others—it contains language that could potentially open up a major new loophole.

Pelosi looks down at the ground

Under the bill, which they are calling the Combatting Financial Conflicts of Interest in Government Act, members of Congress, senior legislative branch employees and other covered individuals would be barred from owning or trading any securities, futures, cryptocurrencies, or other covered assets. In order to comply with the law, they would have 180 days after the law is signed, or after joining Congress, to divest of these banned assets or place them in a blind trust.

The bill appears to mostly rely on the definition of “qualified blind trust” that has been in U.S. law since Congress passed the Ethics in Government Act of 1978. That law established the requirement for members of Congress to file financial disclosures, and it exempted assets held in blind trusts from needing to be disclosed. To qualify, blind trusts have to meet several conditions: the trustee and all of their employees must meet several criteria to be considered sufficiently independent, assets in the trust must not have restrictions with respect to their transfer or sale, the trustee must have sole control of the assets, and more.

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