Business & Lobbying

Judiciary under microscope as Congress weighs stock trade ban

Greg Nash

Lawmakers are pushing for stronger stock trading rules for Supreme Court justices and federal judges as they weigh a stock trading ban for members of Congress.   

Advocates say that changes to the current system are long overdue, pointing to recent court cases where judges ruled in favor of companies that they owned stock in.  

Late last year, the House overwhelmingly passed a bill to subject the judiciary to the same stock trading reporting as lawmakers and executive branch officials.   

And last week, Speaker Nancy Pelosi (D-Calif.) indicated that any bill passed to regulate officials’ stock trading must include stricter transparency rules for Supreme Court justices.   

“It has to be governmentwide,” Pelosi told reporters. “The Supreme Court has no disclosure, it has no reporting of stock transactions. And yet it makes important decisions every day.”   

Supreme Court justices disclose their financial holdings annually, but they are not required to report their individual stock trades in real time, only including information about their financial transactions in a year-end report.   

While federal judges are required to disclose their stock trades, the information isn’t widely available to the public. Courts are slow about releasing stock trade disclosures, sometimes taking years to fulfill requests for a judge’s financial transactions.   

The issue caught lawmakers’ attention after a Wall Street Journal investigation found that more than 130 judges improperly failed to recuse themselves from at least 950 cases involving companies in which the judges or their family members owned stock. More often than not, judges ruled in favor of the company that they were invested in, according to the report.  

Courts rely on an automated screening process to ensure that judges aren’t assigned cases involving companies that they’re invested in, but both the conflict-screening software and the judges themselves missed conflicts of interest in hundreds of cases since 2010.  

“If I’m a litigant in federal court, there’s no way to know what potential conflicts my judge has,” said Gabe Roth, executive director of Fix the Court, a nonpartisan group that lobbies lawmakers to make the judiciary more accountable. “And if we know that judges oversaw 950 cases in which they had a financial conflict, clearly the system is broken.” 

Lawmakers have taken notice. In December, the House voted 422-4 in favor of the Courthouse Ethics and Transparency Act, which would require all federal judges and Supreme Court justices to report stock trades within 45 days, the same timeline abided by lawmakers. 

The law would require the Administrative Office of the U.S. Courts to launch an online database of judges’ finances within 180 days of its signing. The agency has privately warned senators that it would struggle to meet that time frame. The bipartisan bill is currently awaiting action from the Senate Homeland Security and Governmental Affairs Committee.  

Pelosi has directed House Administration Committee Chairwoman Zoe Lofgren (D-Calif.), a strong supporter of the House bill, to draft larger recommendations for an all-encompassing bill to overhaul stock trading rules.   

Democratic leaders, eager to capitalize on immense public approval for a stock trading ban, aim to pass a bill before the end of the year.   

Last week, Sen. Kirsten Gillibrand (D-N.Y.) and Rep. Katie Porter (D-Calif.) reintroduced a bill that would prohibit Supreme Court justices, members of Congress, top Federal Reserve officials and the president and vice president from trading individual stocks. It would also require “expeditious public disclosure” of stock trades by federal judges.   

“The American people deserve to have confidence that those in power are working in the public’s interest, not in their own self-interests,” Porter said in a statement.  

Three Supreme Court justices reported owning stock in individual companies last year. Chief Justice John Roberts held stock in Sirius XM and Thermo Fisher Scientific, while Justice Stephen Breyer was invested in Raytheon Technologies.   

Justice Samuel Alito, the most active trader on the high court, held stock in 10 companies, including Boeing, Johnson & Johnson and ConocoPhillips.   

Experts say that a stock trading ban or stricter disclosure rules shouldn’t single out Supreme Court justices, arguing that conflicts of interest appear to be more prevalent in lower courts that don’t receive nearly as much scrutiny.   

The Journal’s investigation, which utilized disclosure reports compiled by the nonprofit Free Law Project, found that in two-thirds of contested motions, judges sided with companies that they or their family were invested in.  

Last month, District Judge Liam O’Grady stepped away from a civil case involving Amazon after the Journal reported on his wife’s stock holdings in the e-commerce giant. He had previously ruled in favor of Amazon during multiple pretrial motions.  

“It’s critical that members of Congress in both parties start to think about the federal judiciary as needing the same types of accountability measures as members of the other branches,” Roth said. “There’s no reason not to do it now, while the attention is there.”  

Reform advocates are bracing for opposition from the judiciary itself. The Judicial Conference, which directs policymaking for federal courts, has often pushed back on lawmakers’ attempts to regulate the judicial branch, insisting that judges can police themselves.  

Roberts, the leader of the organization, acknowledged in a year-end report that judges failed to comply with ethics rules, but cast most instances of financial conflicts as unintentional oversights.   

Roberts wrote that Congress may want to provide more funds to update courts’ automated conflict-screening programs but said that the Judicial Conference is already implementing more rigorous training programs to promote a “culture of compliance,” a signal to lawmakers that the judiciary can handle its own problems.   

“The bottom line is that the Conference is taking the concerns seriously and has committed itself to the careful labor of addressing them,” he wrote. 

Tags Kirsten Gillibrand Nancy Pelosi Samuel Alito Stephen Breyer Zoe Lofgren

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