In Light of Wall Street Journal-Free Law Project Report Detailing Hundreds of Stock-Related Errors, FTC Calls on Congress to Pass a STOCK Act for the Judiciary

Fix the Court is calling on lawmakers to pass a STOCK Act for the judiciary following the release of a Wall Street Journal report documenting hundreds of overlooked investment-based recusals from 131 federal judges.

Enacted in 2012, the Act requires members of Congress and top executive branch officials to report, within 45 days of a securities transaction, which stock they’ve bought or sold and, within a range, the amount of the transaction (either the cost of the security or how much they made selling it). These “periodic transaction reports” are posted on a House, Senate or executive branch website.

“This investigation should send a shudder through anyone who finds him or herself before a federal judge right now,” Fix the Court’s Gabe Roth said. “If we can’t trust our judges to be impartial, we’re in a bad place as a nation of laws.”

Roth added: “Though the Administrative Office of the U.S. Courts said it’d ‘carefully review[…] the matter,’ in light of the reporting that’s not enough. That some judges are contrite when confronted with their missed recusals does not undo the harm or give the public confidence going forward. Greater transparency around judicial stock transactions is needed, and we’ll only get that when Congress passes a law to make it so.”

Until today, no publicly available disclosure database existed for federal judges or justices. Currently, jurists’ financial disclosure reports, which include stock transaction data, are filed once per year, yet are typically released by the AO on a several-year delay. The most recently available non-SCOTUS bulk third branch disclosures are from 2018.

Free Law Project has compiled judges’ disclosures from 2011 to 2018 and gave the Journal exclusive access to them, which today are being released to the public in database form.

Judges are required to recuse from a case if they, their spouse or their minor children own a single share of stock in a litigant — whether they manage their investments themselves or have a money manager; whether the shares are part of a retirement account or are more liquid.

Judges are also required, per 28 U.S.C. §455(c), to “know about [their] personal and fiduciary financial interests,” a provision that’s been interpreted to mean that blind trusts are verboten for the third branch. The Journal’s investigation, then, makes a strong argument that federal judges should not own any individual shares of stock, though currently, according to the story, about two-thirds of lower court judges do. FTC believes it’s more likely that a judiciary STOCK Act passes versus some 800 judges selling their shares in individual companies, though from an ethics perspective either outcome would be a marked improvement.

Three of the nine Supreme Court justices — Roberts, Breyer and Alito — own individual stock, and the trio regularly, and as recently as this past January, miss stock-based recusals, as documented by Fix the Court.

One bill introduced in this Congress, Sen. John Kennedy’s Supreme Court Transparency Act (S. 956), would require the justices to file periodic transaction reports. FTC was pleased with its introduction but did not endorse it since it only included nine of the roughly 1,370 active and senior federal judges who should be included in the STOCK Act. FTC hopes the Journal‘s report compels that inclusion in a future version.

When asked last year by FTC why judges and justices weren’t included in the Act’s reporting rubric, a former Sen. Lieberman staffer who worked on the bill told us on background, “I wasn’t thinking of it. And nobody with whom I was working raised it. It sounds stupid now, but we weren’t focused on judges.”

FTC has previously called on the judiciary to post judges’ annual financial disclosures online within 90 days of a reporting deadline and to double the size of its Financial Disclosure Office in order to ensure quicker turnaround on disclosure requests from the press and public.