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On the Judiciary and Stocks, Ban, Baby, Ban (Or At Least Report)

FTC to work to ensure judges and justices are included in House Admin Committee’s stock proposal

Fix the Court is praising Speaker Nancy Pelosi’s comments today that any new legislation to restrict avenues of investing for members of Congress be “governmentwide” and include the federal judiciary, which, as she noted, “has no [contemporaneous] reporting of stock transactions and makes important decisions every day.”

“Supreme Court justices and lower court judges should not own individual stocks because they, like members of Congress and top executive branch officials, are public servants who should be expected to put the interests of the public before their own financial interests,” Fix the Court’s Gabe Roth said.

That’s not all. Each year Supreme Court justices review dozens of petitions — 33 last term; 19 so far this term — in which a company whose stock they own is a litigant, which requires recusal and leads to a diminished court and the potential for a time-wasting 4-4 deadlock.

Even worse, Fix the Court has found that the three justices who own stocks — Chief Justice Roberts and Justices Breyer and Alito — have each in recent years failed to recuse from petitions in which a company whose shares they own is a party. That violates federal law.

“Overlooking or ignoring stock-based conflicts erodes trust in the high court, much as similar activity in the lower courts — recall the Wall Street Journal’s 2021 investigation that found 131 judges illegally participated in 685 cases in which they had a financial stake — erodes faith in the entire branch,” Roth added.

FTC will be working with members of Congress in the coming weeks to ensure that, per Speaker Pelosi’s comments, judges and justices are included in the stock trading proposal being put together by the House Administration Committee.

Two options look to be on the table: first, banning judges and justices from owning and trading individual stocks, which we assume the Judicial Conference of the U.S. will vehemently oppose, since they oppose nearly every congressional regulation proposal; or second, incorporate the Courthouse Ethics and Transparency Act (CETA) into the TRUST in Congress Act/Ban Conflicted Trading Act.

CETA would add the third branch to the STOCK Act by requiring judges and justices to file transaction reports within 45 days of a stock purchase or sale — Congress and top executive branch officials do this now, but Article III is exempt — and would require the judiciary to post judges and justices’ annual financial disclosure reports online within 90 days of the reporting deadline. Congressional disclosures are typically posted within 30 days of the deadline.

The bill passed 422-4 in the House on Dec. 1 but has for reasons that defy logic stalled in the Senate.

Absent congressional action, FTC will advocate that the Code of Conduct for U.S. Judges be updated to require stock divestment — and that the SCOTUS Code of Conduct that Chief Justice Roberts is reportedly ruminating on include a similar provision.

Additional background:
Since FTC’s 2014 founding, the organization has tried various tactics (letters to the justices, op-eds, outreach to people who are in contact with them, etc.) to convince the stock-owning justices to sell their shares with moderate success: at the end of 2013, Roberts, Breyer and Alito owned shares in 79 companies combined; now they own shares in 41 companies.

A couple of federal judges have even told FTC over the years, albeit not on the record, they find it ridiculous that their colleagues on the bench buy and sell securities while they serve.

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