Why Our Federal MPs Need Stricter Rules on Trading Shares

The U.S. politicians have demonstrated exceptional trading skills, often outperforming the market and raising concerns about their loyalty and transparency. Australia's regulations for politicians are even less stringent, which diminishes public trust and democratic integrity.

In Australia, while federal ministers are prohibited from holding company shares, there are no restrictions on investments by their families, staff, or other MPs. This loophole allows insider trading based on privileged information.

Recently, a bipartisan group of U.S. senators proposed a ban on share trading by Congress members and their families, with severe penalties for violations. This proposal drives discussions about implementing a similar, more comprehensive ban in Australia.

Sean Johnson, founder of Open Politics, advocates for an Australian ban that would apply to all parliamentarians, their partners, dependent children, ministerial staff, and senior public officials. This ban would prevent them from owning shares or options in any company, directly or through self-managed super funds and trusts.

Currently, 67 MPs (30% of parliament) have declared shareholdings, with investments in mining, energy, financials, and telecommunications. For instance, Telstra (TLSYY:US) is widely held, and Lynas Rare Earths, a company recently supported by the federal government, is held by several government MPs.

Johnson notes that such holdings, even if they do not directly influence decisions, create a perception of conflict of interest that can erode public confidence.

In the U.S., the scrutiny of politicians' trades is common. Nancy Pelosi, the former House Speaker, is known for her impressive trading returns, including a 65% gain in 2023. Her $5 million investment in Nvidia before its 180% rise highlights the level of scrutiny.

The Capitol Trades website, which tracks U.S. congressional trades, has uncovered suspicious transactions, such as trades before the Silicon Valley Bank crisis. Australia lacks a similar tool, relying only on the Parliamentary Register of Interests, which provides limited information.

In Australia, Barnaby Joyce’s recent investments, including Bougainville Copper and Lynas shares, have drawn attention. Other notable trades include Keith Pitt’s investments in fossil fuel companies and Pauline Hanson’s in Bowen Coking Coal. Ged Kearney’s spouse, Leigh Hubbard, has diverse investments in lithium and rare earths, including companies that received significant government support.

While there is no direct evidence of insider trading in Australia, the existing system’s transparency issues are concerning. Family and staff transactions should face the same restrictions as those for MPs, and detailed transaction information should be publicly accessible.

If the U.S. moves to ban share trading by politicians, Australia should consider an even more comprehensive approach, extending bans to backbenchers, their families, and staffers to enhance transparency and public trust.