Senate File 557 - Introduced SENATE FILE 557 BY WAHLS , ZIMMER , BLAKE , TOWNSEND , TRONE GARRIOTT , and WEINER A BILL FOR An Act relating to transactions involving covered financial 1 instruments by members of the general assembly, legislative 2 staff, and their immediate family, based on nonpublic 3 information, and providing penalties. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 2310XS (9) 91 th/jh

S.F. 557 Section 1. NEW SECTION . 68B.40 Definitions. 1 For purposes of this subchapter: 2 1. a. “Covered financial instrument” means any of the 3 following: 4 (1) An investment in a security or security future as each 5 is defined in section 3(a) of the federal Securities Exchange 6 Act of 1934. 7 (2) A commodity as defined in section 1a of the federal 8 Commodity Exchange Act. 9 (3) Any economic interest comparable to an instrument 10 described in subparagraph (1) or (2) acquired through synthetic 11 means, such as the use of a derivate, including an option, 12 warrant, or other similar means. 13 b. “Covered financial instrument” does not mean any of the 14 following: 15 (1) A diversified mutual fund. 16 (2) A diversified exchange-traded fund. 17 (3) A United States treasury bill, note, or bond. 18 2. “Ethics committee” means the senate ethics committee or 19 house ethics committee, as applicable. 20 3. “Immediate family” means a spouse or child. 21 Sec. 2. NEW SECTION . 68B.41 Transactions involving covered 22 financial instruments prohibited —— exception. 23 1. A member of the general assembly, a legislative staff 24 person, and the immediate family of either shall not directly 25 or indirectly buy, sell, or otherwise engage in a transaction 26 involving a covered financial instrument if the transaction 27 is based on information derived from the member’s position or 28 official duties, that has not been made publicly available, and 29 that could reasonably be expected to affect the market value of 30 the covered financial instrument. 31 2. A transaction involving a covered financial instrument 32 held by a member of the general assembly, a legislative staff 33 person, or the immediate family of either does not violate 34 subsection 1 if the person can demonstrate the transaction was 35 -1- LSB 2310XS (9) 91 th/jh 1/ 4

S.F. 557 based solely on publicly available information and that no 1 conflict of interest exists. 2 Sec. 3. NEW SECTION . 68B.42 Reporting requirements —— 3 transactions involving covered financial instruments. 4 1. A member of the general assembly shall report any 5 transaction involving a covered financial instrument made by 6 the member or the member’s immediate family to the board within 7 thirty days after the transaction is completed. 8 2. The report shall be in writing, and may be submitted 9 electronically. 10 3. The report must include all of the following: 11 a. The date of the transaction. 12 b. The type of covered financial instrument involved. 13 c. The number and value of covered financial instruments 14 involved in the transaction. 15 d. The name of the entity that facilitated the transaction. 16 e. A description of any relevant legislative matters, 17 government policies, or actions that may have been the basis 18 for the transaction. 19 Sec. 4. NEW SECTION . 68B.43 Public disclosure of 20 transactions. 21 The board shall post reports filed under section 68B.42 on 22 the board’s internet site. The reports shall be available to 23 the public and accessible without undue burden. The board’s 24 internet site must present filed reports in a searchable 25 format. 26 Sec. 5. NEW SECTION . 68B.44 Enforcement and oversight. 27 1. The board shall investigate alleged violations and 28 may refer cases of suspected violations to other appropriate 29 authorities for further investigation and action. 30 2. The board shall submit an annual report to the general 31 assembly including information regarding the effectiveness 32 of this subchapter, the number of transactions reported, 33 any penalties imposed, and any recommendations for further 34 legislative action. 35 -2- LSB 2310XS (9) 91 th/jh 2/ 4

S.F. 557 Sec. 6. NEW SECTION . 68B.45 Penalties. 1 1. A violation of this subchapter is a class “C” felony. 2 2. A member of the general assembly, a legislative staff 3 person, and the immediate family of either, as applicable, 4 shall disgorge to the department of revenue any profit from a 5 transaction or holding involving a covered financial instrument 6 that violates this subchapter for deposit in the general fund. 7 3. A loss from a transaction or holding involving a covered 8 financial instrument that violates this subchapter shall not 9 be deducted from the amount of income tax the member of the 10 general assembly, a legislative staff person, or the immediate 11 family of either owes to this state. 12 4. If a member of the general assembly, a legislative staff 13 person, or the immediate family of either holds or conducts a 14 transaction that violates this subchapter, the ethics committee 15 may hold a hearing and the member or legislative staff person 16 may be subject to additional punishment under the applicable 17 code of ethics. 18 5. A penalty imposed under this section does not prohibit 19 a federal authority from imposing additional penalties, if 20 applicable. 21 Sec. 7. Section 422.7, Code 2025, is amended by adding the 22 following new subsection: 23 NEW SUBSECTION . 45. Add, to the extent excluded, the 24 ordinary or capital loss realized by the taxpayer in a 25 transaction that violates section 68B.41, subsection 1. 26 Sec. 8. CODE EDITOR DIRECTIVE. The Code editor shall 27 designate sections 68B.40 through 68B.45, as enacted in this 28 Act, as a new subchapter in chapter 68B. 29 EXPLANATION 30 The inclusion of this explanation does not constitute agreement with 31 the explanation’s substance by the members of the general assembly. 32 This bill relates to trading transactions involving covered 33 financial instruments by members of the general assembly, 34 legislative staff persons, and the immediate family of either 35 -3- LSB 2310XS (9) 91 th/jh 3/ 4

S.F. 557 based on nonpublic information. 1 The bill prohibits a member of the general assembly, a 2 legislative staff person, and the immediate family of either 3 from directly or indirectly buying, selling, or otherwise 4 engaging in a transaction involving a covered financial 5 instrument if the transaction is based on information derived 6 from the member’s position or official duties, that has not 7 been made publicly available, and that could reasonably be 8 expected to affect the market value of the covered financial 9 instrument, subject to limited exceptions. 10 Current law requires members of, and candidates for, 11 the general assembly to file personal financial disclosure 12 statements with the member’s chamber. The bill requires 13 members of the general assembly to report transactions 14 involving covered financial instruments to the Iowa ethics and 15 campaign disclosure board (board). The board must disclose the 16 reports to the public on the board’s internet site. 17 The board is required to investigate alleged violations of 18 the bill and may refer cases of suspected violations to other 19 appropriate authorities for further investigation and action. 20 The board must submit an annual report to the general assembly 21 including information regarding the effectiveness of the bill, 22 the number of transactions reported, any penalties imposed, and 23 any recommendations for further legislative action. 24 A violation of the bill is a class “C” felony. A class 25 “C” felony is punishable by confinement for no more than 10 26 years and a fine of at least $1,370 but not more than $13,660. 27 In addition, a person who violates the bill is subject to 28 financial penalties, including disgorgement of any profits 29 resulting from a prohibited transaction, tax liability relating 30 to prohibited transactions, and a member or legislative staff 31 person may face disciplinary action by the applicable ethics 32 committee. The bill does not prohibit a federal authority from 33 imposing additional penalties, if applicable. 34 -4- LSB 2310XS (9) 91 th/jh 4/ 4