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Investors Could Track Congressional Stock Trades by Party With 2 New ETFs

By Dinah Wisenberg Brin

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While congressional leaders appear in no hurry to advance legislation to curb stock trading by lawmakers, two proposed exchange-traded funds would allow investors to pick the same securities as Republicans and Democrats in Congress.

Investment firm Subversive Capital and anti-corruption data platform Unusual Whales in September filed the new ETFs —  the Unusual Whales Subversive Democratic Trading ETF (NANC) and Unusual Whales Subversive Republican Trading ETF (KRUZ) — with the Securities and Exchange Commission.

Each ETF will carry a 1% management fee, according to the prospectus, filed on Sept. 15.

“The ETFs follow trading of Democratic and Republican members, and their family,” Unusual Whales noted on its website, explaining that the firm is a data provider for and partner with Subversive Capital, which is in charge of the filing, collects fees and ensuring regulatory compliance.

“Unusual Whales hopes to push for changes in politics,” it says on its website, adding that it has been involved in the push to ban politicians from trading stocks. “One hopes this will increase public notice on the issue,” the firm said.

Subversive Capital founder and CEO Michael Auerbach and the firm’s ETF portfolios manager, Christian H. Cooper, manage the funds, according to the prospectus, which anticipates the filing would become effective in 75 days. The filing notes that the prospectus information is incomplete and may change.

The funds are actively managed diversified ETFs that seek to invest primarily in stocks of companies that sitting Democratic and Republican members of Congress, respectively, and/or their spouses have reported to have invested in through public disclosure filings made under  the Stop Trading on Congressional Knowledge (STOCK) Act. 

STOCK Act filings, known as periodic transaction reports (PTRs), are filed with either the Senate Office of Public Records or the clerk of the House of Representatives and made available online pursuant to the Ethics in Government Act, the filing noted.

The ETFs will focus only on the stocks bought or sold by members of Congress who are registered members of the Democratic or Republican parties and their spouses and won’t consider investments by those registered as an Independents.

Subversive Capital Advisor LLC will analyze PTRs filed by Congress members and their spouses to determine which securities, and how much of each security, to select for the funds, selling when a position is reported as being sold.

The ETFs typically will invest in portfolios of 500 to 600 equity securities, but the number of positions will vary based on those held by Congress members and spouses. 

Congressional leaders recently postponed action on legislation to limit stock trading by lawmakers despite growing pressure from the public and some members to prohibit such activity and avoid conflicts of interest.

Dinah Wisenberg Brin

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