It's not strictly about actual unethical behavior. It's also about not ever creating the appearance of unethical behavior which erodes trust in government institutions. It's half of any ethics course on the job.

My friend who is a lowly public servant is not allowed to hold anything besides index/mutual funds already and has to report any trades of those before they happen.

This is for an individual with no tangible insider info.

Elected officials with significant insider info need to be held to a much higher standard.