The House passed late Monday the 8-K Trading Gap Act, which would fix a loophole allowing corporate executives to trade on information before it’s disclosed to the public and to their own shareholders.
As it stands now if a public company has a “significant corporate event” the company must disclose it to the public by filing a Form 8-K within four days of the event.
“During this four-day gap, executives at the company know about the significant event, but other investors, and the public, do not,” said Rep. Carolyn B. Maloney, D-New York, the bill’s sponsor, in a statement.
Maloney said the bill, H.R. 4335, offers a “very simple solution to this problem: prohibit executives from trading during the four-day gap between when an event happens and when the company publicly files a Form 8-K to alert the public and shareholders of the event.”
Maloney said her bill received unanimous, bipartisan support in the House Financial Services Committee, she noted, and as well as a broad bipartisan vote out of the House. “I hope the bill will pass the Senate quickly. It’s just commonsense.”
Sen. Chris Van Hollen, D-Maryland, has introduced companion legislation to H.R. 4335.
“When a corporation faces a big change — like a data breach, merger, or acquisition — public transparency is crucial to prevent insider trading and protect retail investors,” Van Hollen said in a statement. “But under the current system, corporate insiders have a head start on the public, allowing them to sell off stock or cash in on private information. This is a total abuse of the public trust.”
More Financial Services Bills Pass
The full House also passed by voice vote late Monday the Prudential Regulators Oversight Act, H.R. 4841, a bipartisan bill that requires the federal prudential banking regulators to provide annual testimony to the House Financial Services Committee, along with semiannual reports on their supervisory and regulatory activities.
Also passed by a voice-vote was the Cybersecurity and Financial System Resilience Act of 2019, H.R. 4458, which would require the Federal Reserve Board to issue reports on cybersecurity with respect to the functions of the Federal Reserve System, and to help strengthen cybersecurity at the prudential banking regulators and the financial institutions they supervise.