Legislation aimed at preventing corporate executives from trading stock before disclosing significant events was introduced Tuesday in the Senate by Sen. Chris Van Hollen, D-Md.
The legislation is intended to close the four-day gap that companies have for disclosing to the Securities and Exchange Commission significant events such as a bankruptcy or an acquisition. During that time, companies are not barred from trading in advance of the filing.
That is "an open invitation to insider trading," Mr. Van Hollen said in a statement. "This legislation is a no-brainer, and it will help ensure fairness and protect shareholders. I'll be urging the Senate Banking Committee to consider the bill without delay."
A House version of the proposed 8-K Trading Gap Act of 2019 will be voted on Wednesday by the House Financial Services Committee. A committee memo cites a 2015 study showing that over a six-year period, company insiders earned $105 million in above-market returns during the four-day gap.