A bill to prohibit corporate executives from trading stock before disclosing significant events was reintroduced in the House and Senate on Thursday.
The legislation — the 8-K Trading Gap Act — 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. However, the bill would require public companies to establish policies to prohibit insiders from making trades during the four-day period.
Democrats Rep. Carolyn Maloney, of New York, a member of the House Financial Services Committee, and Sen. Chris Van Hollen, of Maryland, a member of the Senate Banking Committee, reintroduced the bill in their respective chambers.
"Corporate executives shouldn't be allowed to trade on significant information ahead of the public and investors, but that's exactly what's happening because of this legal loophole," Ms. Maloney said in a news release.
Added Mr. Van Hollen in the news release: "Time and again we've seen corporate executives take advantage of the 8-K trading gap by selling off bundles of shares prior to a major announcement. It's clear this gap gives corporate insiders a massive unfair advantage over the public."
In January 2020, during the previous congressional session, the bill was overwhelmingly approved in the House — in a 384-7 vote — but did not advance in the Senate after its introduction in September 2019.