September 17, 2019

Van Hollen Introduces Bill to Prevent Unfair Corporate Insider Advantage in Stock Sales

Legislation Closes 8-K Trading Gap, Prevent Executives from Profiting Before Significant Problems are Disclosed to SEC

Today, U.S. Senator Chris Van Hollen (D-Md.) introduced the 8-K Trading Gap Act of 2019 to prevent executives and other corporate insiders from profiting off the gap between the occurrence of a significant event, such as bankruptcy or an acquisition, and its legally mandated disclosure to the Securities and Exchange Commission (SEC). Right now, companies have four days to file the 8-K disclosure form with the SEC, but they are not barred from trading in advance of the filing – giving them an unfair advantage. This bill would close this gap by requiring the SEC to write a rule to prohibit insiders from making trades during this four-day period.

“As we saw in the Equifax consumer data breach, big corporate executives and insiders have a clear advantage over the public when it comes to the 8-K filing. Why would we give them four full days to sell their stock before disclosing a major problem? As SEC Commissioner Robert Jackson has said, it’s an open invitation to insider trading,” said Senator Van Hollen. “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.”

The House Financial Services Committee has a markup of the bill planned for Wednesday, September 18, 2019. To read the full text of the bill, click here.