Like Causes?

Install the App
TRY NOW

house Bill H.R. 1528

Should the SEC Study Potential Changes to an Insider Trading Rule?

Argument in favor

Insider trading is a serious crime that makes the market unfair for investors who don’t have inside knowledge of companies’ operations. Trades allowed under the rule in question need to be closely monitored and subject to rules that ensure executives and insiders can’t use their knowledge of companies’ operations to engage in insider trading.

Leslie's Opinion
···
03/08/2021
Need to close the loopholes on insider trading especially who is considered an insider as it’s just not corporations but governmental legislators, regulators, law enforcement, etc that may also have advance knowledge of major changes in companies or government that effect stock prices.
Like (38)
Follow
Share
jimK's Opinion
···
03/09/2021
Insider trading destroys the concept of a free market, putting everyone without the means to get insider information in the position of funding the transfer of investment funds to those that can. Many of the big investment houses use their industry contacts to develop insider information which greatly contributes to their success. Congresspeople have developed protections for themselves from oversight allowing them to gather insider information in exchange for political favor. Many congresspeople start their careers relatively poor and retire relatively rich due to their investments, despite their only official income being their congressional salary. McConnell, for example, has an estimated net worth in excess of $60M despite entering Congress as a relatively poor Kentucky lawyer. Executive Branch employees are required to annually file any investment holdings and certify that they are not, in any way, able to use their official position to influence the value of their holdings. Something that our most Senior political appointees seem to routinely ignore- while lower level employees are held to that standard. … … … Congresspeople are only held to this standard through their own ethics rules and only seems to be only enforced to punish fellow congresspeople for some other reason. I recall the case of a Florida Senator from the time when the land along coastal Florida around where Miami was built, was owned by the Federal government for military defense. He argued that the land should be for sale to increase government revenues with the provision that the Military could take over the lands whenever it was deemed necessary for defense. He organized a group of investors, himself included, and bought most of the land where Miami now stands. A couple of years later, he authored legislation to remove the military re-occupation provision, making this coastal property much more valuable as he and his group sold off parcels for the development of greater Miami with huge profits. Even back then, what he was doing was obvious and accepted - and just plain wrong, it violates the basis precepts of a free and fair market. … … … So yes, insider access to markets is wrong, no matter how cleverly it is conceived and hidden. It distorts the concept of free markets to transfer wealth to the insiders from everyone else. It can always be better regulated.
Like (23)
Follow
Share
Dorothy's Opinion
···
03/08/2021
This was always a law and illegal until the corrupt GQP changed it GQP have been abusing it for years. Jail the corrupt bastards
Like (12)
Follow
Share

Argument opposed

When properly administered, plans under the rule in question are important investment tools for executives and other insiders to trade stocks. While bad investors will occasionally engage in improper trades, it’d be an overreaction to curtail these plans due to a few bad actors.

B.R.'s Opinion
···
03/08/2021
HR 1528 already outlines what changes are needed/necessary. What is with the costly study? Just document the proposed changes, vote on it and be done with it.
Like (6)
Follow
Share
Carina's Opinion
···
03/08/2021
People should not be taken advantage of when they invest their money and no way should executives or traders take wrongful advantage. I do not support this bill!!
Like (2)
Follow
Share
Anthony's Opinion
···
03/09/2021
The House of Representatives has no credibility on the subject of insider trading since Nancy Pelosi was proven to have engaged in trading in stock she used confidential.non public information obtained as a Member of Congress to generate profits for her personal benefit. She defended her position by asserting members of Congress are exempt for insider trading laws. Congress should focus on earning the confidence of the American People by disallowing such exceptions and honoring their oath of office.
Like (1)
Follow
Share

What is House Bill H.R. 1528?

This bill would require the Securities and Exchange Commission (SEC) to study and potentially amend Rule 10b5-1 to ensure that corporate insiders are unable to indirectly engage in illegal insider trading through changes to their trading plans.

Specifically, the SEC would be required to examine the impact of the following changes to 10b5-1 rules:

  • Limits on creating 10b5-1 trading plans during insider trading windows;
  • Prohibiting multiple, overlapping 10b5-1 plans;
  • Implementing a mandatory delay between the adoption of the plan and the first trade;
  • Creating rules as to the frequency with which insiders may adopt, modify, or cancel plans;
  • Requiring insiders to file trading plan adoptions, amendments, terminations, and transactions with the SEC; and
  • Requiring board oversight of 10b5-1 plans, including corporate policies, adoption, and monitoring.

Impact

Executives; insiders; stock trading; the SEC; and Rule 10b5-1.

Cost of House Bill H.R. 1528

$1.00 Million
When this bill was introduced in the 115th Congress, the CBO estimated that implementing it would cost around $1 million for the SEC to conduct the required studies and rulemakings and issue reports.

More Information

In-DepthHouse Financial Services Committee Chairwoman Maxine Waters (D-CA) reintroduced this legislation from the 116th and 115th Congresses to direct the Securities and Exchange Commission (SEC) to study amending Rule 10b5-1 to ensure that corporate insiders can’t indirectly engage in illegal insider trading. When she introduced this bill in the 116th Congress, Rep. Waters said:

"I am happy to work with Ranking Member McHenry on the first of what I hope will be many bipartisan bills to strengthen consumer and investor protections in the 116th Congress. Our bill, the Promoting Transparent Standards for Corporate Insiders Act, will play a critical role in holding corporate executives accountable and improving SEC Rule 10b5-1, which currently allows corporate insiders to avoid accusations of illegal insider trading. It would require the SEC to study how to amend its rule to address reported incidents of manipulation, report to Congress, and write rules consistent with the results of the study. It should be a top priority for regulators to ensure clear guidelines and robust enforcement of illicit activities, such as insider trading, and this legislation will serve as a driving force to hold regulators and bad actors accountable."

When he and Waters reintroduced this bill in the 116th Congress, Ranking Member Patrick McHenry (R-NC) said:

“Cracking down on fraud and abuse within our financial system is apolitical. I am proud to support this meaningful effort to help the SEC better understand illicit insider trading. I look forward to working with Chairwoman Waters, and the Financial Services Committee as a whole, to explore ways to improve federal government oversight and protect American investors.”

CalSTRS, California’s educator-only pension fund, expressed support for this legislation in the 116th Congress. In a January 23, 2019 letter, CalSTRS’ CEO, Jack Ehnes, wrote:

“We believe [this] is an important step to limit abusive trading practices and aligns with the SEC’s mission to ‘protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. We strongly support this important bi-partisan legislation that will benefit institutional investors, other market participants and the capital markets.”

Americans for Financial Reform (AFR) and the Consumer Federation of America (CFA) wrote a letter to Congress in July 2018 supporting this bill in the 115th Congress:

“This [bill] is especially timely given the multi-trillion dollar wave of company share buybacks that have been occurring in the current low interest rate environment and in response to the enormous corporate tax cuts recently passed by Congress. Insiders can make large profits by selling directly into such share buybacks. The combination of share buybacks and insider trading represents a direct diversion of corporate revenues from investment in the broader economy to private payments for top executives. It constitutes a major incentive for corporate decision makers to inappropriately favor share buybacks over other uses of funds such as investment and hiring. Evidence has been available for many years that corporate executives take advantage of their knowledge of buyback plans to make additional profits selling their own stock. This evidence was recently summarized by SEC Commissioner Robert Jackson. It appears that the SEC’s current rule 10b5-1 facilitates such profiteering by providing an overly broad safe harbor against insider trading prohibitions. Over the past five years the Council of Institutional Investors (CII) has repeatedly urged the SEC to take action to prevent these abuses. This bill would require the SEC to study whether Rule 10b5-1 is providing adequate protection against insider trading and whether it should be changed in accordance with the recommendations of the CII. The specificity of the directives for this study should be useful in driving action by the SEC. We urge the Committee to pass this bill.”

The American Bar Association acknowledges that rule 10b5-1 trading plans can increase an insider’s liability risk, but also points out that properly structured and administered rule 10b5-1 trading plans are a safe and effective way for insiders to trade:

“When used improperly, Rule 10b5-1 trading plans can increase an insider's liability risk, such as where trades occur too soon after the adoption of a plan, where plans are repeatedly adopted and terminated or where the insider supplements a plan with non-plan trades, each of which may suggest that the insider attempted to take advantage of material nonpublic information. But when structured and administered properly, Rule 10b5-1 trading plans can provide a safe and effective way for insiders to trade.”

This legislation does not yet have any cosponsors in the 117th Congress. During the 116th session of Congress, this bill had two bipartisan cosponsors, Rep. Patrick McHenry (R-NC) and Rep. Al Green (D-TX), as well as the support of the Council of Institutional Investors (CII) and Public Citizen.

In the 115th Congress, this bill was part of a bipartisan economic growth bill, the JOBS Act 3.0, which the House passed on a 406-4 vote.


Of NoteRule 10b5-1 of the Securities Exchange Act of 1934 allows officers, directors and other insiders of public companies to purchase and sell their company's stock while they are in possession of material nonpublic information, provided that the transaction is made pursuant to a trading plan previously established at a time when the insider was not aware of material non-public information. Bipartisan political scrutiny of executive 10b5-1 plans increased over the 2017-2018 period due to the timing of some 10b5-1 stock trades relative to the internal discovery and/or public announcement of major scandals by multiple companies, including Intel and Equifax.

Critics of rule 10b5-1 have long viewed it as creating an opportunity for abuse, as insiders may be aware of material nonpublic information at the time plans are established, and the rule can be used to provide cover for improper trades.


Media:

Summary by Lorelei Yang

(Photo Credit: iStockphoto.com / gopixa)

AKA

Promoting Transparent Standards for Corporate Insiders Act

Official Title

To require the Securities and Exchange Commission to carry out a study of Rule 10b5-1 trading plans, and for other purposes.

bill Progress


  • Not enacted
    The President has not signed this bill
  • The senate has not voted
  • The house has not voted
      house Committees
      Committee on Financial Services
    IntroducedMarch 2nd, 2021
    Need to close the loopholes on insider trading especially who is considered an insider as it’s just not corporations but governmental legislators, regulators, law enforcement, etc that may also have advance knowledge of major changes in companies or government that effect stock prices.
    Like (38)
    Follow
    Share
    HR 1528 already outlines what changes are needed/necessary. What is with the costly study? Just document the proposed changes, vote on it and be done with it.
    Like (6)
    Follow
    Share
    Why the need to study this? It’s wrong. Stop it from happening & penalize all who do...including members of Congress!!!
    Like (23)
    Follow
    Share
    Insider trading destroys the concept of a free market, putting everyone without the means to get insider information in the position of funding the transfer of investment funds to those that can. Many of the big investment houses use their industry contacts to develop insider information which greatly contributes to their success. Congresspeople have developed protections for themselves from oversight allowing them to gather insider information in exchange for political favor. Many congresspeople start their careers relatively poor and retire relatively rich due to their investments, despite their only official income being their congressional salary. McConnell, for example, has an estimated net worth in excess of $60M despite entering Congress as a relatively poor Kentucky lawyer. Executive Branch employees are required to annually file any investment holdings and certify that they are not, in any way, able to use their official position to influence the value of their holdings. Something that our most Senior political appointees seem to routinely ignore- while lower level employees are held to that standard. … … … Congresspeople are only held to this standard through their own ethics rules and only seems to be only enforced to punish fellow congresspeople for some other reason. I recall the case of a Florida Senator from the time when the land along coastal Florida around where Miami was built, was owned by the Federal government for military defense. He argued that the land should be for sale to increase government revenues with the provision that the Military could take over the lands whenever it was deemed necessary for defense. He organized a group of investors, himself included, and bought most of the land where Miami now stands. A couple of years later, he authored legislation to remove the military re-occupation provision, making this coastal property much more valuable as he and his group sold off parcels for the development of greater Miami with huge profits. Even back then, what he was doing was obvious and accepted - and just plain wrong, it violates the basis precepts of a free and fair market. … … … So yes, insider access to markets is wrong, no matter how cleverly it is conceived and hidden. It distorts the concept of free markets to transfer wealth to the insiders from everyone else. It can always be better regulated.
    Like (23)
    Follow
    Share
    This was always a law and illegal until the corrupt GQP changed it GQP have been abusing it for years. Jail the corrupt bastards
    Like (12)
    Follow
    Share
    Representatives, We most strongly urge you to fully support H.R. 1528, “Promoting Transparent Standards for Corporate Insiders Act.” For too long, the SEC has been becoming increasingly lax in its mission "to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation.” Require the SEC to fully and thoroughly examine the impact of changes to 10b5-1 rules to ensure that corporate insiders cannot indirectly engage in illegal insider trading. Further, ensure that no member of any branch of government can engage in direct or indirect insider trading.
    Like (12)
    Follow
    Share
    No further study should be necessary. STOP ALL INSIDER TRADING IN ALL FORMS!!
    Like (10)
    Follow
    Share
    Stop the steal.
    Like (10)
    Follow
    Share
    This practice is unfair and illegal. There are several members of Congress who have benefited from this practice in the past. If Martha Stewart served time for this so should all who are guilty.
    Like (8)
    Follow
    Share
    It’s illegal Didn’t Martha Stewart go to jail for same Time to change laws -public employees at every level must divest stock or find some other profession If you are elected to public service than serve we the people not them the stock market I know some very poor use of the English language
    Like (6)
    Follow
    Share
    Considering America's Elected Public Servants are using information to enrich themselves from the Committees they sit on, and No Doubt doing this while they're supposed to be working for We The People, SUCKS & NEEDS TO STOP IMMEDIATELY.
    Like (5)
    Follow
    Share
    Let's make it a crime for everyone who committs insider trading and by that I mean all of our useless lawmakers. These lowlifes have made millions, if not billions off of insider trading deals. They get info on what's going to happen and buy or sell off their stocks after getting said info. The rest of us pions aren't privy to this info and if we were we would be arrested and sent to prison (ie: Martha Stewart).... Too many lawmakers have benefited from insider trading and this needs to end, here and now.
    Like (5)
    Follow
    Share
    The key words, for me, in the objection is that plans that are properly managed and overseen are unlikely to allow illicit trading. What does that mean, and how many actually meet that criteria and what teeth does enforcement have and how often are stiffly penalties actually applied? If you’re a billionaire, what’s a $100,000 fine? As I recall, very few in the Wall Street debacle that caused the Great Recession were punished. If memory serves, only one actually went to jail. Who oversees the plans anyway? Are we asking the fox to guard the henhouse? Wall Street has proven its participants are not trustworthy to police their own. A delay in trading will only be as effective as the extent to which it exceeds the predictive ability of executives who have intimate knowledge of company finances, plans for expansion, financial situation, product development, and its operating industry - which can be a view quite a distance in the future. I don’t think company executives, owners, and board members should be allowed to trade in their own company’s sticks at all, and its questionable whether their spouses should be allowed to do so.
    Like (5)
    Follow
    Share
    I should have answered “no,” since the SEC studying anything is like the fox guarding the henhouse. And governmental bodies “studying” is a euphemism for “nothing will ever get done and then ...everybody forgets.”
    Like (4)
    Follow
    Share
    Others on this link have expressed disgust over the relief bills calling it “pork”, but things like this are the real pork . The same wealthy folks who are basking in tax reductions from the 2017 tax bill can find more money in insider trading. Talk about the Wild West. And trump have some of these crooks a pardon to boot. Inside trading hurts anyone who has in pension, 401k, 403b, profit sharing plan or any other investment administered by an employer or advisor. And insider trading can causes losses. It is necessary to investigate and put into law strict penalties.
    Like (4)
    Follow
    Share
    Elected officials and their families should not be able to trade stocks that they have any connection to.
    Like (4)
    Follow
    Share
    Yes the SEC should consider looking at evolving the rule to help prevent it.
    Like (4)
    Follow
    Share
    If Martha could be disciplined for her minor escape, I am sure there are many members of Congress or their spouses that should be examined as well as inside traders.
    Like (4)
    Follow
    Share
    There are already laws to forbid insider trading. They do not need to be changed. They need to be enforced!
    Like (4)
    Follow
    Share
    As long as Congress is included in scrutiny- must be a coincidence that no matter how much $$$$ they have entering Congress they have bundles more $$$$ when leaving
    Like (4)
    Follow
    Share
    MORE