The publication is reproduced in full below:
PROMOTING TRANSPARENT STANDARDS FOR CORPORATE INSIDERS ACT
Mr. PERLMUTTER. Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 1528) to require the Securities and Exchange Commission to carry out a study of Rule 10b5-1 trading plans, and for other purposes.
The Clerk read the title of the bill.
The text of the bill is as follows:
H.R. 1528
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Promoting Transparent Standards for Corporate Insiders Act''.
SEC. 2. SEC STUDY.
(a) Study.--
(1) In general.--The Securities and Exchange Commission shall carry out a study of whether Rule 10b5-1 (17 CFR 240.10b5-1) should be amended to--
(A) limit the ability of issuers and issuer insiders to adopt a plan described under paragraph (c)(1)(i)(A)(3) of Rule 10b5-1 (``trading plan'') to a time when the issuer or issuer insider is permitted to buy or sell securities during issuer-adopted trading windows;
(B) limit the ability of issuers and issuer insiders to adopt multiple trading plans;
(C) establish a mandatory delay between the adoption of a trading plan and the execution of the first trade pursuant to such a plan and, if so and depending on the Commission's findings with respect to subparagraph (A)--
(i) whether any such delay should be the same for trading plans adopted during an issuer-adopted trading window as opposed to outside of such a window; and
(ii) whether any exceptions to such a delay are appropriate;
(D) limit the frequency that issuers and issuer insiders may modify or cancel trading plans;
(E) require issuers and issuer insiders to file with the Commission trading plan adoptions, amendments, terminations and transactions; or
(F) require boards of issuers that have adopted a trading plan to--
(i) adopt policies covering trading plan practices;
(ii) periodically monitor trading plan transactions; and
(iii) ensure that issuer policies discuss trading plan use in the context of guidelines or requirements on equity hedging, holding, and ownership.
(2) Additional considerations.--In carrying out the study required under paragraph (1), the Commission shall consider--
(A) how any such amendments may clarify and enhance existing prohibitions against insider trading;
(B) the impact any such amendments may have on the ability of issuers to attract persons to become an issuer insider;
(C) the impact any such amendments may have on capital formation;
(D) the impact any such amendments may have on an issuer's willingness to operate as a public company; and
(E) any other consideration that the Commission considers necessary and appropriate for the protection of investors.
(b) Report.--Not later than the end of the 1-year period beginning on the date of the enactment of this Act, the Commission shall issue a report to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate containing all findings and determinations made in carrying out the study required under section (a).
(c) Rulemaking.--After the completion of the study required under subsection (a), the Commission shall, subject to public notice and comment, revise Rule 10b5-1 consistent with the results of such study.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from Colorado (Mr. Perlmutter) and the gentleman from North Carolina (Mr. McHenry) each will control 20 minutes.
The Chair recognizes the gentleman from Colorado.
General Leave
Mr. PERLMUTTER. Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days in which to revise and extend their remarks on this legislation and to insert extraneous material thereon.
The SPEAKER pro tempore. Is there objection to the request of the gentleman from Colorado?
There was no objection.
Mr. PERLMUTTER. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, H.R. 1528, the Promoting Transparent Standards for Corporate Insiders Act, is a bill introduced by Chairwoman Maxine Waters for several Congresses to strengthen confidence in our capital markets by ensuring everyone plays by the same rules.
This bill passed with overwhelming bipartisan support in the last Congress and is designed to promote strong enforcement against financial fraud by ensuring corporate executives cannot indirectly or illegally trade on material nonpublic information they know about their companies.
The Securities and Exchange Commission, the SEC, prohibits insider trading as a fraud that hurts investors as well as the integrity of our capital markets. Those accused of illegal insider trading sometimes defend themselves using the SEC's rule for trading plans and claim any trades that occurred while they possessed inside information were made pursuant to a preapproved trading plan. But the rule for trading plans has several shortcomings and loopholes that may allow corporate insiders to get away with insider trading.
This bill would require the SEC to study whether to amend its rule for trading plans to limit the ability of corporate insiders to, for example, adopt multiple overlapping plans or change their plans to indirectly take advantage of inside information. This bill would then require the SEC to report to Congress and revise its rules based on the results of the study.
This bill is needed to protect confidence in our markets. For example, last year, we saw numerous pharmaceutical executives profiting from conveniently timed announcements regarding the companies' progress toward a COVID-19 vaccine.
For instance, shortly after Moderna announced positive results for its vaccine, the pharmaceutical company's CEO altered his trading plan to increase the number of shares sold through the plan. Shortly thereafter, he sold shares for millions of dollars in profit.
Similarly, on the same day Pfizer announced positive data regarding its vaccine, Pfizer's CEO sold more than $5 million worth of shares as part of his trading plan.
This bill is supported by investor and consumer advocates, public pension funds, and State securities regulators, including the California Public Employees' Retirement System, the Council of Institutional Investors, and the North American Securities Administrators Association.
Mr. Speaker, I urge all of my colleagues to vote ``yes'' on this bipartisan bill, and I reserve the balance of my time.
Mr. McHENRY. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I rise in support of H.R. 1528, the Promoting Transparent Standards for Corporate Insiders Act.
As my colleague stated, this is bipartisan legislation that strikes an important balance. It protects retail investors in the market from illicit insider trading while, at the same time, ensuring that the rules governing insider trading are clear, fair, and not prohibitively onerous.
I thank my colleagues for supporting this bill last Congress, and I think they should do so this Congress. Thwarting and punishing fraud and abuse within our financial markets is not a Republican or Democrat issue. This includes illegal insider trading. When a corporate insider gains an unfair advantage by violating current insider trading rules and trading on material nonpublic information, that illegal behavior harms Main Street investors.
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It harms those who diligently put their hard-earned money aside for retirement.
It is important to note that not every corporate insider or executive trading in the stock of his or her company is a bad actor. The Securities and Exchange Commission's current rules and guidelines allow corporate insiders to purchase and sell securities of their company without fear of insider trading liability. Most corporate insiders carefully follow this rule called rule 10b5-1, and they follow it to the letter of the law.
Moreover, this rule ensures that insider trading guidelines are fair tools when properly followed. These rules are designed to allow corporate insiders to liquidate their stock options when needed, such as when trying to pay for a child's education, buying a house, or paying medical expenses.
Furthermore, allowing insiders to purchase and sell securities at a predetermined time on a scheduled basis under rule 10b5-1 ensures market stability.
This rule also decreases the risk of volatility by preventing fraudulent behavior, such as the so-called pump-and-dump schemes that some have tried to take advantage of.
This bill requires the SEC to study whether this current rule should be amended. In studying the rule, the SEC is directed to consider how any amendments would clarify and enhance existing prohibitions against insider trading. Importantly, though, the bill also requires the SEC to weigh any potential amendments against the important benefits of this rule.
The SEC is also directed to consider what effects amending the rules would have on attracting qualified candidates for open insider positions, such as capital formation, and a company's willingness to go public.
I am pleased that this is a bipartisan legislation that thoughtfully balances the meaningful goals of protecting everyday investors with facilitating economic growth opportunities, and I think that ensures that we keep a healthy capital markets function here in the United States.
Mr. Speaker, I have no further speakers on my side, and I yield back the balance of my time.
Mr. PERLMUTTER. Mr. Speaker, I yield myself the balance of my time.
In closing, I urge my colleagues to vote ``yes'' on H.R. 1528, which will help prevent corporate insiders from using inside information to rig the game in their favor at the expense of investors and the integrity of our markets.
Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore. The question is on the motion offered by the gentleman from Colorado (Mr. Perlmutter) that the House suspend the rules and pass the bill, H.R. 1528.
The question was taken.
The SPEAKER pro tempore. In the opinion of the Chair, two-thirds being in the affirmative, the ayes have it.
Mr. ROSENDALE. Mr. Speaker, on that I demand the yeas and nays.
The SPEAKER pro tempore. Pursuant to section 3(s) of House Resolution 8, the yeas and nays are ordered.
Pursuant to clause 8 of rule XX, further proceedings on this motion are postponed.
____________________
SOURCE: Congressional Record Vol. 167, No. 67
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