[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4208 Introduced in House (IH)]






108th CONGRESS
  2d Session
                                H. R. 4208

   To discourage the abuse of stock options by executives of public 
  companies by preventing unjust enrichment through the recapture of 
                profits when shareholders suffer losses.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             April 22, 2004

  Mr. Frank of Massachusetts introduced the following bill; which was 
            referred to the Committee on Financial Services

_______________________________________________________________________

                                 A BILL


 
   To discourage the abuse of stock options by executives of public 
  companies by preventing unjust enrichment through the recapture of 
                profits when shareholders suffer losses.

    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 ``Executive Stock Option Profit 
Recapture Act''.

SEC. 2. PURPOSES.

    The purposes of this Act are--
            (1) to reduce the perverse incentive created by executive 
        stock options for executives to take actions to inflate the 
        value of their shares prior to exercising options; and
            (2) to prevent the resulting losses to shareholders by 
        limiting the ability of executive officers and directors to 
        profit from the exercise of stock options when shareholders 
        have suffered substantial losses.

SEC. 3. RETURN OF STOCK OPTION PROFITS.

    Section 304 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7243) is 
amended
            (1) by redesignating subsection (b) as subsection (c);
            (2) by inserting after subsection (a) the following new 
        subsection:
    ``(b) Stock Option Exercise Prior to Stock Price Declines.--The 
Commission shall prescribe rules requiring that, if, at the end of a 
period ending one year after one or more of the five most highly 
compensated executive officers or the directors of an issuer have 
exercised options on securities of an issuer granted to the executive 
officer or director as compensation, the stock of the issuer has 
declined by a material amount, as determined by the Commission by rule, 
then such executive officer or director shall be required to reimburse 
the issuer for all gains realized on the sale of securities obtained as 
a result of the option exercise that are in excess of any gains that 
would have been realized had the securities been sold at the stock 
price at the end of such one-year period. Such rules shall be effective 
one year after the date of enactment of the Executive Compensation and 
Corporate Governance Act of 2004.''; and
            (3) in subsection (c) (as redesignated by paragraph (1) of 
        this section), by striking ``subsection (a)'' and inserting 
        ``subsections (a) and (b)''.

SEC. 4. DEADLINE FOR RULEMAKING.

    The Securities and Exchange Commission shall prescribe the rules 
and regulations required by the amendments made by this Act within 270 
days after the date of enactment of this Act.
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