[Congressional Record Volume 165, Number 17 (Monday, January 28, 2019)]
[House]
[Pages H1221-H1223]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




       PROMOTING TRANSPARENT STANDARDS FOR CORPORATE INSIDERS ACT

  Mr. HIMES. Mr. Speaker, I move to suspend the rules and pass the bill 
(H.R. 624) 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. 624

       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 C.F.R. 
     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 
Connecticut (Mr. Himes) and the gentleman from North Carolina (Mr. 
McHenry) each will control 20 minutes.
  The Chair recognizes the gentleman from Connecticut.


                             General Leave

  Mr. HIMES. Mr. Speaker, I ask unanimous consent that all Members have 
5 legislative days within 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 Connecticut?
  There was no objection.
  Mr. HIMES. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I am delighted to rise in support of H.R. 624 and to 
recognize the bipartisan fashion in which this bill is being brought to 
the floor and, in particular, thank Ranking Member McHenry for his work 
on this bipartisan bill.
  It is terrific to see the first bill out of the committee and onto 
the floor be not only a bipartisan bill, but the kind of thing that I 
think we should be able to find agreement on in this Congress.
  We have a robust debate in the committee and in this Congress around 
the question of how we establish well-balanced regulation on the 
capital markets and the financial services industry. That is a good 
debate in which the answer is always moving, but it is terrific to see 
that we can agree that wherever there is an opportunity either for 
fraudulent behavior, insider trading, or rent-seeking to occur--that is 
to say, when there is an advantage for a particular player in the 
market--that the parties can come together to move legislation like 
H.R. 624.
  Whatever we may think and however we may argue over the proper 
balance of regulation, if market participants do not have confidence in 
those markets, we have a huge problem. And nothing erodes confidence so 
much as the suspicion that there may be players in the market who have 
an inside advantage who are operating fraudulently.
  So, again, I thank Mr. McHenry for his work on this bill. I thank 
Chairwoman Waters, in particular, for her hard work on this bill.
  Mr. Speaker, 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. 624, the Promoting Transparent 
Standards for Corporate Insiders Act.
  This bipartisan legislation is critical for protecting mom-and-pop 
investors from the effects of insider trading while ensuring that the 
rules are clear, fair, and not unduly burdensome.
  I want to first thank Chairwoman Waters for her sponsorship of this 
bill and for writing this legislation. I am glad to join her in a 
meaningful effort to help the Securities and Exchange Commission better 
understanding illicit trading, and I look forward to working with her 
in many more bipartisan efforts and her leadership on the Financial 
Services Committee.
  Mr. Speaker, preventing and cracking down on fraud and abuse within 
our financial system, such as illegal insider trading, is apolitical 
and should be.
  When a corporate insider breaks the rules on trading and profits from 
trading on insider information, that illegal activity hurts everyday 
investors who diligently put their hard-earned money away for 
retirement.
  To be clear, most corporate insiders faithfully follow the insider 
trading guidelines under Rule 10b5-1. I know that is not an everyday 
quoted thing, but those folks who are abiding by the law are complying 
with this very complex but important rule from the Securities and 
Exchange Commission. That allows for them to purchase and sell 
securities without concern for insider trading liability.

[[Page H1222]]

  These law-abiding corporate insiders should not be punished or barred 
from trading just because of the bad actors who succumbed to greed and 
those who chose to illegally trade on insider information.
  When properly adhered to, 10b5-1 insider trading rules are fair tools 
for allowing folks to help pay for down payments on a home or help pay 
for their kids' college education or other normal financial 
transactions.
  Moreover, allowing folks to purchase and sell securities at 
predetermined times on a scheduled basis under that rule ensures market 
stability and decreases the risk of volatility by preventing fraudulent 
behavior, such as pump-and-dump schemes that sometimes occur in the 
financial markets.
  By directing the Securities and Exchange Commission to study whether 
Rule 10b5-1 should be amended and to consider how any amendments to the 
rule would clarify and enhance existing prohibitions against insider 
trading, this legislation achieves a bipartisan goal of protecting mom-
and-pop investors while encouraging economic growth.
  And, again, I want to thank Chairwoman Waters for her leadership. I 
applaud her willingness to work in a bipartisan way and in this 
important bipartisan manner that she is approaching the Financial 
Services Committee's jurisdiction we both care so much about. That 
bipartisan activity should help improve Federal oversight and protect 
American investors as well as enhance economic growth.
  Mr. Speaker, I urge my colleagues to support H.R. 624, and I reserve 
the balance of my time
  The SPEAKER pro tempore. Without objection, the gentlewoman from 
California (Ms. Waters) will control the time for the majority.
  There was no objection.
  Ms. WATERS. Mr. Speaker, I yield myself such time as I may consume.
  I am very pleased to have worked with Ranking Member McHenry on this 
bipartisan bill, H.R. 624, the Promoting Transparent Standards for 
Corporate Insiders Act.
  The bill is designed to promote strong enforcement against financial 
fraud by ensuring that corporate executives cannot indirectly and 
illegally trade on material nonpublic information that they know about 
their companies.

  The Securities and Exchange Commission prohibits insider trading as a 
fraud that hurts both company investors and the integrity of our 
capital markets. Those accused of illegal insider trading may defend 
themselves by using the SEC's rule for trading plans, Rule 10b5-1, and 
state that any trades that occurred while they possessed inside 
information were made pursuant to a pre-approved training plan. But the 
rule for trading plans has several shortcomings that may allow 
corporate insiders to get away with insider trading.
  My 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. The bill would then 
require the SEC to report to Congress and revise its rules based on the 
results of the study.
  This bill is much needed as fraudulent stock sales by high-ranking 
executives can erode confidence in our markets. For example, in 
November of 2017, the CEO of Intel reportedly sold $39 million in stock 
after he learned of two security flaws in Intel processors and within 
days of revising his trading plan for the second time that year.
  This bill is supported by investor and consumer advocates, public 
pension funds, and State securities regulators, including Public 
Citizen; Americans for Financial Reform; California Public Employees' 
Retirement System, CalPERS; the California State Teachers' Retirement 
System, CalSTRS; the Council of Institutional Investors; Healthy 
Markets; and North American Securities Administrators Association.
  I thank Ranking Member McHenry for joining me in reintroducing this 
bill this Congress, and I urge Members to vote ``yes.''
  Mr. Speaker, I reserve the balance of my time.
  Mr. McHENRY. Mr. Speaker, I yield 2 minutes to the gentleman from 
Texas (Mr. Gooden), a new Member of this body and a new member of the 
Financial Services Committee.
  Mr. GOODEN. Mr. Speaker, I rise today in support of H.R. 624, the 
Promoting Transparent Standards for Corporate Insiders Act.
  Introduced by Chairwoman Waters and Ranking Member McHenry, this 
bipartisan bill would require the SEC to update regulatory language to 
ensure corporate insiders are not able to take advantage of loopholes 
in the system to engage in illegal insider trading.
  The language within the bill overwhelming passed the House last 
Congress as part of the JOBS Act 3.0.
  Simply put, Mr. Speaker, it should be a top priority for financial 
regulators to ensure clear guidelines and robust enforcement against 
any illegal activity.
  This legislation, along with the SEC's recent guidance, will help us 
better understand insider trading, serve as a driving force to hold 
potential bad actors accountable, and further promote good governance 
among the leaders of our Nation's financial system.
  I strongly support this bill and would like to thank Ranking Member 
McHenry for the time this afternoon.
  Mr. Speaker, I also look forward to working with all my colleagues on 
the Financial Services Committee, and I thank Chairwoman Waters for 
filing this bill and carrying it forward.
  Ms. WATERS. Mr. Speaker, I yield 3 minutes to the gentlewoman from 
New York (Ms. Velazquez), who is a senior member of the Financial 
Services Committee and the chairwoman of the Small Business Committee.
  Ms. VELAZQUEZ. Mr. Speaker, I rise in support of H.R. 624, the 
Promoting Transparent Standards for Corporate Insiders Act, bipartisan 
legislation sponsored by Chairwoman Waters and Ranking Member McHenry.
  Mr. Speaker, our Nation's financial markets are safer and more 
efficient when they are transparent.

                              {time}  1700

  Unfortunately, those that participate in insider trading damage the 
structure and integrity of our financial markets by engaging in 
practices outside of the public's view, profiting on information that 
is only known to a select few.
  This nefarious practice damages ordinary, hardworking Americans who 
invest in pension funds, 401(k)s, mutual funds, and other retirement 
vehicles. As lawmakers, we must remain ever vigilant and seek to root 
out this illegal practice before it starts.
  Currently, SEC regulations permit corporate insiders to evade insider 
trading rules by allowing them to adopt multiple trading plans and make 
select changes to their predetermined trading plans.
  H.R. 624 closes this loophole by requiring the SEC to study and 
analyze the effectiveness of its current insider trading rules while 
also considering any rule change's impact on capital formation and a 
company's willingness to go public. Further, the bill requires the SEC 
report to Congress on its finding and draft rules consistent with the 
results.
  This carefully crafted piece of legislation is an important step to 
closing a loophole in our Nation's insider trading laws.
  Mr. Speaker, I want to take this opportunity to commend Chair Waters 
and Ranking Member McHenry for working in a bipartisan manner on this 
bill. I hope it is the first of many bipartisan bills we can bring to 
the floor from the Financial Services Committee in the 116th Congress.
  Mr. Speaker, I urge the speedy adoption of this important measure.
  Mr. McHENRY. Mr. Speaker, I reserve the balance of my time.
  Ms. WATERS. Mr. Speaker, I yield 2 minutes to the gentleman from 
Connecticut (Mr. Himes), who is a senior member on the Financial 
Services Committee and on the Intelligence Committee.
  Mr. HIMES. Mr. Speaker, I thank very much Madam Chairwoman for 
yielding, and, again, to the ranking member. It is a delight, as I said 
before, to come right out with a bipartisan bill that really addresses 
the fundamental question of confidence in our markets.
  H.R. 624--and I will be proud to vote for it and urge my colleagues 
to do the same--closes a number of technical loopholes that have 
allowed corporate

[[Page H1223]]

insiders over time flexibility to actually trade possibly on inside 
information. That, of course, has the effect of causing regular 
investors to wonder whether they want to compete with that sort of 
player in the market.
  H.R. 624 is a terrific bipartisan, thoughtful bill right out of the 
gates in the Financial Services Committee.
  I want to just take 30 seconds, though, to reflect on the fact that 
at this point in time, there is currently no Federal law explicitly 
prohibiting insider trading. That requires the SEC and the Department 
of Justice to rely on general antifraud provisions in the law to go 
after people suspected of insider trading.
  Mr. Speaker, in closing, I would just like to urge the committee, the 
chairwoman and the ranking member, to reflect on the words of U.S. 
District Judge Jed Rakoff, who wrote: ``But if unlawful insider trading 
is to be properly deterred, it must be adequately defined. The 
appropriate body to do so, one would think, is Congress.''
  Mr. Speaker, I thank the chairwoman and ranking member for their hard 
work on this bill. I hope we can take it to the next step of making it 
very clear that insider trading itself is a crime for the lack of 
confidence that it generates in our capital markets.
  Mr. Speaker, I again thank the chairwoman and the ranking member, and 
I urge passage of H.R. 624.
  Mr. McHENRY. Mr. Speaker, I am prepared to close, and I reserve the 
balance of my time.
  Ms. WATERS. Mr. Speaker, I yield 2 minutes to the gentleman from 
Illinois (Mr. Casten).
  Mr. CASTEN of Illinois. Mr. Speaker, I thank Chairwoman Waters and 
Ranking Member McHenry for working in a bipartisan manner to craft H.R. 
624, a bill to help the Securities and Exchange Commission better 
protect hardworking Americans from financial fraud.
  As a new member on the Financial Services Committee, I look forward 
to working together with both the chairwoman and the ranking member on 
similar commonsense pieces of legislation.
  However, we cannot forget that the most recent shutdown all but 
caused the SEC to shut its doors. If people wanted to manipulate and 
defraud financial markets that was the perfect time to get away with 
it.
  Now that the shutdown has ended, we have to work together to ensure 
that the government stays open to protect consumers and focus on 
proactive measures like H.R. 624 that will strengthen our markets.
  Mr. Speaker, I support H.R. 624, and I thank the chairwoman for her 
leadership.
  Mr. McHENRY. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, now, being in the minority and the majority, we are both 
learning something in the organization of control and debate on the 
House floor. Chairwoman Waters has been the ranking member of the 
committee previously to coming to the chair. Now I have to ask her for 
time, which is a different process.
  Mr. Speaker, I would like to close on this important bill, the first 
bill from the Financial Services Committee for this Congress. It is a 
bill written by Chairwoman Waters and cosponsored by me as the ranking 
member.
  This is a piece of legislation that we had discussed and worked 
through last Congress, and she was the lead sponsor and I was the 
cosponsor of it last Congress, and I held to my word and she has held 
to her word.
  This is proof that we can have bipartisan achievement that is of 
substance, that is real, that is meaningful, and we can do it 
representing vastly different districts, having different world views, 
having our disagreements that we have stated publicly and privately to 
one another, but still being willing to work through those 
disagreements to hammer out something that is good for the investor, 
for the consumer, to make sure that we have important consumer 
protections while also having vibrant markets of exchange so that we 
can lift folks out of poverty, to actually make sure people are safe 
for retirement.

  There are wonderful opportunities for us to legislate in a bipartisan 
way. This is proof of what potential we have in the Financial Services 
jurisdiction.
  Mr. Speaker, I want to thank Chairwoman Waters for her efforts here. 
I urge my colleagues to support and vote for this important piece of 
legislation.
  Mr. Speaker, I thank once again Chairwoman Waters for her leadership, 
and I yield back the balance of my time.
  Ms. WATERS. Mr. Speaker, I yield myself the balance of my time. I am 
pleased that I was able to work in a bipartisan manner with the 
gentleman from North Carolina (Mr. McHenry), the committee's ranking 
member.
  This bill shows that protecting our capital markets is something that 
both sides of the aisle should support. The SEC is indeed our cop on 
the block, and they need this bill and additional funding resources in 
order to make sure that our markets and our investors are safe from 
fraud.
  Another thing that the SEC needs is stability. During the recent 
government shutdown, the longest shutdown in American history, the SEC 
essentially closed its doors, furloughing 94 percent of its staff and 
suspending its enforcement efforts.
  For 34 days the agency was forced to police the markets with a 
skeleton crew of 110 enforcement staff. This may translate into 
unacceptable delays in holding bad actors accountable and obtaining 
relief for their victims.
  The SEC wasn't the only agency impacted. The Congressional Budget 
Office estimates that the Trump shutdown cost our economy $11 billion, 
and $3 billion of that will never be recovered.
  What is more, the White House wouldn't even rule out the chance of 
another shutdown in 3 weeks.
  Mr. Speaker, we should fully fund our government and focus our 
efforts on bipartisan compromises like H.R. 624.
  Again, I am pleased that one of the first bills to be brought to the 
floor for a vote from the Financial Services Committee is a bill that 
is cosponsored by Ranking Member McHenry that seeks to strengthen the 
ability of the SEC to punish fraudsters and protect investors.
  So, Mr. Speaker and Members, again, I am pleased to have had the 
opportunity to work with the ranking member and to come together and 
present a bill that is extremely important and will go a long way to 
getting rid of insiders who would basically cheat the system.
  So Mr. McHenry and I have not only worked on this bill together, we 
developed a relationship some time ago. And I know that there are those 
who are thinking that, oh, I don't know if both sides are going to be 
able to get together in an atmosphere that really is not conducive to 
getting along sometimes, but Mr. McHenry and I have shown that it is 
possible, and we are looking forward to other opportunities.
  We are not going to agree on everything and we are going to oppose 
each other on some things, but this bill here today indicates that we 
are willing to work together to try and see what we can do as 
cosponsors and coauthors of important pieces of legislation that both 
sides of the aisle should be supporting.
  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 Connecticut (Mr. Himes) that the House suspend the rules 
and pass the bill, H.R. 624.
  The question was taken.
  The SPEAKER pro tempore. In the opinion of the Chair, two-thirds 
being in the affirmative, the ayes have it.
  Ms. WATERS. Mr. Speaker, on that I demand the yeas and nays.
  The yeas and nays were ordered.
  The SPEAKER pro tempore. Pursuant to clause 8 of rule XX, further 
proceedings on this motion will be postponed.

                          ____________________