[Congressional Record Volume 167, Number 67 (Monday, April 19, 2021)]
[House]
[Pages H1913-H1915]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




       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--

[[Page H1914]]

       (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.

                              {time}  1615

  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.

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