House Overwhelmingly Passes Maloney Bill to Close Trading Loophole

Press Release

The House of Representatives today passed Congresswoman Carolyn B. Maloney's (D-NY) H.R. 4335, the 8-K Trading Gap Act, to fix a loophole in our current law that allows corporate executives to trade on information before it's disclosed to the public and to their own shareholders.

Currently, when there's a significant corporate event at a public company, the company must disclose that significant event to the public by filing a Form 8-K within four days of the event. During this four-day gap, executives at the company know about the significant event, but other investors, and the public, do not.

"Corporate executives shouldn't be allowed to trade on significant information ahead of the public and investors, but that's exactly what's happening because of this legal loophole," said Rep. Maloney. "My bill has a very simple solution to this problem; prohibit executives from trading during the four-day gap between when an event happens and when the company publicly files a Form 8-K to alert the public and shareholders of the event. Given the unanimous, bipartisan support for this bill in the House Committee on Financial Services, and the broad bipartisan vote out of the House, I hope the bill will pass the Senate quickly. It's just commonsense."

The Senate companion to H.R. 4335 has been introduced by Senator Chris Van Hollen (D-MD).

"When a corporation faces a big change -- like a data breach, merger, or acquisition -- public transparency is crucial to prevent insider trading and protect retail investors. But under the current system, corporate insiders have a head start on the public, allowing them to sell off stock or cash in on private information. This is a total abuse of the public trust. Our legislation will help close this loophole, hold all companies accountable, and protect shareholders. I'm pleased to see the House pass this commonsense measure, and I appreciate Representative Maloney's leadership on this issue. I will continue to press my colleagues in the Senate to follow suit with urgency," said Senator Van Hollen.

Background

H.R. 4335 would require public companies to put in place policies and procedures that are reasonably designed to prohibit officers and directors from trading company stock after the company has determined that a significant corporate event has occurred, but before the company has filed a Form 8-K with the SEC disclosing such event. This would prevent corporate insiders from inappropriately taking advantage of non-public information for their own personal gain.

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