Promoting Transparent Standards for Corporate Insiders Act

II 116TH CONGRESS 1ST SESSION S. 573 To require the Securities and Exchange Commission to carry out a study of Rule 10b5–1 trading plans, and for other purposes. IN THE SENATE OF THE UNITED STATES FEBRUARY 27, 2019 Mr. VAN HOLLEN (for himself and Mrs. FISCHER) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs A BILL To require the Securities and Exchange Commission to carry out a study of Rule 10b5–1 trading plans, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Promoting Trans- 4 parent Standards for Corporate Insiders Act’’. 5 SEC. 2. SEC STUDY. 6 (a) DEFINITIONS.—In this section— 7 (1) the term ‘‘Commission’’ means the Securi- 8 ties and Exchange Commission; 9 VerDate Sep 11 2014 04:27 Mar 05, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S573.IS S573 kjohnson on DSK79L0C42 with BILLS 2 •S 573 IS (2) the term ‘‘Rule 10b5–1’’ means section 1 240.10b5–1 of title 17, Code of Federal Regulations; 2 and 3 (3) the term ‘‘trading plan’’ means a plan de- 4 scribed in paragraph (c)(1)(i)(A)(3) of Rule 10b5– 5 1. 6 (b) STUDY.— 7 (1) IN GENERAL.—The Commission shall carry 8 out a study of whether Rule 10b5–1 should be 9 amended to— 10 (A) limit the ability of issuers and issuer 11 insiders to adopt a trading plan to a period 12 during which the issuer or issuer insider, as ap- 13 plicable, is permitted to buy or sell securities 14 during issuer-adopted trading windows; 15 (B) limit the ability of issuers and issuer 16 insiders to adopt multiple trading plans; 17 (C) establish a mandatory delay during the 18 period beginning on the date on which a trading 19 plan is adopted and ending on the date on 20 which the first trade is executed under such a 21 plan; 22 (D) with respect to a delay established 23 under subparagraph (C), and depending on the 24 VerDate Sep 11 2014 04:27 Mar 05, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S573.IS S573 kjohnson on DSK79L0C42 with BILLS 3 •S 573 IS findings of the Commission under subparagraph 1 (A)— 2 (i) impose the same delay for trading 3 plans adopted during an issuer-adopted 4 trading window as opposed to outside of 5 such a window; and 6 (ii) provide an exception to such a 7 delay; 8 (E) limit the frequency with which issuers 9 and issuer insiders may modify or cancel trad- 10 ing plans; 11 (F) require issuers and issuer insiders to 12 file with the Commission any adoption of, 13 amendment to, termination of, and transaction 14 under a trading plan; or 15 (G) require the board of directors of an 16 issuer that has adopted a trading plan to— 17 (i) adopt policies governing trading 18 plan practices; 19 (ii) periodically monitor transactions 20 made under the trading plan; and 21 (iii) ensure that the policies of the 22 issuer discuss the use of the trading plan 23 in the context of guidelines or require- 24 VerDate Sep 11 2014 04:27 Mar 05, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S573.IS S573 kjohnson on DSK79L0C42 with BILLS 4 •S 573 IS ments with respect to equity hedging, hold- 1 ing, and ownership. 2 (2) ADDITIONAL CONSIDERATIONS.—In car- 3 rying out the study required under paragraph (1), 4 the Commission shall consider, with respect to each 5 amendment considered by the Commission under 6 that paragraph— 7 (A) how the amendment may clarify and 8 enhance existing prohibitions against insider 9 trading; 10 (B) the impact that the amendment may 11 have on the ability of an issuer to attract a per- 12 son to become an issuer insider; 13 (C) the impact that the amendment may 14 have on capital formation; 15 (D) the impact that the amendment may 16 have on the willingness of an issuer to operate 17 as a public company; and 18 (E) any other consideration that the Com- 19 mission considers necessary and appropriate for 20 the protection of investors. 21 (c) REPORT.—Not later than 1 year after the date 22 of enactment of this Act, the Commission shall submit to 23 the Committee on Banking, Housing, and Urban Affairs 24 of the Senate and the Committee on Financial Services 25 VerDate Sep 11 2014 04:27 Mar 05, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S573.IS S573 kjohnson on DSK79L0C42 with BILLS 5 •S 573 IS of the House of Representatives a report that contains all 1 findings and determinations made in carrying out the 2 study required under subsection (b). 3 (d) RULEMAKING.—After completing the study re- 4 quired under subsection (b), the Commission shall, subject 5 to public notice and comment, amend Rule 10b5–1 in a 6 manner that is consistent with the results of the study. 7 Æ VerDate Sep 11 2014 04:27 Mar 05, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6301 E:\BILLS\S573.IS S573 kjohnson on DSK79L0C42 with BILLS