What This Bill Does
This bill restricts when executives at large publicly traded companies can sell stock they received as compensation. The bill also requires the Securities and Exchange Commission (a federal agency that oversees financial markets) to create rules for companies to quickly announce when they plan to buy back their own stock.
Who It Affects
Executive officers at large publicly traded companies (companies whose stock is registered under the Securities Exchange Act of 1934). The Securities and Exchange Commission.
Key Provisions
• Companies must publicly disclose plans to buy back their own stock within one business day after the plan is authorized by the company's board of directors (Sec. 2(b))
• Executive officers cannot sell stock they received as compensation if the company bought back stock in the past year, unless exceptions apply (Sec. 2(c)(1))
• Executive officers cannot sell stock they received as compensation until at least three years after they were granted the stock, unless exceptions apply (Sec. 2(c)(1))
• Exceptions to the sales restrictions include selling stock to pay taxes owed on receiving the stock, using proceeds to pay medical expenses, education costs, or first-time home purchase costs (Sec. 2(c)(2))
What Changes
If this bill becomes law, companies will have to announce stock buyback plans publicly within one business day. Executives will face new restrictions on when they can sell their compensation stock.
Important Definitions
Covered issuer: A large company whose stock is registered under securities laws. Covered person: An executive officer of a covered issuer. Subject security: Stock awarded to an executive officer as part of their pay. Share repurchase authorization: A board decision to have the company buy back its own stock.
Effective Date
The Securities and Exchange Commission has 180 days after the bill becomes law to issue regulations on disclosing stock buyback plans (Sec. 2(b)).
II
118TH CONGRESS
1ST SESSION
S. 790
To align executive compensation with sustainable value creation, and for
other purposes.
IN THE SENATE OF THE UNITED STATES
MARCH 14, 2023
Mr. WARNER (for himself, Ms. WARREN, and Ms. BALDWIN) introduced the
following bill; which was read twice and referred to the Committee on
Banking, Housing, and Urban Affairs
A BILL
To align executive compensation with sustainable value
creation, 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 ‘‘Advancing Long-term
4
Incentives for Governance Now Act’’ or the ‘‘ALIGN Act’’.
5
SEC. 2. RESTRICTIONS ON SALE OF SHARES FOLLOWING
6
STOCK BUYBACKS.
7
(a) DEFINITIONS.—In this section:
8
(1) COVERED
ISSUER.—The term ‘‘covered
9
issuer’’ means an issuer, a security of which is reg-
10
VerDate Sep 11 2014
23:46 Mar 23, 2023
Jkt 039200
PO 00000
Frm 00001
Fmt 6652
Sfmt 6201
E:\BILLS\S790.IS
S790
kjohnson on DSK79L0C42PROD with BILLS
2
•S 790 IS
istered under subsection (b) or (g) of section 12 of
1
the Securities Exchange Act of 1934 (15 U.S.C.
2
78l).
3
(2) COVERED
PERSON.—The term ‘‘covered
4
person’’ means an executive officer, as that term is
5
defined in section 240.3b–7 of title 17, Code of Fed-
6
eral Regulations, or any successor regulation, with
7
respect to a covered issuer.
8
(3) EQUITY
SECURITY; ISSUER; SECURITY.—
9
The terms ‘‘equity security’’, ‘‘issuer’’, and ‘‘secu-
10
rity’’ have the meanings given the terms in section
11
3(a) of the Securities Exchange Act of 1934 (15
12
U.S.C. 78c(a)).
13
(4) SHARE
REPURCHASE
AUTHORIZATION.—
14
The term ‘‘share repurchase authorization’’ means
15
an authorization by the board of directors of a cov-
16
ered issuer to purchase shares of the covered issuer.
17
(5) SUBJECT
SECURITY.—The term ‘‘subject
18
security’’ means any equity security of a covered
19
issuer that is awarded to a covered person with re-
20
spect to that covered issuer as part of the compensa-
21
tion of that covered person.
22
(b) DISCLOSURE OF SHARE REPURCHASE AUTHOR-
23
IZATION.—
24
VerDate Sep 11 2014
23:46 Mar 23, 2023
Jkt 039200
PO 00000
Frm 00002
Fmt 6652
Sfmt 6201
E:\BILLS\S790.IS
S790
kjohnson on DSK79L0C42PROD with BILLS
3
•S 790 IS
(1) IN
GENERAL.—Not later than 180 days
1
after the date of enactment of this Act, the Securi-
2
ties and Exchange Commission shall issue regula-
3
tions to require covered issuers to publicly disclose
4
a share repurchase authorization not later than 1
5
business day after the authorization has occurred.
6
(2) CONTENTS.—In issuing regulations under
7
paragraph (1), the Securities and Exchange Com-
8
mission shall ensure that each disclosure required
9
under those regulations is—
10
(A) uniform for all covered issuers; and
11
(B) made in a manner that—
12
(i) maintains accuracy; and
13
(ii) reduces the unauthorized disclo-
14
sure of information.
15
(c) SALE OF SUBJECT SECURITIES.—
16
(1) PROHIBITIONS.—Except as provided in
17
paragraph (2), no covered person may sell or trans-
18
fer, or divest an economic interest in, any subject se-
19
curity with respect to the covered person, if—
20
(A) during the preceding 1-year period, the
21
applicable covered issuer was required to make
22
a disclosure pursuant to the regulations issued
23
under subsection (b); or
24
VerDate Sep 11 2014
23:46 Mar 23, 2023
Jkt 039200
PO 00000
Frm 00003
Fmt 6652
Sfmt 6201
E:\BILLS\S790.IS
S790
kjohnson on DSK79L0C42PROD with BILLS
4
•S 790 IS
(B) fewer than 3 years have elapsed since
1
the covered person was granted the subject se-
2
curity.
3
(2) EXCEPTIONS.—The prohibition under para-
4
graph (1) shall not apply with respect to any of the
5
following:
6
(A) Any subject security sold or trans-
7
ferred by a covered person in connection with a
8
change of control with respect to the applicable
9
covered issuer, including an affiliate of that cov-
10
ered issuer.
11
(B) Any subject security sold or trans-
12
ferred by a covered person through—
13
(i) a will; or
14
(ii) the laws of descent or distribution.
15
(C) Any subject security that a covered
16
person owns or beneficially owns, as of the day
17
before the date of enactment of this Act.
18
(D) Any subject security awarded to the
19
applicable covered person that is immediately
20
withheld by the covered issuer and sold solely
21
for the purposes of meeting a tax obligation of
22
the covered person with respect to the receipt of
23
the subject security.
24
(E) Any sale or transfer—
25
VerDate Sep 11 2014
23:46 Mar 23, 2023
Jkt 039200
PO 00000
Frm 00004
Fmt 6652
Sfmt 6201
E:\BILLS\S790.IS
S790
kjohnson on DSK79L0C42PROD with BILLS
5
•S 790 IS
(i) which is made on or after the
1
death of the covered person;
2
(ii) which is made on or after the date
3
on which the covered person becomes dis-
4
abled (within the meaning of section
5
72(m)(7) of the Internal Revenue Code of
6
1986);
7
(iii) which is made pursuant to a do-
8
mestic relations order in settlement of
9
marital property rights;
10
(iv) to the extent the aggregate of
11
such sales and transfers during any tax-
12
able year of the covered person does not
13
exceed the qualified higher education ex-
14
penses (as defined in section 72(t)(7) of
15
such Code) of the covered person for such
16
taxable year;
17
(v) to the extent the proceeds of such
18
sale or transfer are used by the covered
19
person in the time and manner described
20
in section 72(t)(8) of such Code to pay
21
qualified acquisition costs described in
22
such section, subject to the rules of such
23
section including the limitation of subpara-
24
graph (B) thereof; or
25
VerDate Sep 11 2014
23:46 Mar 23, 2023
Jkt 039200
PO 00000
Frm 00005
Fmt 6652
Sfmt 6201
E:\BILLS\S790.IS
S790
kjohnson on DSK79L0C42PROD with BILLS
6
•S 790 IS
(vi) to the extent the aggregate of
1
such sales and transfers during any tax-
2
able year of the covered person does not
3
exceed the amount allowable as a deduc-
4
tion under section 213 of such Code to the
5
covered person for amounts paid during
6
such taxable year for medical care (deter-
7
mined without regard to whether the cov-
8
ered person itemizes deductions for such
9
taxable year).
10
Æ
VerDate Sep 11 2014
23:46 Mar 23, 2023
Jkt 039200
PO 00000
Frm 00006
Fmt 6652
Sfmt 6301
E:\BILLS\S790.IS
S790
kjohnson on DSK79L0C42PROD with BILLS