8–K Trading Gap Act of 2019

II 116TH CONGRESS 1ST SESSION S. 2488 To amend the Securities Exchange Act of 1934 to require the Securities and Exchange Commission to issue rules that prohibit officers and direc- tors of certain companies from trading securities in anticipation of a current report, and for other purposes. IN THE SENATE OF THE UNITED STATES SEPTEMBER 17, 2019 Mr. VAN HOLLEN introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs A BILL To amend the Securities Exchange Act of 1934 to require the Securities and Exchange Commission to issue rules that prohibit officers and directors of certain companies from trading securities in anticipation of a current re- port, 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 ‘‘8–K Trading Gap Act 4 of 2019’’. 5 VerDate Sep 11 2014 18:22 Sep 19, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S2488.IS S2488 kjohnson on DSK79L0C42 with BILLS 2 •S 2488 IS SEC. 2. PROHIBITION ON CERTAIN TRADING IN ANTICIPA- 1 TION OF A CURRENT REPORT. 2 The Securities Exchange Act of 1934 (15 U.S.C. 78a 3 et seq.) is amended by inserting after section 10D (15 4 U.S.C. 78j–4) the following: 5 ‘‘SEC. 10E. PROHIBITION ON CERTAIN TRADING IN ANTICI- 6 PATION OF A CURRENT REPORT. 7 ‘‘(a) PROHIBITION.—Not later than 1 year after the 8 date of enactment of this section, the Commission shall 9 issue rules that require each issuer that is subject to re- 10 porting requirements under section 13(a) or 15(d) to es- 11 tablish and maintain policies, controls, and procedures 12 that are reasonably designed to prohibit executive officers 13 and directors of the issuer from purchasing, selling, or 14 otherwise transferring any equity security of the issuer, 15 directly or indirectly— 16 ‘‘(1) subject to subsection (b)(3)(C), with re- 17 spect to an event described in any of sections 1 18 through 6 of Form 8–K, during the period beginning 19 on the date on which the event occurs and ending 20 on the date on which the issuer files or furnishes a 21 current report on Form 8–K with respect to the 22 event; and 23 ‘‘(2) with respect to an event described in sec- 24 tion 7 or 8 of Form 8–K, during the period begin- 25 ning on the date on which the issuer determines that 26 VerDate Sep 11 2014 18:22 Sep 19, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S2488.IS S2488 kjohnson on DSK79L0C42 with BILLS 3 •S 2488 IS the issuer will disclose the event and ending on the 1 date on which the issuer files or furnishes a current 2 report on Form 8–K with respect to the event. 3 ‘‘(b) PERMISSIBLE TRANSACTIONS.—In issuing rules 4 under subsection (a), the Commission— 5 ‘‘(1) may exempt from those rules certain 6 transactions as the Commission determines to be ap- 7 propriate, including those transactions that— 8 ‘‘(A) occur automatically; 9 ‘‘(B) are made pursuant to an advance 10 election; or 11 ‘‘(C) except as provided in paragraph (2), 12 involve a purchase or sale of equity securities 13 that satisfies the conditions under section 14 240.10b5–1(c) of title 17, Code of Federal Reg- 15 ulations, or any successor regulation; 16 ‘‘(2) may not exempt from those rules a trans- 17 action made by an executive officer or director of an 18 issuer under a plan that— 19 ‘‘(A) is described in section 240.10b5– 20 1(c)(1)(i)(A)(3) of title 17, Code of Federal 21 Regulations, or any successor regulation; and 22 ‘‘(B) was adopted— 23 ‘‘(i) with respect to an event described 24 in sections 1 through 6 of Form 8–K, dur- 25 VerDate Sep 11 2014 18:22 Sep 19, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S2488.IS S2488 kjohnson on DSK79L0C42 with BILLS 4 •S 2488 IS ing the period beginning on the date on 1 which the event occurred and ending on 2 the date on which the issuer files or fur- 3 nishes a current report on Form 8–K with 4 respect to the event; and 5 ‘‘(ii) with respect to an event de- 6 scribed in section 7 or 8 of Form 8–K, 7 during the period beginning on the date on 8 which the issuer determines that the issuer 9 will disclose the event and ending on the 10 date on which the issuer files or furnishes 11 a current report on Form 8–K with respect 12 to the event; and 13 ‘‘(3) shall exempt from those rules— 14 ‘‘(A) issuers that are required to adopt and 15 administer a code of ethics under section 16 270.17j–1 of title 17, Code of Federal Regula- 17 tions, or any successor regulation; 18 ‘‘(B) any other issuer that is registered 19 under the Investment Company Act of 1940 20 (15 U.S.C. 80a–1 et seq.) and the investment 21 advisers of which are required to adopt and ad- 22 minister a code of ethics under section 23 275.204A–1 of title 17, Code of Federal Regu- 24 lations, or any successor regulation; and 25 VerDate Sep 11 2014 18:22 Sep 19, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S2488.IS S2488 kjohnson on DSK79L0C42 with BILLS 5 •S 2488 IS ‘‘(C) any event— 1 ‘‘(i) that is described in any of sec- 2 tions 1 through 6 of Form 8–K; and 3 ‘‘(ii) with respect to which the issuer 4 has announced the event in a press release 5 or other method of dissemination that com- 6 plies with the method of public disclosure 7 described in section 243.101(e)(2) of title 8 17, Code of Federal Regulations, or any 9 successor regulation. 10 ‘‘(c) RULE OF CONSTRUCTION.—Any reference in 11 this section to a section of Form 8–K shall be construed 12 to refer to that section of Form 8–K as in effect on the 13 date of enactment of this section.’’. 14 Æ VerDate Sep 11 2014 18:22 Sep 19, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6301 E:\BILLS\S2488.IS S2488 kjohnson on DSK79L0C42 with BILLS