Promoting Transparent Standards for Corporate Insiders Act

Floor Speech

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I am very pleased to have worked with Ranking Member McHenry on this bipartisan bill, H.R. 624, the Promoting Transparent Standards for Corporate Insiders Act.

The bill is designed to promote strong enforcement against financial fraud by ensuring that corporate executives cannot indirectly and illegally trade on material nonpublic information that they know about their companies.

The Securities and Exchange Commission prohibits insider trading as a fraud that hurts both company investors and the integrity of our capital markets. Those accused of illegal insider trading may defend themselves by using the SEC's rule for trading plans, Rule 10b5-1, and state that any trades that occurred while they possessed inside information were made pursuant to a pre-approved training plan. But the rule for trading plans has several shortcomings that may allow corporate insiders to get away with insider trading.

My 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. The bill would then require the SEC to report to Congress and revise its rules based on the results of the study.

This bill is much needed as fraudulent stock sales by high-ranking executives can erode confidence in our markets. For example, in November of 2017, the CEO of Intel reportedly sold $39 million in stock after he learned of two security flaws in Intel processors and within days of revising his trading plan for the second time that year.

This bill is supported by investor and consumer advocates, public pension funds, and State securities regulators, including Public Citizen; Americans for Financial Reform; California Public Employees' Retirement System, CalPERS; the California State Teachers' Retirement System, CalSTRS; the Council of Institutional Investors; Healthy Markets; and North American Securities Administrators Association.

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Ms. WATERS. Velazquez), who is a senior member of the Financial Services Committee and the chairwoman of the Small Business Committee.

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Ms. WATERS. I am pleased that I was able to work in a bipartisan manner with the gentleman from North Carolina (Mr. McHenry), the committee's ranking member.

This bill shows that protecting our capital markets is something that both sides of the aisle should support. The SEC is indeed our cop on the block, and they need this bill and additional funding resources in order to make sure that our markets and our investors are safe from fraud.

Another thing that the SEC needs is stability. During the recent government shutdown, the longest shutdown in American history, the SEC essentially closed its doors, furloughing 94 percent of its staff and suspending its enforcement efforts.

For 34 days the agency was forced to police the markets with a skeleton crew of 110 enforcement staff. This may translate into unacceptable delays in holding bad actors accountable and obtaining relief for their victims.

The SEC wasn't the only agency impacted. The Congressional Budget Office estimates that the Trump shutdown cost our economy $11 billion, and $3 billion of that will never be recovered.

What is more, the White House wouldn't even rule out the chance of another shutdown in 3 weeks.

Mr. Speaker, we should fully fund our government and focus our efforts on bipartisan compromises like H.R. 624.

Again, I am pleased that one of the first bills to be brought to the floor for a vote from the Financial Services Committee is a bill that is cosponsored by Ranking Member McHenry that seeks to strengthen the ability of the SEC to punish fraudsters and protect investors.

So, Mr. Speaker and Members, again, I am pleased to have had the opportunity to work with the ranking member and to come together and present a bill that is extremely important and will go a long way to getting rid of insiders who would basically cheat the system.

So Mr. McHenry and I have not only worked on this bill together, we developed a relationship some time ago. And I know that there are those who are thinking that, oh, I don't know if both sides are going to be able to get together in an atmosphere that really is not conducive to getting along sometimes, but Mr. McHenry and I have shown that it is possible, and we are looking forward to other opportunities.

We are not going to agree on everything and we are going to oppose each other on some things, but this bill here today indicates that we are willing to work together to try and see what we can do as cosponsors and coauthors of important pieces of legislation that both sides of the aisle should be supporting.

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Ms. WATERS. Mr. Speaker, on that I demand the yeas and nays.

The yeas and nays were ordered.

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