House Financial Services Unanimously Passes Maloney Bill to Close Trading Loophole

Sep 20, 2019
Press Release

WASHINGTON, DC – The House Committee on Financial Services today passed Congresswoman Carolyn B. Maloney’s (D-NY) H.R. 4335, the 8-K Trading Gap Act, unanimously out of committee.

The 8-K Trading Gap Act would 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. Right now, when there’s a significant corporate event at a public company, the company has to disclose that significant event to the public by filing a Form 8-K within four days of the event occurring. During this four-day gap, executives at the company know about the significant event, but other investors don’t.

“Corporate executives shouldn’t be allowed to trade on significant information before it’s disclosed to the public and to investors, but that’s exactly what they do because of a legal loophole,” said Rep. Maloney. “My bill has a very simple solution to this problem; prohibiting 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 our committee, I hope the bill will pass the full House and Senate quickly with bipartisan support. 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 necessary to prevent insider trading and protect retail investors. Once corporate insiders recognize they have a duty to inform the public about a material event they should be immediately barred from selling their stock. Giving them four days to cash in on inside information is a total abuse of the public trust. This legislation will help close that loophole, hold all companies accountable, and protect shareholders. I salute Representative Maloney for her sponsorship of this bill and the House Financial Service Committee for taking bipartisan action. I urge the Senate Banking Committee to follow suit without delay,” said Senator Van Hollen. 


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.