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House Passes 8-K Trading Gap Disclosure Bill

By Stephen Barlas
April 1, 2020
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The House of Representatives overwhelmingly passed the 8-K Trading Gap Act of 2019 (H.R. 4335), a bill that fixes a loophole in current law that allows corporate executives to trade on information before it’s disclosed to the public and to the corporation’s own shareholders.

 

Currently, when there’s a significant corporate event—such as a material reorganization, recapitalization, merger, sale, and so forth—the company must disclose it to the public by filing a Form 8-K within four days of the event. During this four-day gap, executives at the company know what occurred, but other investors and the public don’t.

 

“Corporate executives shouldn’t be allowed to trade on significant information ahead of the public and investors, but that’s exactly what’s happening because of this legal loophole,” said Rep. Carolyn Maloney (D.-N.Y.), sponsor of the bill, which passed the House by a vote of 384-7 in January 2020. Sen. Chris Van Hollen (D.-Md.) is sponsoring the bill in the Senate.

 

Stephen Barlas has covered Washington, D.C., for trade and professional magazines since 1981 and since 1984 for Strategic Finance and its predecessor Management Accounting. You can reach him at sbarlas@verizon.net.
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