Rep. Carolyn B. Maloney, D-N.Y., and Sen. Chris Van Hollen, D-Md., reintroduced Thursday the 8-K Trading Gap Act, legislation to fix a loophole in current law that allows corporate executives to trade on information before it's disclosed to the public and to their own shareholders.
"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," Maloney, a senior member of the House Financial Services Committee, said in a statement.
"Time and again we've seen corporate executives take advantage of the 8-K trading gap by selling off bundles of shares prior to a major announcement," added Van Hollen, a member of the Senate Banking Committee. "It's clear this gap gives corporate insiders a massive unfair advantage over the public."
As it stands now, when a bankruptcy or an acquisition occurs at a public company, the company must disclose that significant event to the Securities and Exchange Commission and the public by filing a Form 8-K within four days of the event, the lawmakers said.
