Van Hollen, Kennedy Introduce Bipartisan Bill to Deter Executives of Foreign Companies from Insider Trading at the Expense of American Investors

Today, Senators Chris Van Hollen (D-Md.) and John Kennedy (R-La.), both members of the Senate Banking Committee, reintroduced the Holding Foreign Insiders Accountable Act to hold executives of foreign companies that are traded on U.S. stock exchanges to the same disclosure requirements that U.S.-based firms are required to follow.

“When corporate insiders sell their stocks, investors and the public have a right to know. U.S. firms are required to disclose these trades and provide this information to the public, but foreign companies don’t have to play by the same rules. Our legislation will ensure all corporate insiders are held to the same standard and prevent foreign executives from insider trading at the expense of American investors,” said Senator Van Hollen.

“Insiders at companies in Beijing and Moscow have been able to avoid billions in losses on the U.S. stock exchange by playing by a different set of rules than Americans do. This insider trading comes at a cost to American investors. The Holding Foreign Insiders Accountable Act will help stop opportunistic insider trading by requiring foreign executives to disclose trades immediately,” said Senator Kennedy.

Currently, executives of U.S. publicly traded companies must disclose any trades they make of their own company’s stocks to the Securities and Exchange Commission (SEC) within two business days. Meanwhile, executives of foreign firms are not required to make such timely disclosures and are required to file by paper. The lag this system creates means that foreign executives can keep trades private for a longer period of time, which promotes insider trading at the expense of everyday American investors.

The legislation would amend Section 16 (a) of the Securities Exchange Act to require executives of public companies based outside the U.S. to make electronic disclosures of trades in their company’s stocks to the SEC within two business days. The SEC would then make that information available to the public, as they currently do with U.S.-based firms. 

Background:

• In April 2023, Kennedy and Van Hollen outlined their bill in the Wall Street Journal.  

• In Aug. 2022, reports uncovered that Chinese investors of corporations listed on U.S. exchanges avoided billions of dollars in losses by making seemingly informed sock sales ahead of declines.

• In May 2022, Kennedy first introduced the Holding Foreign Insiders Accountable Act. 

Text of the Holding Foreign Insiders Accountable Act is available here.