TheCorporateCounsel.net

Earlier this year, I blogged about pending legislation that would repeal foreign private issuers’ exemption from Section 16 of the Exchange Act.  Yesterday, Alan Dye provided an update on the bill’s status on the Section16.net Blog. He says that legislation is dead, at least for now:

I said in this earlier blog that I would try to get to the bottom of how a proposal to rescind the SEC’s Section 16 exemption for insiders of foreign private issuers found its way into the National Defense Authorization for 2024, which passed the U.S. Senate on July 27, 2023. The proposed rescission was not in the House bill and was dropped in conference, so it’s not going to be enacted this year, if ever. For those interested in what the proposal is about, though, read on.

The proposal was originally introduced in the Senate in 2022, as a standalone bill entitled the Holding Foreign Insiders Accountable Act. The bill was intended to address trading abuses identified by former Commissioner Robert Jackson (now at NYU law school) and Wharton professors Bradford Levy and Daniel Taylor in an April 2022 paper entitled “Holding Foreign Insiders Accountable.” The authors examined trading by insiders of certain foreign private issuers, particularly Russian and Chinese issuers, and concluded that insiders of many of those companies avoided trading losses by selling their company stock shortly before significant declines in its price. In an opinion piece they wrote for the Wall Street Journal, Senators Kennedy and van Hollen said that American investors absorb most of the losses avoided by foreign insiders and that subjecting those insiders to Section 16 would alert investors to insider sell-offs and give American law enforcement agencies better ability to identify insider trading.

The bill went nowhere in 2022 but was re-introduced in 2023 and later merged into the National Defense Authorization Act for 2024.

– John Jenkins