In Focus

CII Sends Letter to Hill on Bill Cracking Down on Insider Trading

CII sent a letter December 2 to Speaker of the House Nancy Pelosi (D-Calif.) and Republican Leader Kevin McCarthy (R-Calif.) expressing general support for the Insider Trading Prohibition Act, H.R. 2534, which is slated to go to a vote on the House floor later this week. Under the bill, to be prosecuted, a person trading while in possession of insider information would not be required to know how the trading information was obtained or whether any personal benefit was paid or promised. Instead, the bill would require that the person was aware, consciously avoided being aware, or recklessly disregarded that such information was wrongfully obtained or communicated. The change “is appropriate because insider trading prosecutions should be obtained even if the trader did not pay for the tip or lacked specific awareness of how the information was obtained,” says CII in the letter. The bill also would improve prosecutors’ ability to prohibit Insider trading based on information acquired through theft, bribery, misrepresentation, misappropriation or breach of fiduciary duty or confidentiality, CII notes.

CII, 90 Investors and Investor Groups Press SEC for More Time to Comment on Controversial Rule Proposals

In letters sent November 22 and November 15, CII and a total of 90 investors and investor groups asked SEC Chair Jay Clayton to extend the comment period for the agency’s recent proposed rules on proxy advice and shareholder proposals from 60 to 120 days. In the letters, CII said the rule proposals the SEC approved November 5 are complex, run to a combined 320 pages, include 345 separate questions and seek supporting “data” repeatedly. The concurrent 60-day comment period also includes at least three public holidays. If adopted, the rules would result in the most significant changes to the voting rights of shareowners in decades, CII said. Separately, CII on November 14 wrote to the SEC to request clarifications and data on various aspects of the proxy advisor proposal.

CII Rebukes SEC Rule Proposals That Undercut Investor Rights

CII believes the rule proposals cited above would impair the independence of proxy advisory firms and restrict shareholder proposals. Both proposals, which the commission approved on a 3-2 vote, would undercut critical shareholder rights and stifle investors’ voice at public companies in which they invest, CII said in a statement. The heavy handed new regulatory structure that the commission backed for proxy advisory firms would require them to let public companies review their reports twice before they send the reports to institutional investors, their paying clients. CII wrote to the SEC October 24 noting little evidence for allegations of pervasive errors in proxy advisory firm reports. CII also questioned the need for the SEC’s proposed hikes in ownership and resubmission thresholds for shareholders to place their own resolutions on company ballots. The higher thresholds would restrict the ability of some investors, especially small holders, to submit shareholder proposals and impede future new social and environmental proposals, since those generally take time to gain traction, CII believes.

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