SEC Proposes Tighter Rules Governing Insider Trading

The Securities and Exchange Commission on Tuesday proposed tightening the rules that govern stock trading by corporate officers and other so-called insiders.

Since 1934, federal regulations have required corporate officers and directors to disclose publicly whenever they buy or sell stock in their own company. The commission, by a 3-0 vote, invited public comment for 90 days on what would be the first major change to the rules since they were established to prevent “insiders” from gaining advantage from information not available to all stockholders.

Corporate officers are supposed to report to the SEC within 10 days of acquiring insider status. They must file subsequent reports in the first 10 days of the month after they buy or sell stock.

According to an SEC staff survey, 43% of the reports have been filed late so far this year. An unknown number of insiders never filed at all.

Under the proposal, companies would be required to list violators in their annual reports and proxy statements.

Insiders also would be required to report trades in exchange-listed options as well as stocks.

A new and narrower definition of insider is being proposed to include only chief executives and other policy-making officers.

The commission is also asking for public comment on whether it should seek authorization from Congress to impose fines against violators. Its only option now is to seek a court order forcing compliance.