ABSTRACT

Insider Trading and Stock Option Grants: An Examination of Corporate Integrity in the COVID-19 Pandemic, Hearing Before the Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets of the Committee on Financial Services, U.S. House of Representatives, One Hundred Sixteenth Congress, Second Session, September 17, 2020   [open pdf - 29MB]

This is the June 17, 2020 hearing on "Insider Trading and Stock Option Grants: An Examination of Corporate Integrity in the COVID-19 [coronavirus disease 2019] Pandemic," held before the House Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets of the Committee on Financial Services. From the opening statement of Brad Sherman: "Our capital market system is unique in history. Up until about 150 years ago, every business enterprise was made up of people who knew each other, were family members, who had personal trust, and a business could only be as large as a group of people could finance and put together, and investment opportunities were limited to those that you happened to know. You wouldn't trust your money with some enterprise of strangers and, of course, you didn't have liquidity since you could sell your investment pretty much only to somebody else who knew those who were in the syndicate. And so at that point, people could rely on personal trust. Today, investors turn their money over to anonymous insiders, corporate boards, and executives whom they have never met, and they know that the insiders have far more information, attention, and power. So, they don't have the bonds of personal trust. They rely on the law to make sure that the insiders are treating the investment fairly. [Inaudible] turn their money over [inaudible]. I will continue. We had a little technical problem there. We now apply that system to the COVID [coronavirus disease 19] pandemic in which nearly 200,000 Americans have lost their lives, and in which many firms affected by this pandemic are having sudden increases or decreases in their value. For many pharmaceutical firms, for example, even the suggestion of involvement in a Federal program can cause shares to shoot up in value. Following this sort of announcement, Kodak, Novavax, and Vaxart each saw their stock prices rise by over 400 percent. With this trend in mind, the SEC has reminded companies that in this pandemic, they should not only abide by the law, but practice, 'good corporate hygiene.' SEC [U.S. Securities and Exchange Commission] Chair Clayton has reiterated these views in a recent letter regarding today's hearing, which will I submit for the record, and it will be made a part of the record, without objection. But admonishments are not laws and regulations. Admonishments will not deter the truly greedy, and so we have to design our laws and regulations to govern those who cannot be governed by mere admonishments." Statements, letters, and materials submitted for the record include those of the following: Rick Claypool, Jill Fisch, Jacob S. Frenkel, and Granville Martin.

Report Number:
Serial No. 116-110
Publisher:
Date:
2021
Series:
Copyright:
Public Domain
Retrieved From:
U.S. Government Publishing Office: https://www.gpo.gov/
Format:
pdf
Media Type:
application/pdf
URL:
Help with citations