This past week, the House Financial Services Committee considered and passed a few bills that would, if passed by the House, result in changes to the securities laws. These include:

The Investor Protection and Capital Markets Fairness Act (H.R.4344), a bill by Representative Ben McAdams (D-UT), would substantially strengthen the authority of the Securities and Exchange Commission (SEC) to recover the wrongful gains of securities law violators for investors. The bill passed the Committee by a bipartisan vote of 49-5. This would overturn the recent Supreme Court decision in Kokesh v. SEC, which held that disgorgement is a penalty and is therefore subject to a five-year statute of limitations. As a result of that case, the SEC may only bring cases for disgorgement within five years of the date of the violation, regardless of whether the SEC was able to detect it within five years of the violation.

The Greater Accountability in Pay Act (H.R. 4242), a bill by Representative Nydia Velázquez (D-NY), would require public companies to disclose the pay raise percentage of their executives and of their median-pay employees over the past year and compare these percentages to the rate of inflation. The bill passed the Committee by a vote of 32-21.

The 8-K Trading Gap Act (H.R. 4335), a bill by Representative Carolyn Maloney (D-NY), Chair of the Subcommittee on Investor Protection, Entrepreneurship and Capital Markets, would fix a supposed loophole to prevent corporate insiders from profiting based on nonpublic information. The bill passed the Committee by a unanimous, bipartisan vote of 52-0. The bill would address the 4-day "gap" that may exist between the occurrence of a material event and its disclosure on a Form 8-K and the possibility that insiders may trade on material nonpublic information.

The ESG Disclosure Simplification Act (H.R. 4329), a bill by Representative Juan Vargas (D-CA), would require public companies to disclose information on their environmental, social and governance (ESG) practices. The bill passed the Committee by a vote of 31-22. The bill would require the SEC to engage in rulemaking to identify ESG information that would be required to be disclosed by public companies in their proxy statements.

The Corporate Management Accountability Act (H.R. 4320), a bill by Representative Katie Porter (D-CA), would require public companies to disclose their policies on whether senior executives or shareholders bear the costs of paying the company's fines and penalties, in order to help prevent the cost of fines being passed off to investors. The bill passed the Committee by a vote of 31-22.

The House of Representatives passed H.R. 3625, the PCAOB Whistleblower Protection Act of 2019, a bill that would protect individuals who blow the whistle on violations and bad actors by establishing a whistleblower program at the Public Company Accounting Oversight Board (PCAOB) similar to the program at the SEC. This bill was introduced by Rep. Sylvia Garcia (D-TX). It was passed by a voice vote.

Visit us at mayerbrown.com

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2019. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.