Themselves after they are finished speaking to mute themselves. Members andtes witnesses as appropriate when not recognized in order to avoid background noise. Members are reminded that all house rules related to order of the court applied to this hearing. Insidering is titled, trading and stock option grants the examination of corporate integrity in the covid19 pandemic. We know we have votes on the floor. We will not have any further delays of the hearing in order to allow members to vote. Rather members should go vote haveeturn and while we all part of the alphabet to vote in, i am sure there could be some accommodation made so if it is your turn to ask questions, you can vote with others not of your same alphabetical characterization. Believe mr. Ting, i meeks has agreed to serve chair until my return. I will recognize myself for five minutes for an opening statement. System isl market unique in history. Up until 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 an Investment Opportunities were limited to those which happen to be able. You would not trust your money with an enterprise of strangers and you did not have liquidity since you could sell your investment pretty much only to somebody else. At that point people could rely on personal trust. Today investors turn their money ,ver to anonymous insiders corporate boards and executives who they have never met. They know that the insiders have more information, attention and power. Vyings oft have the personal trust. They rely on law to make sure insiders are treating investors fairly. I would i will continue. We had a little technical problem. We apply that system to the covert pandemic in which nearly 200,000 americans have lost their lives and in which many pandemicected by this are having sudden increases or decreases in their value. Many pharmaceutical firms, even the suggestion of involving a federal program can cause a shares to shoot up in value. Following this sort of announcement, kodak, novavax, and back start each soft stock prices rise by over 400 . The fcc has mind reminded companies that in this pandemic they should not only abide by law but practice good corporate hygiene. Chair clayton has reiterated these views in a recent letter regarding todays hearing which i submit for the record and will be made part of the record without objection. Admonishments are not laws and regulations. Admonishments will not deter the truly greedy. We have to resign our laws and to govern those who cannot be governed by mere admonishments. Taxpayers havele in federal. 1 billion contracts with novavax and moderna to develop a vaccine. They have sold over 60 Million Dollars in their companys stock. We need to know that they were not taking advantage of any inside information, that perhaps their stock has gone up too high given the possibilities. Isreader greater concern the activity involving kodak with the announcement of a loan that raised insider trader concern. In particular we have a concern on Stock Options and their grant dates. Compensationty insiders needs to be approved by shareholders. When Shareholders Approve a plan that says that Stock Options will be granted with a stock option exercise price equal to fair market value on grant date, executives whoat get these Stock Options will live by that. If instead the fair market value does not reflect Material Information, Insider Information that will be announced the next week, thennext shareholders have been duped into approving compensation that does not reflect fair market value. I want to thank the insiders at kodak who have added insult to injury. First they granted Stock Options at what they knew to be an unfairly low price and then they spit shareholder money on Corporate Law firms and told him it was legal. Tot memo tells us we have change the law because of any major firm can say this is legal, it should not be. And so we have to deal with the issues of what is called spring loading where Shareholders Approve a Compensation Plan based on fair market value. It has to be fair market value when the market has knowledge of the material transactions that the insiders know about. I look forward to exploring this. Ith our witnesses we will now hear from the Ranking Member for four minutes for his opening statement. Thank you, mr. Chairman. The definition of insanity is doing the same thing expecting different results. Here we are once again holding a hearing on an issue we have already held a hearing on. Three of these bills attached to this hearing have not only had a hearing, they have been passed by the house. I asked the committee why are we spending precious time and resources on bills that have already passed the house of representatives nine months ago just because we keep having hearings on bills that have already passed does not mean the senate is going to take them up. Insider trading is not only wrong, it is illegal and not only does it hurt the integrity of our Capital Markets, it also hurts our main Street Investors as well as mr. Mss 401 k . We agree Insider Trading should be punished for the full 16 of the law. The subcommittee should not be used as a chain game for companies for wrongdoing that they perceived to have happened. The facts surrounding one company appear to be suspicious and need to be investigated. That is not our job. The securities and Exchange Commission is tapped with ensuring market integrity. And under the exchange act of 1934 the fcc has the power to bring Enforcement Actions in instances of Insider Trading. During 2019 the commission brought 862 Enforcement Actions to hold individual issuers and others accountable, sending a clear message to market participants. Last years results speak for themselves. Actions,cement and obtained a judgment totaling more than 4. 3 billion in penalties. Nearly 600 bars or suspensions against participants, suspended trading in securities of 271 issuers and returns nearly 1. 2 billion to investors. Instead of playing judge, jury and executioner, the committee should be focused on the Bipartisan Solutions that support job creators of all sizes, particularly Small Businesses. These proposals would strengthen broader access to capital, reduce costs and burden and improve access for investors to better put their money to work and create more opportunities for everyday investors. I am not just going to curse the political darkness. I will try to live a policy candle. Here is a partial list of what we should be discussing today. 860 introduced by the Ranking Member. We have my legislation which is a Small Business mergers some act, something we have dealt with for four congress is in a row. Hr 1909, helping lead our startups. Hr 2899, the main street growth act. 3987, alleviating stress to help investors act. 4076, modernizing disclosures for investors act introduced by ms. Wagners dear hr 2919, improving investment issuers act. Representative style, helping startups continue to grow act. The improvement act introduced by the subcommittee by its Ranking Member hollingsworth. I could go on and on. The list is exhaustive. We have much more to do. Instead of Holding Hearings on legislation the house has already acted on, lets move forward on Bipartisan Solutions that deliver the results the people deserve from the Financial Services committee. We know there are problems. We need to address those problems. This is not going to do it, unfortunately. One part of this hearing is on my bill to deal with spring loading which is not been considered and which bans a practice that is wrongful and unfortunately legal. We have a strong purpose to have this hearing. I recognize the Ranking Member for one minute. Insider trading is wrong. We can agree on that. The fcc is doing a really good job to pursue bad actors. What we should be spending our time on as my friend just said, we should be spending time on identifying solutions to strengthen our Economy Economic recovery and Health Workers come workforcey to the after the virus, after we get testing and treatment going. Today i introduce a bill to do just that. Gig worker Equity Compensation act. It is not to be bound by traditional constraints such as an office or set hours or traditional employeremployee relationships. In workers are critical and our technologically driven world. My bill allows gig workers such as rideshare drivers to share in the same economic benefits, the potential of owning the businesses they are helping to improve. Todays hearing should be focused on that type of solution, not just a rear facing set of issues in election year. Thanks so much. I will point out that spring loading is legal until this Committee Makes it illegal and it is just as wrong. If we wish to debate, the chairs can debate but you should not opine about everyone elses opinion. That is not in good form for the chair. You are not recognized. When people question whether this is a legitimate hearing, it is appropriate to spend 10 or 20 seconds responding. Today we welcome the hegemony of chill fis ool, dr. And mr. Gavin martin. Researchool is a director where he focuses on corporate crime and wrongdoing and the ways in which Corporate Power distorts our democracy. The distinguished professor of business law and codirector of the institute of law and economics at the university of pennsylvania law school. Is chair of the enforcement practice at dickinson wright. He previously served as senior counsel for the fccs division of enforcement. Mr. Martin is Senior Vice President and general counsel for the society for Corporate Governance where he leads the efforts related to Corporate Governance, laws and regulations. Witnesses are reminded that your oral testimony will be limited to five minutes. A chime will go off at the end of your time and i ask you to respect our rules by wrapping up your testimony. Without objection, your statements will be made part of the record. Recognize our first witness, mr. Claypool. You. Ank chair sherman, Ranking Members. On behalf of more than 500,000 members, many of whom are investors and are hopeful for the development of affordable treatment, we welcome this probe into Insider Trading. The events are concerning. The chair described the concerns well. Moderna therapeutics announced that all 45 participants in the first phase of his trials develop antibodies. The good news that pushed up the stock price 30 to an alltime high of 87. Prior to the announcement, several executives modified new plans. In the days following the announcement, the ceo and other executives sold about 90 million worth of company shares. It is taxpayer money funding 100 of this to develop a vaccine for covid19. A study published found that stock market value for the Biotech Companies in the s p 500 grew by 130 billion between january and august. Executives from three of these 370nies sold at least million in Company Stocks. Reporting withs a number of Enforcement Actions has plummeted to its lowest point in decades. Thearch has documented enforcement at the fcc and across the federal government. If an agency is following the trump administrations orders and numerous policies such as any executive order and subsequent memo, that deserves a hearing. As for legislation, we look forward to passage of a bill requiring the fcc to provide monthly reports on consumer and investor protection. Ideally the fcc will want to report an increase against opportunistic inquiries. We applaud the house were proving the Public Citizen trading reform bill. It establishes a clear law against illegal trading. Passage of the bill offered by Carolyn Maloney and the trading plan offered by chair waters. One is compensation deferral meccas is a that requires citizens place a significant percent of compensation in a collective pool. Company be found to later engage in any misconduct, then the tenure managers will fund the finding. It already exists in separate those sponsored by Tulsi Gabbard and katie porter. It is crucial for congress to commission the federal aid with the intention of helping workers so that it is not the burden of pandemic propagator. We applaud the heroes act and look forward to working with you when you fashion the next round of recovery. I welcome your questions. This may be the first time in decades the witness has concluded in less than five minutes. The witness did not choose to yield his remaining time to me and i will recognize the doctor. We are going to break away from this momentarily to keep our commitment to live congressional coverage. The u. S. House is coming for a solutions to the many challenges facing our nation. Give them wisdom and insight to engage in their deliberations. Bless those throughout our nation who are suffering from the pandemic, fires, hurricanes and flooding. You are other you are our refuge and strength. Increase our faith that we might not fear, though the earth should change, though the waters roar and foam , though the winds swirl and destroy all in their paths. Please, accompany us through it all. Lord, have mercy. May all that is done that is done this day be for your greater honor and glory. Amen. The speaker pro tempore pursuant to section 4a of House Resolution 967, the journal of the last days proceedings is approved. The chair will now lead the house in the pledge of allegiance. I pledge allegiance to the flag of the United States of america and to the republic for which it stands, one nation, under god, indivisible, with liberty and justice for all. The chair lays before the house a communication. The clerk the honorable the speaker, house of representatives. Madam, pursuant to the permission granted in clause 2h of rule 2 of the rules of the u. S. House of representatives, the clerk received the following message from the secretary of the senate on september 17, twenlt, at 4 03 p. M. That the Senate Passed senate 3051. With best wished i am, signed, sincerely, cherl l. Johnson, clerk of the house cheryl l. Johnson, clerk of the house. The speaker pro tempore pursuant to clause carries brought. Constitutes securities fraud. False statements that are made can subject the officials to criminal liability. This is not a gray area. Premature disclosure of uncertain information may prove inaccurate. At the same time, stock prices are reacting dramatically. Chairman sherman identified the possibility that stock prices were too high. The concept of stock prices reflect fundamental value or that the value of these companies is knowable at any given point right now. It is something that is very challenging from a market regulatory perspective. And as is running short a law professor, i am always longwinded. I will cut to the chase in response to your question about Stock Options and insidertrading. Let me say a couple of words about regulatory reform. The law doesnt prohibit accurate statements even if the statements are forwardlooking. Onn if they are not based hard science about what a vaccine is going to do. The law doesnt permit executives from Trading Opportunities through their public statements. If i could just take a minute to wrap up the potential which the of a plan current market environment has exposed is creating a potential regulatory gap. A potential opportunity for profitable manipulation of disclosures in order for the potential of self gain is a promising area. Thatt is an area legislation has not fully recognized. I would be happy to talk about that more. Thank you for your testimony. Thank you and good afternoon, chairman and Ranking Member and distinguished members. Thank you for giving me the opportunity to testify on Critical Issues impacting our markets. Our perspective comes from 32 years of experience in Capital Markets enforcements, investigations and integrity issues including my work at the as a prosecutor, as a practicing defense and governance lawyer. Unlikeve that in 2020, 20 or more years ago, most corporate birds dashboards and managements want to get it right. Nevertheless, we still see activity that gives rise to questions about commitment to dutiesnce and commonlaw that are the responsibility of corporate custodians. Identifiedtee has trading spring loading and bullet dodging. Concern,iable areas of i suggest the committee respectfully that covid19 solutions related to Capital Market activities should provide scrutiny of other issues. Regulatione first, and its inapplicability to private issuers. We saw the exception to weeks ago when the