In a letter earlier this week, the Investment Company Institute supported the Securities Exchange Commissions proposal to amend Form8-K under the Securities Exchange Act of 1934, but suggested that several changes be made.
The proposed amendment would require adding a new item to Form 8-K requiring the disclosure of certain insider trading activities, including directors and executive officers transactions in company equity securities and loans to them that are guaranteed by their company.
"The Institute strongly supports the Commissions proposal," the ICIs letter said. "Our members invest almost $4 trillion in U.S. equity securities on behalf of millions of individual shareholders. As significant participants in the securities markets, our members are keenly interested in having timely access to information about transactions in an issuers securities by corporate insiders."
However, there are some parts of the proposal that the ICI believes should be changed. The proposal says that the transactions that would be required in Form 8-K that are also required by Section 16(a) of the Exchange Act would have to be disclosed in both places. The ICI believes that duplication is unnecessary and could lead to some confusion for investors.
While the ICI supports the inclusion of a requirement to report transactions in company derivative securities, it believes the rule is unclear, specifically because there is no mention of security-based swap agreements.
The SEC sought comment specifically on whether the requirements should extend beyond directors and executive officers to principal financial officers and principal accounting officers. The ICI believes it should. The Institute also said that the requirements should include directors and officers holdings in the company in addition to transactional information.
Finally, while the ICI supports the tabular format of disclosure proposed by the SEC, it suggests that a "plain English" description of the transactions to facilitate investor understanding.