U.S. SECURITIES GROUP BACKS INSIDER RESTRAINTS
The Securities Industry Association
backed a variety of restraints on insider trading and hostile
corporate takeovers and asked Congress to define insider
trading in law.
    The industry trade association called on U.S. securities
firms to take steps to protect sensitive corporate secrets to
guard against illegal trading by employees.
    The association also backed broad federal restrictions on a
variety of tactics used in hostile corporate takeovers.
    But it said investment banking firms should be allowed to
continue to engage in both arbitrage and merger and acquisition
activities so long as those functions were kept separate.
    The SIA, in a report adopted yesterday by its board of
directors, backed a higher enforcement budget for the federal
Securities and Exchange Commission and called on U.S. stock
exchanges to beef up their supervision of member brokerages.
    The report said securities firms "should be more rigorous in
restricting sensitive information on a need-to-know basis."
    It said firms should train their employees to understand
the need for confidentiality of market-sensitive information.
    It said legislation to define insider trading should avoid
expanding current law in a way that would impede the market.
    It said an insider trading definition should exempt a
securities firm from liability for law violations by its
employees unless the firm had participated in or was aware of
the wrongdoing.
    In the mergers and acquisitions area, the association
advocated a ban on greenmail payments or poison pill takeover
protection plans without prior shareholder approval.
    It said a group or individual buying up a company's stock
should be required to file a public disclosure statement before
acquiring more than five pct of the company's shares. Under
current law, disclosure may be made as late as ten days after
exceeding the five pct limit.
    The association said all purchases exceeding 20 pct of a
company's voting stock shouls be made only through a tender
offer open to all shareholders. Under current law there is no
limit on open market purchases.
    The group said the federal government should preempt state
regulation of defensive takeover tactics.
    The group said all tender offers should remain open for at
least 30 calendar days.
    The current requirement is expressed in business days.
    It said so-called "lockup" devices, in which securities are
issued to a friendly investor to seal a takeover deal or fend
off an unfriendly predator should be limited to 18.5 pct of the
target company's total common stock.
    Association president Edward O'Brien said the group acted
out of concern over the ad hoc restructuring of corporate
America on Wall Street and investor fears about insider trading
and fairness in the marketplace.
 Reuter
