Sen. William Proxmire (D-Wis.), chairman of the Senate Banking Committee, yesterday introduced his long-awaited bill designed to curb illegal insider stock trading and corporate takeovers.

Proxmire has been critical of Wall Street and the takeover boom for several years. His bill, cosponsored by eight of the other 10 Democrats on the banking panel, would stiffen the penalties for illegal insider stock trading and require corporate raiders and others to make more thorough and timely disclosure of their takeover plans.

Because of his leadership of the Banking Committee, Proxmire has an important role in the fate of takeover bills. One of the bill's other sponsors is Sen. Donald W. Riegle Jr. (D-Mich.), who, as chairman of the Banking Committee's securities subcommittee, also has a strong hand in moves to discourage insider trading.

"We are now in the throes of a massive white-collar crime wave," Proxmire said. "Our capital markets are besieged by a new breed that makes Ponzi look like a petty pickpocket. This new breed is the market-manipulating corporate raider. The purpose {of this bill} is simple: to redress the rampant manipulation now undermining the stability of our capital markets."

One of the bill's other sponsors, Sen. James R. Sasser (D-Tenn.), said yesterday he wants bidders to be required to submit a community impact statement and wants to see a limit on the amount of money that can be borrowed to finance a takeover.

Proxmire's bill would:Increase the criminal penalties for trading stocks on the basis of inside information from a maximum of five years per count to 10 years, and increase the maximum criminal fine from $100,000 to $1 million. Require a minimum one-year prison term, to be served concurrently with other penalties, for perjury or obstruction of justice in connection with an insider probe. Require the registration of risk arbitrage funds, which invest in stocks of companies involved in corporate takeovers, with the Securities and Exchange Commission. Require corporate raiders and other investors to disclose holdings in a public company within one day of reaching 3 percent, and prohibit acquisitions of stock beyond 3 percent until there is public disclosure. (Current rules, which require disclosure within 10 days of reaching 5 percent, do not prevent raiders from amassing stakes in excess of 5 percent during the 10-day window.) Change the definition of an investor "group" required to disclose the combined holdings of its members to include persons acting in a parallel manner with knowledge of one another's transactions, and require "group" disclosure at 3 percent.

Expand disclosure requirements for those with stakes of 3 percent or more to include: a list of persons with whom purchase of the shares has been discussed in the last 90 days; the fees paid to lenders or others in connection with the stock purchase; and the sources of financing. Investors also would be required to specify whether the purpose of the stock purchase is for investment or to seek control of the company. If the investor claims the purchase is for investment purposes only, no tender offer may be made for six months. Extend from 20 business days to 35 the period during which a tender offer to purchase shares in a target company must be left open. The bill also would restrict "creeping" tender offers by prohibiting open market stock purchases in excess of 15 percent of a company's stock. If an investor wished to go beyond 15 percent, he or she could do so only through a tender offer to all shareholders, giving everyone an equal chance to sell. (This would eliminate the practice of "sweeping the Street" by buying chunks of a company's shares from professional speculators.) Prohibit greenmail, which is the purchase by the target company of stock at a premium price from a raider who in return agrees to drop a takeover bid. Also, prohibit the adoption of the powerful "poison pill" takeover defense during takeover battles, and prohibit the adoption of lucrative "golden parachute" contracts during a takeover contest. Golden parachutes are lucrative severance arrangements for top executives who lose their jobs through takeovers. Prohibit the use of surplus pension assets to finance a takeover for five years following a takeover. Also, allow managers of pension funds to take into account long term investment prospects.

CAPTION: Proxmire says markets "are besieged by a new breed that makes Ponzi look like a petty pickpocket."