Insider Trading Prohibition Act
This bill generally provides statutory authority for the prohibition against securities trading, as well as related communications to others, by a person aware of material, nonpublic information. The bill further provides, for purposes of establishing a violation of this prohibition, that it is not necessary for such a person to know specifically how such information was obtained or whether a personal benefit was paid or promised.
[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2655 Introduced in House (IH)]
<DOC>
117th CONGRESS
1st Session
H. R. 2655
To amend the Securities Exchange Act of 1934 to prohibit certain
securities trading and related communications by those who possess
material, nonpublic information.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
April 19, 2021
Mr. Himes (for himself and Mrs. Carolyn B. Maloney of New York)
introduced the following bill; which was referred to the Committee on
Financial Services
_______________________________________________________________________
A BILL
To amend the Securities Exchange Act of 1934 to prohibit certain
securities trading and related communications by those who possess
material, nonpublic information.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Insider Trading Prohibition Act''.
SEC. 2. PROHIBITION ON INSIDER TRADING.
(a) In General.--The Securities Exchange Act of 1934 (15 U.S.C. 78a
et seq.) is amended by inserting after section 16 the following new
section:
``SEC. 16A. PROHIBITION ON INSIDER TRADING.
``(a) Prohibition Against Trading Securities While Aware of
Material, Nonpublic Information.--It shall be unlawful for any person,
directly or indirectly, to purchase, sell, or enter into, or cause the
purchase or sale of or entry into, any security, security-based swap,
or security-based swap agreement, while aware of material, nonpublic
information relating to such security, security-based swap, or
security-based swap agreement, or any nonpublic information, from
whatever source, that has, or would reasonably be expected to have, a
material effect on the market price of any such security, security-
based swap, or security-based swap agreement, if such person knows, or
recklessly disregards, that such information has been obtained
wrongfully, or that such purchase or sale would constitute a wrongful
use of such information.
``(b) Prohibition Against the Wrongful Communication of Certain
Material, Nonpublic Information.--It shall be unlawful for any person
whose own purchase or sale of a security, security-based swap, or entry
into a security-based swap agreement would violate subsection (a),
wrongfully to communicate material, nonpublic information relating to
such security, security-based swap, or security-based swap agreement,
or any nonpublic information, from whatever source, that has, or would
reasonably be expected to have, a material effect on the market price
of any such security, security-based swap, or security-based swap
agreement, to any other person if--
``(1) the other person--
``(A) purchases, sells, or causes the purchase or
sale of, any security or security-based swap or enters
into or causes the entry into any security-based swap
agreement, to which such communication relates; or
``(B) communicates the information to another
person who makes or causes such a purchase, sale, or
entry while aware of such information; and
``(2) such a purchase, sale, or entry while aware of such
information is reasonably foreseeable.
``(c) Standard and Knowledge Requirement.--
``(1) Standard.--For purposes of this section, trading
while aware of material, nonpublic information under subsection
(a) or communicating material nonpublic information under
subsection (b) is wrongful only if the information has been
obtained by, or its communication or use would constitute,
directly or indirectly--
``(A) theft, bribery, misrepresentation, or
espionage (through electronic or other means);
``(B) a violation of any Federal law protecting
computer data or the intellectual property or privacy
of computer users;
``(C) conversion, misappropriation, or other
unauthorized and deceptive taking of such information;
or
``(D) a breach of any fiduciary duty, a breach of a
confidentiality agreement, a breach of contract, a
breach of any code of conduct or ethics policy, or a
breach of any other personal or other relationship of
trust and confidence for a direct or indirect personal
benefit (including pecuniary gain, reputational
benefit, or a gift of confidential information to a
trading relative or friend).
``(2) Knowledge requirement.--It shall not be necessary
that the person trading while aware of such information (as
proscribed by subsection (a)), or making the communication (as
proscribed by subsection (b)), knows the specific means by
which the information was obtained or communicated, or whether
any personal benefit was paid or promised by or to any person
in the chain of communication, so long as the person trading
while aware of such information or making the communication, as
the case may be, was aware, consciously avoided being aware, or
recklessly disregarded that such information was wrongfully
obtained, improperly used, or wrongfully communicated.
``(d) Derivative Liability.--Except as provided in section 20(a),
no person shall be liable under this section solely by reason of the
fact that such person controls or employs a person who has violated
this section, if such controlling person or employer did not
participate in, or directly or indirectly induce the acts constituting
a violation of this section.
``(e) Affirmative Defenses.--
``(1) In general.--The Commission may, by rule or by order,
exempt any person, security, or transaction, or any class of
persons, securities, or transactions, from any or all of the
provisions of this section, upon such terms and conditions as
it considers necessary or appropriate in furtherance of the
purposes of this title.
``(2) Directed trading.--The prohibitions of this section
shall not apply to any person who acts at the specific
direction of, and solely for the account of another person
whose own securities trading, or communications of material,
nonpublic information, would be lawful under this section.
``(3) Rule 10b-5-1 compliant transactions.--The
prohibitions of this section shall not apply to any transaction
that satisfies the requirements of Rule 10b-5-1 (17 CFR
240.10b5-1), or any successor regulation.''.
(b) Commission Review of Rule 10b-5-1.--Not later than 180 days
after the date of the enactment of this Act, the Securities and
Exchange Commission shall review Rule 10b-5-1 (17 CFR 240.10b5-1) and
make any modifications the Securities and Exchange Commission
determines necessary or appropriate because of the amendment to the
Securities Exchange Act of 1934 made by this Act.
(c) Conforming Amendments.--The Securities Exchange Act of 1934 (15
U.S.C. 78a et seq.) is further amended--
(1) in section 21(d)(2), by inserting ``, section 16A of
this title'' after ``section 10(b) of this title,'';
(2) in section 21A--
(A) in subsection (g)(1), by inserting ``and
section 16A,'' after ``thereunder,''; and
(B) in subsection (h)(1), by inserting ``and
section 16A,'' after ``thereunder,''; and
(3) in section 21C(f), by inserting ``or section 16A,''
after ``section 10(b)''.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Financial Services.
Mr. Cleaver moved to suspend the rules and pass the bill, as amended.
Considered under suspension of the rules. (consideration: CR H2460-2463; text: CR H2460)
DEBATE - The House proceeded with forty minutes of debate on H.R. 2655.
At the conclusion of debate, the Yeas and Nays were demanded and ordered. Pursuant to the provisions of clause 8, rule XX, the Chair announced that further proceedings on the motion would be postponed.
Pursuant to the provisions of H. Res. 403, proceedings on H.R. 2655 are considered vacated.
Passed/agreed to in House: Pursuant to section 5 of H. Res. 403, and the motion offered by Mr. Hoyer, the following bills passed under suspension of the rules: H.R. 144, as amended; H.R. 204, as amended; H.R. 210, as amended; H.R. 240; H.R. 707, as amended; H.R. 711, as amended; H.R. 1157, as amended; H.R. 1447, as amended; H.R. 1510, as amended; H.R. 1711, as amended; H.R. 2027; H.R. 2167, as amended; H.R. 2441; H.R. 2494; H.R. 2533; H.R. 2655, as amended; H.R. 2695, H.R. 2704; H.R. 2788; H.R. 2878, as amended; and H.R. 3008.(consideration: CR H2482-2520; text: CR H2515)
Pursuant to section 5 of H. Res. 403, and the motion offered by Mr. Hoyer, the following bills passed under suspension of the rules: H.R. 144, as amended; H.R. 204, as amended; H.R. 210, as amended; H.R. 240; H.R. 707, as amended; H.R. 711, as amended; H.R. 1157, as amended; H.R. 1447, as amended; H.R. 1510, as amended; H.R. 1711, as amended; H.R. 2027; H.R. 2167, as amended; H.R. 2441; H.R. 2494; H.R. 2533; H.R. 2655, as amended; H.R. 2695, H.R. 2704; H.R. 2788; H.R. 2878, as amended; and H.R. 3008. (consideration: CR H2482-2520; text: CR H2515)
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Received in the Senate and Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.