H. R. 2534
IN THE HOUSE OF REPRESENTATIVES
May 7, 2019
Mr. Himes introduced the following bill; which was referred to the Committee on Financial Services
To amend the Securities Exchange Act of 1934 to prohibit certain securities trading and related communications by those who possess material, nonpublic information.
This Act may be cited as the
Insider Trading Prohibition Act.
Prohibition on insider trading
The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended by inserting after section 16 the following new section:
Prohibition on insider trading
Prohibition against trading securities while in possession 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 in possession of material, nonpublic information relating to such security, security-based swap, or security-based swap agreement, or relating to the market for 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.
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) (referred to in this subsection as the ‘communicating person’), wrongfully to communicate material, nonpublic information relating to such security, security-based swap, or security-based swap agreement, or relating to the market for such security, security-based swap, or security-based swap agreement, to any other person if—
the other person—
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
communicates the information to another person who makes or causes such a purchase, sale, or entry while in possession of such information; and
such a purchase, sale, or entry while in possession of such information is reasonably foreseeable.
Standard and knowledge requirement
For purposes of this section, trading while in possession 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—
theft, bribery, misrepresentation, or espionage (through electronic or other means);
a violation of any Federal law protecting computer data or the intellectual property or privacy of computer users;
conversion, misappropriation, or other unauthorized and deceptive taking of such information; or
a breach of any fiduciary duty, a breach of a confidentiality agreement, a breach of contract, or a breach of any other personal or other relationship of trust and confidence.
It shall not be necessary that the person trading while in possession 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 in possession 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 or communicated.
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, profit from, or directly or indirectly induce the acts constituting the violation of this section.
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, if the Commission determines that such action is not inconsistent with the purposes of this section. The prohibitions of this section shall not apply to any person who acts at the specific direction of, and solely for the account of, a person whose own securities trading, or communications of material, nonpublic information, would be lawful under this section.
Not later than 180 days after the date of the enactment of this section, the Commission shall determine if any automatic trading transactions should be exempted from any of the provisions of this section and shall make such determination available to the public, including on the website of the Commission.
During the period between the date of the enactment of this section and the date on which the Commission makes a determination pursuant to subparagraph (A), automatic trading transactions shall be exempted from the provisions of this section.
Automatic trading transaction defined
For the purposes of this paragraph, the term
automatic trading transaction means any purchase or sale of a security, security-based swap, or security-based swap agreement that—
occurs automatically; or
is made pursuant to an advance election.
The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is further amended—
in section 21(d)(2), by inserting
, section 16A of this title after
section 10(b) of this title,;
in section 21A—
in subsection (g)(1), by inserting
and section 16A, after
in subsection (h)(1), by inserting
and section 16A, after
in section 21C(f), by inserting
or section 16A, after
Sense of Congress
It is the sense of the Congress that the amendments made by this Act are intended to supercede section 10(b) or 14e of the Securities Exchange Act of 1934 with regard to the wrongful use or wrongful communication of material, nonpublic information in connection with the purchase or sale of securities, security-based swaps, and security-based swap agreements.