I 

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. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Insider Trading Prohi5 bition Act’’. 

6 SEC. 2. PROHIBITION ON INSIDER TRADING. 

7 (a) IN GENERAL.—The Securities Exchange Act of 

8 1934 (15 U.S.C. 78a et seq.) is amended by inserting after 

9 section 16 the following new section: 


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1 ‘‘SEC. 16A. PROHIBITION ON INSIDER TRADING. 

2 ‘‘(a) PROHIBITION AGAINST TRADING SECURITIES

3 WHILE AWARE OF MATERIAL, NONPUBLIC INFORMA4 TION.—It shall be unlawful for any person, directly or in5 directly, to purchase, sell, or enter into, or cause the pur6 chase or sale of or entry into, any security, security-based 

7 swap, or security-based swap agreement, while aware of 

8 material, nonpublic information relating to such security, 

9 security-based swap, or security-based swap agreement, or 

10 any nonpublic information, from whatever source, that 

11 has, or would reasonably be expected to have, a material 

12 effect on the market price of any such security, security13 based swap, or security-based swap agreement, if such 

14 person knows, or recklessly disregards, that such informa15 tion has been obtained wrongfully, or that such purchase 

16 or sale would constitute a wrongful use of such informa17 tion. 

18 ‘‘(b) PROHIBITION AGAINST THE WRONGFUL COM19 MUNICATION OF CERTAIN MATERIAL, NONPUBLIC INFOR20 MATION.—It shall be unlawful for any person whose own 

21 purchase or sale of a security, security-based swap, or 

22 entry into a security-based swap agreement would violate 

23 subsection (a), wrongfully to communicate material, non24 public information relating to such security, security-based 

25 swap, or security-based swap agreement, or any nonpublic 

26 information, from whatever source, that has, or would reaVerDate Sep 11 2014 01:49 May 15, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H2655.IH H2655

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1 sonably be expected to have, a material effect on the mar2 ket price of any such security, security-based swap, or se3 curity-based swap agreement, to any other person if— 

4 ‘‘(1) the other person— 

5 ‘‘(A) purchases, sells, or causes the pur6 chase or sale of, any security or security-based 

7 swap or enters into or causes the entry into any 

8 security-based swap agreement, to which such 

9 communication relates; or 

10 ‘‘(B) communicates the information to an11 other person who makes or causes such a pur12 chase, sale, or entry while aware of such infor13 mation; and 

14 ‘‘(2) such a purchase, sale, or entry while aware 

15 of such information is reasonably foreseeable. 

16 ‘‘(c) STANDARD AND KNOWLEDGE REQUIREMENT.— 

17 ‘‘(1) STANDARD.—For purposes of this section, 

18 trading while aware of material, nonpublic informa19 tion under subsection (a) or communicating material 

20 nonpublic information under subsection (b) is wrong21 ful only if the information has been obtained by, or 

22 its communication or use would constitute, directly 

23 or indirectly— 

24 ‘‘(A) theft, bribery, misrepresentation, or 

25 espionage (through electronic or other means); 


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1 ‘‘(B) a violation of any Federal law pro2 tecting computer data or the intellectual prop3 erty or privacy of computer users; 

4 ‘‘(C) conversion, misappropriation, or other 

5 unauthorized and deceptive taking of such in6 formation; or 

7 ‘‘(D) a breach of any fiduciary duty, a 

8 breach of a confidentiality agreement, a breach 

9 of contract, a breach of any code of conduct or 

10 ethics policy, or a breach of any other personal 

11 or other relationship of trust and confidence for 

12 a direct or indirect personal benefit (including 

13 pecuniary gain, reputational benefit, or a gift of 

14 confidential information to a trading relative or 

15 friend). 

16 ‘‘(2) KNOWLEDGE REQUIREMENT.—It shall not 

17 be necessary that the person trading while aware of 

18 such information (as proscribed by subsection (a)), 

19 or making the communication (as proscribed by sub20 section (b)), knows the specific means by which the 

21 information was obtained or communicated, or 

22 whether any personal benefit was paid or promised 

23 by or to any person in the chain of communication, 

24 so long as the person trading while aware of such in25 formation or making the communication, as the case 


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1 may be, was aware, consciously avoided being aware, 

2 or recklessly disregarded that such information was 

3 wrongfully obtained, improperly used, or wrongfully 

4 communicated. 

5 ‘‘(d) DERIVATIVE LIABILITY.—Except as provided in 

6 section 20(a), no person shall be liable under this section 

7 solely by reason of the fact that such person controls or 

8 employs a person who has violated this section, if such 

9 controlling person or employer did not participate in, or 

10 directly or indirectly induce the acts constituting a viola11 tion of this section. 

12 ‘‘(e) AFFIRMATIVE DEFENSES.— 

13 ‘‘(1) IN GENERAL.—The Commission may, by 

14 rule or by order, exempt any person, security, or 

15 transaction, or any class of persons, securities, or 

16 transactions, from any or all of the provisions of this 

17 section, upon such terms and conditions as it con18 siders necessary or appropriate in furtherance of the 

19 purposes of this title. 

20 ‘‘(2) DIRECTED TRADING.—The prohibitions of 

21 this section shall not apply to any person who acts 

22 at the specific direction of, and solely for the ac23 count of another person whose own securities trad24 ing, or communications of material, nonpublic infor25 mation, would be lawful under this section. 


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1 ‘‘(3) RULE 10b–5–1 COMPLIANT TRANS2 ACTIONS.—The prohibitions of this section shall not 

3 apply to any transaction that satisfies the require4 ments of Rule 10b–5–1 (17 CFR 240.10b5–1), or 

5 any successor regulation.’’. 

6 (b) COMMISSION REVIEW OF RULE 10b–5–1.—Not 

7 later than 180 days after the date of the enactment of 

8 this Act, the Securities and Exchange Commission shall 

9 review Rule 10b–5–1 (17 CFR 240.10b5–1) and make any 

10 modifications the Securities and Exchange Commission 

11 determines necessary or appropriate because of the 

12 amendment to the Securities Exchange Act of 1934 made 

13 by this Act. 

14 (c) CONFORMING AMENDMENTS.—The Securities 

15 Exchange Act of 1934 (15 U.S.C. 78a et seq.) is further 

16 amended— 

17 (1) in section 21(d)(2), by inserting ‘‘, section 

18 16A of this title’’ after ‘‘section 10(b) of this title,’’; 

19 (2) in section 21A— 

20 (A) in subsection (g)(1), by inserting ‘‘and 

21 section 16A,’’ after ‘‘thereunder,’’; and 

22 (B) in subsection (h)(1), by inserting ‘‘and 

23 section 16A,’’ after ‘‘thereunder,’’; and 


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1 (3) in section 21C(f), by inserting ‘‘or section 

2 16A,’’ after ‘‘section 10(b)’’. 

Æ 


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