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[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>
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