I 

116TH CONGRESS 

1ST SESSION H. R. 2534 

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 

MAY 7, 2019 

Mr. HIMES 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 IN POSSESSION OF MATERIAL, NONPUBLIC IN4 FORMATION.—It shall be unlawful for any person, directly 

5 or indirectly, to purchase, sell, or enter into, or cause the 

6 purchase or sale of or entry into, any security, security7 based swap, or security-based swap agreement, while in 

8 possession of material, nonpublic information relating to 

9 such security, security-based swap, or security-based swap 

10 agreement, or relating to the market for such security, se11 curity-based swap, or security-based swap agreement, if 

12 such person knows, or recklessly disregards, that such in13 formation has been obtained wrongfully, or that such pur14 chase or sale would constitute a wrongful use of such in15 formation. 

16 ‘‘(b) PROHIBITION AGAINST THE WRONGFUL COM17 MUNICATION OF CERTAIN MATERIAL, NONPUBLIC INFOR18 MATION.—It shall be unlawful for any person whose own 

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

20 entry into a security-based swap agreement would violate 

21 subsection (a) (referred to in this subsection as the ‘com22 municating person’), wrongfully to communicate material, 

23 nonpublic information relating to such security, security24 based swap, or security-based swap agreement, or relating 

25 to the market for such security, security-based swap, or 

26 security-based swap agreement, to any other person if— 


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1 ‘‘(1) the other person— 

2 ‘‘(A) purchases, sells, or causes the pur3 chase or sale of, any security or security-based 

4 swap or enters into or causes the entry into any 

5 security-based swap agreement, to which such 

6 communication relates; or 

7 ‘‘(B) communicates the information to an8 other person who makes or causes such a pur9 chase, sale, or entry while in possession of such 

10 information; and 

11 ‘‘(2) such a purchase, sale, or entry while in 

12 possession of such information is reasonably foresee13 able. 

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

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

16 trading while in possession of material, nonpublic in17 formation under subsection (a) or communicating 

18 material nonpublic information under subsection (b) 

19 is wrongful only if the information has been obtained 

20 by, or its communication or use would constitute, di21 rectly or indirectly— 

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

23 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, or a breach of any other personal 

10 or other relationship of trust and confidence. 

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

12 be necessary that the person trading while in posses13 sion of such information (as proscribed by sub14 section (a)), or making the communication (as pro15 scribed by subsection (b)), knows the specific means 

16 by which the information was obtained or commu17 nicated, or whether any personal benefit was paid or 

18 promised by or to any person in the chain of com19 munication, so long as the person trading while in 

20 possession of such information or making the com21 munication, as the case may be, was aware, con22 sciously avoided being aware, or recklessly dis23 regarded that such information was wrongfully ob24 tained or communicated. 


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

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

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

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

5 controlling person or employer did not participate in, prof6 it from, or directly or indirectly induce the acts consti7 tuting the violation of this section. 

8 ‘‘(e) EXEMPTED TRANSACTIONS.— 

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

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

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

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

13 section, upon such terms and conditions as it con14 siders necessary or appropriate, if the Commission 

15 determines that such action is not inconsistent with 

16 the purposes of this section. The prohibitions of this 

17 section shall not apply to any person who acts at the 

18 specific direction of, and solely for the account of, a 

19 person whose own securities trading, or communica20 tions of material, nonpublic information, would be 

21 lawful under this section. 

22 ‘‘(2) AUTOMATIC TRADING.— 

23 ‘‘(A) IN GENERAL.—Not later than 180 

24 days after the date of the enactment of this sec25 tion, the Commission shall determine if any 


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1 automatic trading transactions should be ex2 empted from any of the provisions of this sec3 tion and shall make such determination avail4 able to the public, including on the website of 

5 the Commission. 

6 ‘‘(B) INTERIM APPLICATION.—During the 

7 period between the date of the enactment of 

8 this section and the date on which the Commis9 sion makes a determination pursuant to sub10 paragraph (A), automatic trading transactions 

11 shall be exempted from the provisions of this 

12 section. 

13 ‘‘(C) AUTOMATIC TRADING TRANSACTION

14 DEFINED.—For the purposes of this paragraph, 

15 the term ‘automatic trading transaction’ means 

16 any purchase or sale of a security, security17 based swap, or security-based swap agreement 

18 that— 

19 ‘‘(i) occurs automatically; or 

20 ‘‘(ii) is made pursuant to an advance 

21 election.’’. 

22 (b) CONFORMING AMENDMENTS.—The Securities 

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

24 amended— 


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

2 16A of this title’’ after ‘‘section 10(b) of this title,’’; 

3 (2) in section 21A— 

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

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

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

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

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

9 16A,’’ after ‘‘section 10(b)’’. 

10 (c) SENSE OF CONGRESS.—It is the sense of the Con11 gress that the amendments made by this Act are intended 

12 to supercede section 10(b) or 14e of the Securities Ex13 change Act of 1934 with regard to the wrongful use or 

14 wrongful communication of material, nonpublic informa15 tion in connection with the purchase or sale of securities, 

16 security-based swaps, and security-based swap agree17 ments. 

Æ 


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