116TH CONGRESS 

1ST SESSION H. R. 2534 

AN ACT 

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, 
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1 SECTION 1 SHORT TITLE. 

2 This Act may be cited as the ‘‘Insider Trading Prohi3 bition Act’’. 

4 SEC. 2. PROHIBITION ON INSIDER TRADING. 

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

6 1934 (15 U.S.C. 78a et seq.) is amended by inserting after 

7 section 16 the following new section: 

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

9 ‘‘(a) PROHIBITION AGAINST TRADING SECURITIES

10 WHILE AWARE OF MATERIAL, NONPUBLIC INFORMA11 TION.—It shall be unlawful for any person, directly or in12 directly, to purchase, sell, or enter into, or cause the pur13 chase or sale of or entry into, any security, security-based 

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

15 material, nonpublic information relating to such security, 

16 security-based swap, or security-based swap agreement, or 

17 any nonpublic information, from whatever source, that 

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

19 effect on the market price of any such security, security20 based swap, or security-based swap agreement, if such 

21 person knows, or recklessly disregards, that such informa22 tion has been obtained wrongfully, or that such purchase 

23 or sale would constitute a wrongful use of such informa24 tion. 

25 ‘‘(b) PROHIBITION AGAINST THE WRONGFUL COM26 MUNICATION OF CERTAIN MATERIAL, NONPUBLIC INFOR-
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1 MATION.—It shall be unlawful for any person whose own 

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

3 entry into a security-based swap agreement would violate 

4 subsection (a), wrongfully to communicate material, non5 public information relating to such security, security-based 

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

7 information, from whatever source, that has, or would rea8 sonably be expected to have, a material effect on the mar9 ket price of any such security, security-based swap, or se10 curity-based swap agreement, to any other person if— 

11 ‘‘(1) the other person— 

12 ‘‘(A) purchases, sells, or causes the pur13 chase or sale of, any security or security-based 

14 swap or enters into or causes the entry into any 

15 security-based swap agreement, to which such 

16 communication relates; or 

17 ‘‘(B) communicates the information to an18 other person who makes or causes such a pur19 chase, sale, or entry while aware of such infor20 mation; and 

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

22 of such information is reasonably foreseeable. 

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

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

25 trading while aware of material, nonpublic informa-
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1 tion under subsection (a) or communicating material 

2 nonpublic information under subsection (b) is wrong3 ful only if the information has been obtained by, or 

4 its communication or use would constitute, directly 

5 or indirectly— 

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

7 espionage (through electronic or other means); 

8 ‘‘(B) a violation of any Federal law pro9 tecting computer data or the intellectual prop10 erty or privacy of computer users; 

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

12 unauthorized and deceptive taking of such in13 formation; or 

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

15 breach of a confidentiality agreement, a breach 

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

17 ethics policy, or a breach of any other personal 

18 or other relationship of trust and confidence for 

19 a direct or indirect personal benefit (including 

20 pecuniary gain, reputational benefit, or a gift of 

21 confidential information to a trading relative or 

22 friend). 

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

24 be necessary that the person trading while aware of 

25 such information (as proscribed by subsection (a)), 
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1 or making the communication (as proscribed by sub2 section (b)), knows the specific means by which the 

3 information was obtained or communicated, or 

4 whether any personal benefit was paid or promised 

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

6 so long as the person trading while aware of such in7 formation or making the communication, as the case 

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

9 or recklessly disregarded that such information was 

10 wrongfully obtained, improperly used, or wrongfully 

11 communicated. 

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

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

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

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

16 controlling person or employer did not participate in, or 

17 directly or indirectly induce the acts constituting a viola18 tion of this section. 

19 ‘‘(e) AFFIRMATIVE DEFENSES.— 

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

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

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

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

24 section, upon such terms and conditions as it con-
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1 siders necessary or appropriate in furtherance of the 

2 purposes of this title. 

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

4 this section shall not apply to any person who acts 

5 at the specific direction of, and solely for the ac6 count of another person whose own securities trad7 ing, or communications of material, nonpublic infor8 mation, would be lawful under this section. 

9 ‘‘(3) RULE 10b–5–1 COMPLIANT TRANS10 ACTIONS.—The prohibitions of this section shall not 

11 apply to any transaction that satisfies the require12 ments of Rule 10b–5–1 (17 CFR 240.10b5–1), or 

13 any successor regulation.’’. 

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

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

16 this Act, the Securities and Exchange Commission shall 

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

18 modifications the Securities and Exchange Commission 

19 determines necessary or appropriate because of the 

20 amendment to the Securities Exchange Act of 1934 made 

21 by this Act. 

22 (c) 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)’’. 

Passed the House of Representatives December 5, 

2019. 

Attest: 

Clerk. 
116TH CONGRESS 

1ST SESSION H. R. 2534 

AN ACT 

To amend the Securities Exchange Act of 1934 to 

nonpublic information. communications by those who possess material, prohibit certain securities trading and related