IB 

Union Calendar No. 172 

116TH CONGRESS 

1ST SESSION H. R. 2534 

[Report No. 116–219] 

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 

SEPTEMBER 27, 2019 

Additional sponsors: Mrs. CAROLYN B. MALONEY of New York and Mr. HECK

SEPTEMBER 27, 2019 

Reported with an amendment, committed to the Committee of the Whole 

House on the State of the Union, and ordered to be printed 

[Strike out all after the enacting clause and insert the part printed in italic] 

[For text of introduced bill, see copy of bill as introduced on May 7, 2019] 


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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. 


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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: 

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

11 ‘‘(a) PROHIBITION AGAINST TRADING SECURITIES

12 WHILE IN POSSESSION OF MATERIAL, NONPUBLIC INFOR13 MATION.—It shall be unlawful for any person, directly or 

14 indirectly, to purchase, sell, or enter into, or cause the pur15 chase or sale of or entry into, any security, security-based 

16 swap, or security-based swap agreement, while in possession 

17 of material, nonpublic information relating to such secu18 rity, security-based swap, or security-based swap agree19 ment, or relating to the market for such security, security20 based swap, or security-based swap agreement, if such per21 son knows, or recklessly disregards, that such information 

22 has been obtained wrongfully, or that such purchase or sale 

23 would constitute a wrongful use of such information. 

24 ‘‘(b) PROHIBITION AGAINST THE WRONGFUL COMMU25 NICATION OF CERTAIN MATERIAL, NONPUBLIC INFORMAVerDate Sep 11 2014 20:05 Sep 27, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6203 E:\BILLS\H2534.RH H2534

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1 TION.—It shall be unlawful for any person whose own pur2 chase or sale of a security, security-based swap, or entry 

3 into a security-based swap agreement would violate sub4 section (a) (referred to in this subsection as the ‘commu5 nicating person’), wrongfully to communicate material, 

6 nonpublic information relating to such security, security7 based swap, or security-based swap agreement, or relating 

8 to the market for such security, security-based swap, or se9 curity-based swap agreement, to any other person if— 

10 ‘‘(1) the other person— 

11 ‘‘(A) purchases, sells, or causes the purchase 

12 or sale of, any security or security-based swap or 

13 enters into or causes the entry into any security14 based swap agreement, to which such commu15 nication relates; or 

16 ‘‘(B) communicates the information to an17 other person who makes or causes such a pur18 chase, sale, or entry while in possession of such 

19 information; and 

20 ‘‘(2) such a purchase, sale, or entry while in pos21 session of such information is reasonably foreseeable. 

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

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

24 trading while in possession of material, nonpublic in25 formation under subsection (a) or communicating 


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1 material nonpublic information under subsection (b) 

2 is wrongful only if the information has been obtained 

3 by, or its communication or use would constitute, di4 rectly or indirectly— 

5 ‘‘(A) theft, bribery, misrepresentation, or es6 pionage (through electronic or other means); 

7 ‘‘(B) a violation of any Federal law pro8 tecting computer data or the intellectual prop9 erty or privacy of computer users; 

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

11 unauthorized and deceptive taking of such infor12 mation; or 

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

14 breach of a confidentiality agreement, a breach 

15 of contract, or a breach of any other personal or 

16 other relationship of trust and confidence. 

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

18 be necessary that the person trading while in posses19 sion of such information (as proscribed by subsection 

20 (a)), or making the communication (as proscribed by 

21 subsection (b)), knows the specific means by which the 

22 information was obtained or communicated, or 

23 whether any personal benefit was paid or promised 

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

25 so long as the person trading while in possession of 


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1 such information or making the communication, as 

2 the case may be, was aware, consciously avoided 

3 being aware, or recklessly disregarded that such infor4 mation was wrongfully obtained or 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 em8 ploys a person who has violated this section, if such control9 ling person or employer did not participate in, profit from, 

10 or directly or indirectly induce the acts constituting the vio11 lation of this section. 

12 ‘‘(e) EXEMPTED TRANSACTIONS.— 

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, if the Commission 

19 determines that such action is not inconsistent with 

20 the purposes of this section. The prohibitions of this 

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

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

23 person whose own securities trading, or communica24 tions of material, nonpublic information, would be 

25 lawful under this section. 


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1 ‘‘(2) AUTOMATIC TRADING.— 

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

3 days after the date of the enactment of this sec4 tion, the Commission shall determine if any 

5 automatic trading transactions should be ex6 empted from any of the provisions of this section 

7 and shall make such determination available to 

8 the public, including on the website of the Com9 mission. 

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

11 period between the date of the enactment of this 

12 section and the date on which the Commission 

13 makes a determination pursuant to subpara14 graph (A), automatic trading transactions shall 

15 be exempted from the provisions of this section. 

16 ‘‘(C) AUTOMATIC TRADING TRANSACTION

17 DEFINED.—For the purposes of this paragraph, 

18 the term ‘automatic trading transaction’ means 

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

20 swap, or security-based swap agreement that— 

21 ‘‘(i) occurs automatically; or 

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

23 election.’’. 


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1 (b) CONFORMING AMENDMENTS.—The Securities Ex2 change Act of 1934 (15 U.S.C. 78a et seq.) is further amend3 ed— 

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

5 16A of this title’’ after ‘‘section 10(b) of this title’’; 

6 (2) in section 21A— 

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

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

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

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

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

12 16A,’’ after ‘‘section 10(b)’’. 


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Union Calendar No. 172 

116TH CONGRESS 

1ST SESSION H. R. 2534 

[Report No. 116–219] 

A BILL 

To amend the Securities Exchange Act of 1934 to 

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

SEPTEMBER 27, 2019 

Reported with an amendment, committed to the Comand ordered to be printed mittee of the Whole House on the State of the Union, 


pamtmann on DSKBC07HB2PROD with BILLS