II 

117TH CONGRESS 

2D SESSION S. 3990 

To amend the Securities Exchange Act of 1934 to prohibit certain securities 

trading and related communications by those who possess material, nonpublic information, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

APRIL 4 (legislative day, MARCH 31), 2022 

Mr. REED (for himself and Mr. MENENDEZ) introduced the following bill; 

which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs 

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, and 

for other purposes. 

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’’. 


kjohnson on DSK79L0C42PROD with BILLS
2 

•S 3990 IS

1 SEC. 2. PROHIBITION ON INSIDER TRADING. 

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

3 1934 (15 U.S.C. 78a et seq.) is amended by inserting after 

4 section 16 (15 U.S.C. 78p) the following: 

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

6 ‘‘(a) PROHIBITION AGAINST TRADING SECURITIES

7 WHILE AWARE OF MATERIAL, NONPUBLIC INFORMA8 TION.—It shall be unlawful for any person, directly or in9 directly, to purchase, sell, or enter into, or cause the pur10 chase or sale of, or entry into, any security, security-based 

11 swap, or security-based swap agreement if that person, at 

12 the time the person takes such an action— 

13 ‘‘(1) has access to information relating to such 

14 security, security-based swap, or security-based swap 

15 agreement that is material and nonpublic and is 

16 aware (including if the person consciously avoids 

17 being aware), or recklessly disregards, that such in18 formation is material and nonpublic; and 

19 ‘‘(2) is aware (including if the person con20 sciously avoids being aware), or recklessly dis21 regards, that— 

22 ‘‘(A) the information described in para23 graph (1) has been obtained wrongfully; or 

24 ‘‘(B) the purchase, sale, or entry would 

25 constitute wrongful trading on the information 

26 described in paragraph (1). 


kjohnson on DSK79L0C42PROD with BILLS
3 

•S 3990 IS

1 ‘‘(b) PROHIBITION AGAINST THE WRONGFUL COM2 MUNICATION OF CERTAIN MATERIAL, NONPUBLIC INFOR3 MATION.—It shall be unlawful for any person, the pur4 chase or sale of a security or security-based swap (or entry 

5 into a security-based swap agreement) by which would vio6 late subsection (a), to wrongfully communicate material, 

7 nonpublic information relating to that security, security8 based swap, or security-based swap agreement to any 

9 other person, if— 

10 ‘‘(1) the person communicating the information, 

11 at the time the person communicates the informa12 tion, is aware (including if the person consciously 

13 avoids being aware), or recklessly disregards, that 

14 such communication would result in such a pur15 chase, sale, or entry; and 

16 ‘‘(2) any recipient of the wrongfully commu17 nicated information purchases, sells, or causes the 

18 purchase or sale of any security or security-based 

19 swap, or enters into (or causes the entry into) any 

20 security-based swap agreement, based on that com21 munication. 

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

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

24 trading while aware of material, nonpublic informa25 tion under subsection (a), or communicating mateVerDate Sep 11 2014 02:28 Apr 05, 2022 Jkt 029200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S3990.IS S3990

kjohnson on DSK79L0C42PROD with BILLS
4 

•S 3990 IS

1 rial, nonpublic information under subsection (b), is 

2 wrongful only if the information has been obtained 

3 by, or the communication or trading on the informa4 tion would constitute, directly or indirectly— 

5 ‘‘(A) theft, conversion, bribery, misrepre6 sentation, espionage (through electronic or 

7 other means), or other unauthorized access of 

8 the information; 

9 ‘‘(B) a violation of any Federal law pro10 tecting— 

11 ‘‘(i) computer data; or 

12 ‘‘(ii) the intellectual property or pri13 vacy of computer users; 

14 ‘‘(C) misappropriation from a source of the 

15 information; or 

16 ‘‘(D) a breach of any fiduciary duty to 

17 shareholders of an issuer for a direct or indirect 

18 personal benefit, including— 

19 ‘‘(i) an existing or future pecuniary 

20 gain or reputational benefit; or 

21 ‘‘(ii) a gift of confidential information 

22 to a relative or friend. 

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

24 be necessary that a person trading while aware of 

25 information in violation of subsection (a), or making 


kjohnson on DSK79L0C42PROD with BILLS
5 

•S 3990 IS

1 a communication in violation of subsection (b), 

2 knows the specific means by which the information 

3 was obtained or communicated or traded on, or the 

4 specific benefit described in paragraph (1)(D) that 

5 was received, paid, or promised by or to any person 

6 in the chain of communication, if the person trading 

7 while aware of the information or making the com8 munication, as applicable, at the time the person 

9 makes the trade or communicates the information, is 

10 aware (including if the person consciously avoids 

11 being aware), or recklessly disregards, that the in12 formation was wrongfully obtained, wrongfully trad13 ed on, or wrongfully communicated. 

14 ‘‘(d) AFFIRMATIVE DEFENSES.— 

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

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

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

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

19 section, upon such terms and conditions as the Com20 mission considers necessary or appropriate in fur21 therance of the purposes of this title. 

22 ‘‘(2) RULE 10B5–1 COMPLIANT TRANS23 ACTIONS.—The prohibitions of this section shall not 

24 apply to any transaction that satisfies the requireVerDate Sep 11 2014 02:28 Apr 05, 2022 Jkt 029200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S3990.IS S3990

kjohnson on DSK79L0C42PROD with BILLS
6 

•S 3990 IS

1 ments of section 240.10b5–1 of title 17, Code of 

2 Federal Regulations, or any successor regulation. 

3 ‘‘(e) RULE OF CONSTRUCTION.—The rights and rem4 edies provided by this section shall be in addition to any 

5 and all other rights and remedies that may exist at law 

6 or in equity (without regard to whether such a right or 

7 remedy is provided under this Act) with respect to an ac8 tion by a person to— 

9 ‘‘(1) purchase, sell, or enter into a security, se10 curity-based swap, or security-based swap agreement 

11 while aware of material, nonpublic information; or 

12 ‘‘(2) communicate material, nonpublic informa13 tion relating to a security, security-based swap, or 

14 security-based swap agreement.’’. 

15 (b) CONFORMING AMENDMENTS.—The Securities 

16 Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amend17 ed— 

18 (1) in section 3(a)(78)(A) (15 U.S.C. 

19 78c(a)(78)(A)), by inserting ‘‘16A,’’ after ‘‘16,’’; 

20 (2) in section 21(d)(2) (15 U.S.C. 78u(d)(2)), 

21 by striking ‘‘or the rules or regulations thereunder’’ 

22 and inserting ‘‘, section 16A of this title, or the 

23 rules or regulations under either such section’’; 

24 (3) in section 21A (15 U.S.C. 78u–1)— 


kjohnson on DSK79L0C42PROD with BILLS
7 

•S 3990 IS

1 (A) in subsection (g)(1), by striking ‘‘sec2 tion 10(b) and Rule 10b–5 thereunder’’ and in3 serting ‘‘section 10(b), Rule 10b–5 thereunder, 

4 and section 16A’’; and 

5 (B) in subsection (h)(1), by striking ‘‘sec6 tion 10(b), and Rule 10b–5 thereunder’’ and in7 serting ‘‘section 10(b), Rule 10b–5 thereunder, 

8 and section 16A’’; and 

9 (4) in section 21C(f) (15 U.S.C. 78u–3(f)), by 

10 striking ‘‘or the rules or regulations thereunder’’ and 

11 inserting ‘‘, section 16A, or the rules or regulations 

12 under either such section’’. 

Æ 


kjohnson on DSK79L0C42PROD with BILLS