Insider Trading Prohibition Act

Bill: 117-hr-2655
Sponsor: full_name: Rep. Himes, James A. [D-CT-4]
Introduced: 2021-04-19
Policy area: Finance and Financial Sector
Subjects: Fraud offenses and financial crimes

Government information and archives

Securities
Latest action: action_date: 2021-05-19
text: Received in the Senate and Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.

Summaries:
action_date: 2021-04-19
action_desc: Introduced in House
text: <p><b>Insider Trading Prohibition Act</b> </p> <p>This bill generally&nbsp;provides statutory authority for&nbsp;the prohibition against securities trading, as well as related communications to others, by a person aware of material, nonpublic information. The bill&nbsp;further provides, for purposes of establishing a violation of this prohibition, that&nbsp;it is not necessary for such a person to know specifically how such information was obtained or whether a personal benefit was paid or promised.&nbsp;&nbsp;&nbsp; </p>

action_date: 2021-05-18
action_desc: Passed House
text: <p><b>Insider Trading Prohibition Act</b> </p> <p>This bill generally&nbsp;provides statutory authority for&nbsp;the prohibition against securities trading, as well as related communications to others, by a person aware of material, nonpublic information. The bill&nbsp;further provides, for purposes of establishing a violation of this prohibition, that&nbsp;it is not necessary for such a person to know specifically how such information was obtained or whether a personal benefit was paid or promised.&nbsp;&nbsp;&nbsp; </p>

tv_txt: I 117th CONGRESS 1st Session H. R. 2655 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.

1. Short title This Act may be cited as the Insider Trading Prohibition Act . 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: 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 10 b –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) .

tv_txt: I 117th CONGRESS 1st Session H. R. 2655 IN THE HOUSE OF REPRESENTATIVES 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. Short title This Act may be cited as the Insider Trading Prohibition Act . 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: 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 10 b –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) . 3. Determination of budgetary effects The budgetary effects of this Act, for the purpose of complying with the Statutory Pay-As-You-Go Act of 2010, shall be determined by reference to the latest statement titled Budgetary Effects of PAYGO Legislation for this Act, submitted for printing in the Congressional Record by the Chairman of the House Budget Committee, provided that such statement has been submitted prior to the vote on passage.

Passed the House of Representatives May 18, 2021. Cheryl L. Johnson, Clerk.

tv_txt: IIB 117th CONGRESS 1st Session H. R. 2655 IN THE SENATE OF THE UNITED STATES May 19, 2021 Received; read twice and referred to the Committee on Banking, Housing, and Urban Affairs 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. Short title This Act may be cited as the Insider Trading Prohibition Act . 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: 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 10 b –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) . 3. Determination of budgetary effects The budgetary effects of this Act, for the purpose of complying with the Statutory Pay-As-You-Go Act of 2010, shall be determined by reference to the latest statement titled Budgetary Effects of PAYGO Legislation for this Act, submitted for printing in the Congressional Record by the Chairman of the House Budget Committee, provided that such statement has been submitted prior to the vote on passage.

Passed the House of Representatives May 18, 2021. Cheryl L. Johnson, Clerk