[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2534 Introduced in House (IH)]
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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.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Insider Trading Prohibition Act''.
SEC. 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:
``SEC. 16A. PROHIBITION ON INSIDER TRADING.
``(a) Prohibition Against Trading Securities While in Possession 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 in possession of material,
nonpublic information relating to such security, security-based swap,
or security-based swap agreement, or relating to the market for 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)
(referred to in this subsection as the `communicating person'),
wrongfully to communicate material, nonpublic information relating to
such security, security-based swap, or security-based swap agreement,
or relating to the market for 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 in possession of such information; and
``(2) such a purchase, sale, or entry while in possession
of such information is reasonably foreseeable.
``(c) Standard and Knowledge Requirement.--
``(1) Standard.--For purposes of this section, trading
while in possession 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, or a
breach of any other personal or other relationship of
trust and confidence.
``(2) Knowledge requirement.--It shall not be necessary
that the person trading while in possession 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 in possession 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 or 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, profit from, or directly or indirectly induce the acts
constituting the violation of this section.
``(e) Exempted Transactions.--
``(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, if the Commission
determines that such action is not inconsistent with the
purposes of this section. The prohibitions of this section
shall not apply to any person who acts at the specific
direction of, and solely for the account of, a person whose own
securities trading, or communications of material, nonpublic
information, would be lawful under this section.
``(2) Automatic trading.--
``(A) In general.--Not later than 180 days after
the date of the enactment of this section, the
Commission shall determine if any automatic trading
transactions should be exempted from any of the
provisions of this section and shall make such
determination available to the public, including on the
website of the Commission.
``(B) Interim application.--During the period
between the date of the enactment of this section and
the date on which the Commission makes a determination
pursuant to subparagraph (A), automatic trading
transactions shall be exempted from the provisions of
this section.
``(C) Automatic trading transaction defined.--For
the purposes of this paragraph, the term `automatic
trading transaction' means any purchase or sale of a
security, security-based swap, or security-based swap
agreement that--
``(i) occurs automatically; or
``(ii) is made pursuant to an advance
election.''.
(b) 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)''.
(c) Sense of Congress.--It is the sense of the Congress that the
amendments made by this Act are intended to supercede section 10(b) or
14e of the Securities Exchange Act of 1934 with regard to the wrongful
use or wrongful communication of material, nonpublic information in
connection with the purchase or sale of securities, security-based
swaps, and security-based swap agreements.
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