[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2534 Reported in House (RH)]

<DOC>





                                                 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]


_______________________________________________________________________

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

_______________________________________________________________________

                           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