Washington, DC— Today, the House of Representatives passed Congressman Jim Himes’ (CT-04) Insider Trading Prohibition Act (HR 2655) as part of larger package of bills with bipartisan support. Last Congress, the bill passed by a vote of 410-13. The bill establishes a clear, statutory prohibition on insider trading. Corporate insiders who wrongfully obtain inside information and misuse it weaken the fairness, integrity, and safety of our nation’s capital markets.
“At a moment when bipartisan cooperation is scarce, this landmark legislation’s passage proves collaboration across the aisle for the public interest is still possible,” said Himes. “The bill’s strong bipartisan support is thanks to years of work incorporating ideas and input from regulatory agencies, legal experts, and my colleagues on both sides of the aisle. The resulting bill makes it clear that if you break the rules to profit from the markets, you have violated the law.”
The Insider Trading Prohibition Act codifies and clarifies the overarching principles on insider trading set forth by courts while eliminating the ambiguities that have existed in the case-by-case evolution of the law in this area.
“There is currently no clear, statutory prohibition on insider trading, which leaves the SEC and DOJ to rely on more general anti-fraud statutes and decades of case law, subject to interpretation by individual judges,” Himes continued. “Laws should be made in the House and Senate chambers, not the chambers of unelected judges. Passage of this legislation will end the challenges in prosecuting a crime that has never been properly defined.”
The Insider Trading Prohibition Act:
- Makes it unlawful for a person to trade while aware of material, non-public information if that person knows, or recklessly disregards, that the information was obtained wrongfully, or that making that trade would constitute a wrongful use of that inside information.
- The bill lays out the following situations in which the trading or communication of material nonpublic information is wrongful:
- Theft, bribery, misrepresentation, or espionage;
- A violation of federal statutes protecting computer data;
- Conversion, misappropriation, or other deceptive taking; or
- A breach of fiduciary duty, contract, or various other agreements.
- Prohibits those with material, nonpublic information from passing along that information to others, or tipping them, if it’s reasonably foreseeable that the recipient of the information will trade on that information or pass it along to others who will.
The present state of uncertainty around insider trading liability harms public confidence in the market. Select insiders should not have the ability to profit from illegally obtained information. Moreover, average investors who are trying to save for their retirement or pay for their children’s college tuition should not be discouraged from investing because of a fear that the market is unfair and unbalanced. Insider trading is wrong, and a clear, legal standard on insider trading is necessary to ensure the ongoing health, transparency, and honesty of our markets.
For more information, or to receive the full text of the bill, contact Elena Radding at Elena.Radding@mail.house.gov.