[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[S. 3990 Introduced in Senate (IS)]
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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.
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 (15 U.S.C. 78p) the
following:
``SEC. 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 if that person, at the time the person
takes such an action--
``(1) has access to information relating to such security,
security-based swap, or security-based swap agreement that is
material and nonpublic and is aware (including if the person
consciously avoids being aware), or recklessly disregards, that
such information is material and nonpublic; and
``(2) is aware (including if the person consciously avoids
being aware), or recklessly disregards, that--
``(A) the information described in paragraph (1)
has been obtained wrongfully; or
``(B) the purchase, sale, or entry would constitute
wrongful trading on the information described in
paragraph (1).
``(b) Prohibition Against the Wrongful Communication of Certain
Material, Nonpublic Information.--It shall be unlawful for any person,
the purchase or sale of a security or security-based swap (or entry
into a security-based swap agreement) by which would violate subsection
(a), to wrongfully communicate material, nonpublic information relating
to that security, security-based swap, or security-based swap agreement
to any other person, if--
``(1) the person communicating the information, at the time
the person communicates the information, is aware (including if
the person consciously avoids being aware), or recklessly
disregards, that such communication would result in such a
purchase, sale, or entry; and
``(2) any recipient of the wrongfully communicated
information 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, based on
that communication.
``(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 the communication or trading on the information
would constitute, directly or indirectly--
``(A) theft, conversion, bribery,
misrepresentation, espionage (through electronic or
other means), or other unauthorized access of the
information;
``(B) a violation of any Federal law protecting--
``(i) computer data; or
``(ii) the intellectual property or privacy
of computer users;
``(C) misappropriation from a source of the
information; or
``(D) a breach of any fiduciary duty to
shareholders of an issuer for a direct or indirect
personal benefit, including--
``(i) an existing or future pecuniary gain
or reputational benefit; or
``(ii) a gift of confidential information
to a relative or friend.
``(2) Knowledge requirement.--It shall not be necessary
that a person trading while aware of information in violation
of subsection (a), or making a communication in violation of
subsection (b), knows the specific means by which the
information was obtained or communicated or traded on, or the
specific benefit described in paragraph (1)(D) that was
received, paid, or promised by or to any person in the chain of
communication, if the person trading while aware of the
information or making the communication, as applicable, at the
time the person makes the trade or communicates the
information, is aware (including if the person consciously
avoids being aware), or recklessly disregards, that the
information was wrongfully obtained, wrongfully traded on, or
wrongfully communicated.
``(d) 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
the Commission considers necessary or appropriate in
furtherance of the purposes of this title.
``(2) Rule 10b5-1 compliant transactions.--The prohibitions
of this section shall not apply to any transaction that
satisfies the requirements of section 240.10b5-1 of title 17,
Code of Federal Regulations, or any successor regulation.
``(e) Rule of Construction.--The rights and remedies provided by
this section shall be in addition to any and all other rights and
remedies that may exist at law or in equity (without regard to whether
such a right or remedy is provided under this Act) with respect to an
action by a person to--
``(1) purchase, sell, or enter into a security, security-
based swap, or security-based swap agreement while aware of
material, nonpublic information; or
``(2) communicate material, nonpublic information relating
to a security, security-based swap, or security-based swap
agreement.''.
(b) Conforming Amendments.--The Securities Exchange Act of 1934 (15
U.S.C. 78a et seq.) is amended--
(1) in section 3(a)(78)(A) (15 U.S.C. 78c(a)(78)(A)), by
inserting ``16A,'' after ``16,'';
(2) in section 21(d)(2) (15 U.S.C. 78u(d)(2)), by striking
``or the rules or regulations thereunder'' and inserting ``,
section 16A of this title, or the rules or regulations under
either such section'';
(3) in section 21A (15 U.S.C. 78u-1)--
(A) in subsection (g)(1), by striking ``section
10(b) and Rule 10b-5 thereunder'' and inserting
``section 10(b), Rule 10b-5 thereunder, and section
16A''; and
(B) in subsection (h)(1), by striking ``section
10(b), and Rule 10b-5 thereunder'' and inserting
``section 10(b), Rule 10b-5 thereunder, and section
16A''; and
(4) in section 21C(f) (15 U.S.C. 78u-3(f)), by striking
``or the rules or regulations thereunder'' and inserting ``,
section 16A, or the rules or regulations under either such
section''.
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