Insider Trading Prohibition Act
Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 2655) to amend the Securities Exchange Act of 1934 to prohibit certain securities trading and related communications by those who possess material, nonpublic information, as…
Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 2655) to amend the Securities Exchange Act of 1934 to prohibit certain securities trading and related communications by those who possess material, nonpublic information, as amended.
Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days within which to revise and extend their remarks on this legislation and to insert any extraneous materials thereon.
Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I rise in strong support of H.R. 2655, the Insider Trading Prohibition Act, which was introduced by my colleague, Mr. Himes.
This long-overdue bill creates a clear definition of illegal insider trading under the securities laws so that there is a codified, consistent standard for courts and market participants. This bill will help to better protect the hard-earned savings of millions of Americans and bring legal and regulatory certainty to U.S. securities markets.
For nearly 80 years, the Securities and Exchange Commission has sought to hold corporate insiders accountable for insider trading through general statutory antifraud provisions and rules it has promulgated under those provisions. This has resulted in a web of court decisions that generally prohibit insiders with a duty of trust and confidence to a corporation from secretly trading on material, nonpublic corporate information for their own personal gain.
These insiders are also generally prohibited from tipping outsiders, known as tippees, who then trade on the information themselves, even though they knew it was wrongly obtained. But because there isn't a statutory definition of insider trading, there is uncertainty around who is subject to insider trading prohibitions.
Further, with various court decisions, liability for this type of violation has shifted. For example, in 2014, an appeals court added a brand-new requirement that the tippee must not just know that information was wrongfully disclosed but must also know about the specific personal benefit that the insider received. This decision has severely hampered the SEC's ability to prosecute insider trading cases.
According to Preet Bharara, the former U.S. attorney for the Southern District of New York, this decision ``provides a virtual roadmap for savvy hedge-fund managers to insulate themselves from tippee liability by knowingly placing themselves at the end of a chain of insider information and avoiding learning details about the sources of obvious confidential and improperly disclosed information.''
I am pleased that this bill codifies existing case law and overturns this new controversial requirement, creating a clear, consistent standard for the SEC, the courts, and market participants to follow.
Last Congress, the House of Representatives passed this commonsense bipartisan bill with an overwhelmingly bipartisan vote of 410-13.
Mr. Speaker, I urge my colleagues to once again support this important bill, and I reserve the balance of my time.
Mr. Speaker, I yield 2 minutes to the gentleman from Connecticut (Mr. Himes), who is also a sponsor of this legislation.
Mr. Speaker, I yield 1 minute to the gentleman from Connecticut (Mr. Himes).
Mr. Speaker, I have no further speakers, I am prepared to close, and I reserve the balance of my time.
Mr. Speaker, I yield myself the balance of my time.
H.R. 2655, the Insider Trading Prohibition Act, is a long overdue piece of legislation that simply spells out the definition of illegal insider trading under the security laws. It creates clarity for participants in financial markets, and empowers the SEC to punish bad actors.
This bill is supported by groups, including the Council of Institutional Investors, the California State Teachers' Retirement System, the North American Securities Administrators Association, and Public Citizen.
Mr. Speaker, I urge all Members to vote ``yes'' on this important bill, and I yield back the balance of my time.