On May 7, 2019, U.S. Representative James Himes (D-Conn) introduced the “Insider Trading Prohibition Act,” which would amend the Securities Exchange Act of 1934, by inserting a new section that defines the elements of criminal insider trading. The bill was passed unanimously in the House Financial Services Committee on May 10.
The bill’s purpose is to do away with any confusion as to exactly what constitutes this offense under current law. It would also significantly expand the potential scope of criminal liability for insider trading in several ways.
First, the bill would negate the existing “personal benefit” requirement. Next, it would expand the scienter requirement from willful to reckless use of “wrongfully obtained” material non-public information. Finally, it would also expand the definition of “wrongfully obtained” information to include stolen, hacked, and fraudulently obtained data.
The chance of the bill becoming law appears to be better than the first time it was introduced in 2015. Regardless of whether or not it does pass this time, change is likely on the horizon according to attorneys Sarah E. Aberg and Kate Ross from Sheppard Mullin Richter & Hampton LLP. For more information, consider reading their recent article in Lexology.
To learn more about how MCO can help keep material non-public information (MNPI) in compliance with securities laws and regulations, click here.