Congresswoman Elaine Luria (VA-02) voted this week for H.R. 2534, the Insider Trading Prohibition Act. This bill would establish an explicit ban of the practice of insider trading.
Insider trading is the inappropriate use of nonpublic information to influence decisions on buying or selling securities. This unethical practice allows insiders and those who wrongfully obtained nonpublic information to profit at the expense of average investors.
Currently, there is no federal law that explicitly defines or bans insider trading. As a result, courts, federal prosecutors, and regulators rely on a provision of the Securities and Exchange Act that prohibits using “manipulative and deceptive devices” in securities transactions. This lack of clarity presents difficulties in proving and prosecuting insider trading cases.
“Banning insider trading is critical to ensuring a fair economy that works for all Coastal Virginians,” Congresswoman Luria said. “The millions of Americans who make investments to fund their retirements, savings, and education for their children should not be discouraged by the fear of a market that only works for select insiders. I am pleased to vote for this bill that will close loopholes that have been exploited for too long.”
The Insider Trading Prohibition Act would codify and clarify existing principles on insider trading set forth by courts while eliminating the ambiguities in this area.
The Insider Trading Prohibition Act:
- Makes it unlawful for one to trade while aware of material, non-public information (MNPI), if they know, or recklessly disregard that the information was obtained wrongfully through tips, hacking, or stealing.
- Prohibits those with MNPI from passing along that information to others, if it’s reasonably evident that the recipient will trade on that information or pass it along to others who will.
The Insider Trading Prohibition Act passed the House by a 410-13 margin.
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