On March 25, 2015, U.S. Representative Jim Himes introduced the Insider Trading Prohibition Act. The bill is the latest in a series of efforts to define insider trading following the Second Circuit’s decision last year in United States v. Newman. We have blogged previously about similar legislation introduced by U.S. Senators Jack Reed and Bob Menendez and U.S. Representative Stephen F. Lynch.
The Himes bill would create a new Section 16A of the Securities Exchange Act. The new section would make it illegal for a person to trade securities on the basis of material, non-public information that the person knows (or recklessly disregards) was wrongfully obtained. The bill would also make it illegal for a person whose own trading would be illegal to wrongfully communicate material, non-public information to another person when it is reasonably foreseeable that the other person is likely to trade on it or pass it on to others.