The Congressional Research Service summarized the evolution of case law concerning insider trading and reviewed pending legislation.
In its report, the CRS reviewed the current legal standards developed by the courts in enforcement cases under SEA Section 10(b) ("Regulation of the Use of manipulative and deceptive devices") and SEA Rule 10b-5 ("Employment of manipulative and deceptive devices"), which "broadly" prohibit fraud in connection with access to non-public information for securities transactions, but lack a specific definition of "insider trading."
The CRS reviewed legislative reform efforts aimed at "codify[ing] the elements of the offense and fill[ing] perceived gaps in existing doctrine," including the:
- Insider Trading Prohibition Act (H.R. 2655), which would prohibit trading on information obtained illegally, regardless of whether a breach of fiduciary obligation is present;
- Ban Insider Trading Act (H.R. 1173), which would eliminate the "personal-benefit" requirement for "tippee" liability;
- Stop Illegal Insider Trading Act (S. 702), which would have further reach than H.R. 2655 and H.R. 1173 by replacing the existing "fraud-based regime" with a new "equal access model" designed to prohibit any trading on the basis of material nonpublic information; and
- Promoting Transparent Standards for Corporate Insiders Act (S. 2211 and H.R. 1528), which would direct the SEC to study possible revisions to Exchange Act Rule 10b5-1.
Primary Sources
- H.R. 2655: Insider Trading Prohibition Act
- H.R. 1173: Ban Insider Trading Act
- S. 702: Stop Illegal Insider Trading Act
- H.R. 1528: Promoting Transparent Standards for Corporate Insiders Act
- S. 2211: Promoting Transparent Standards for Corporate Insiders Act
- CRS Report: Insider Trading
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