Insider Trading Prohibition Act

This bill amends the Securities Exchange Act of 1934 to establish an explicit federal statutory law prohibiting insider trading and the improper sharing ("tipping") of material, nonpublic information. It adds a new section (Section 16A) to the Act and updates enforcement tools for the Securities and Exchange Commission (SEC).

* **Traders and Investors:** Anyone buying, selling, or entering into securities, security-based swaps, or security-based swap agreements. * **Corporate Insiders, Directors, and Officers:** Company executives and board members who handle confidential business details. * **Recipients and Communicators of Nonpublic Information:** Individuals who pass along or receive insider information ("tippers" and "tippees"). * **Securities and Exchange Commission (SEC):** The federal agency responsible for enforcing these provisions and issuing exemptions.

* **Trading Prohibitions:** It becomes explicitly unlawful to trade securities or swaps while possessing material, nonpublic information if the trader knows, consciously avoids knowing, or recklessly disregards that the information was wrongfully obtained or that the trade itself is wrongful. * **Tipping Prohibitions:** It becomes unlawful to pass along material, nonpublic information if the sender knows, consciously avoids knowing, or recklessly disregards that the communication will lead to a trade, and the recipient actually trades based on that information. * **Definition of "Wrongful":** Information or trading is legally "wrongful" if it involves: * Theft, bribery, misrepresentation, electronic or other espionage, or unauthorized access; * Violations of federal computer data, user privacy, or intellectual property laws; * Misappropriation from a source; or * A breach of fiduciary duty owed to shareholders in exchange for a direct or indirect personal benefit (including financial gain, reputational gain, or a gift of confidential information to a friend or relative). * **Knowledge Standard:** A violator does not need to know the exact technical method used to steal the information or the specific personal benefit given in a chain of communications. It is enough that they were aware (or recklessly ignored) that the information was wrongfully obtained or communicated. * **Enforcement Tools:** The bill updates existing enforcement provisions under the Securities Exchange Act of 1934, allowing the SEC to impose civil money penalties, prohibit individuals from serving as corporate officers or directors, and issue administrative cease-and-desist orders for violations.

The bill summary does not mention any specific federal budget appropriations, tax changes, or funding amounts. However, it updates enforcement mechanisms to allow the imposition of civil monetary penalties against violators.

* **Pre-planned Trading Plans:** Trades made under SEC Rule 10b5-1 (pre-planned trading arrangements) or successor regulations are explicitly exempt from these prohibitions. * **SEC Exemption Authority:** The SEC is authorized to exempt any person, security, or transaction from these rules through official rules or administrative orders. * **Preservation of Existing Remedies:** The bill states that the rights and remedies established under this section are in addition to existing legal and equitable remedies, not a replacement for them.

This bill creates a clear statutory prohibition against insider trading and tipping based on wrongfully obtained secret information, defines what makes such information "wrongful," and authorizes the SEC to enforce civil penalties and officer bans, while keeping exemptions for pre-planned trading arrangements.