H.R. 2534 — what changed

“16A. Prohibition on insider trading

changed “(a) Prohibition against trading securities while in possession aware of material, nonpublic information—It shall be unlawful for any person, directly or indirectly, to purchase, sell, or enter into, or cause the purchase or sale of or entry into, any security, security-based swap, or security-based swap agreement, while in possession aware of material, nonpublic information relating to such security, security-based swap, or security-based swap agreement, or relating any nonpublic information, from whatever source, that has, or would reasonably be expected to have, a material effect on the market for price of any such security, security-based swap, or security-based swap agreement, if such person knows, or recklessly disregards, that such information has been obtained wrongfully, or that such purchase or sale would constitute a wrongful use of such information.

changed “(b) Prohibition against the wrongful communication of certain material, nonpublic information—It shall be unlawful for any person whose own purchase or sale of a security, security-based swap, or entry into a security-based swap agreement would violate subsection (a) (referred to in this subsection as the ‘communicating person’), (a), wrongfully to communicate material, nonpublic information relating to such security, security-based swap, or security-based swap agreement, or relating any nonpublic information, from whatever source, that has, or would reasonably be expected to have, a material effect on the market for price of any such security, security-based swap, or security-based swap agreement, to any other person if—

“(1) the other person—

“(A) purchases, sells, or causes the purchase or sale of, any security or security-based swap or enters into or causes the entry into any security-based swap agreement, to which such communication relates; or

changed “(B) communicates the information to another person who makes or causes such a purchase, sale, or entry while in possession aware of such information; and

changed “(2) such a purchase, sale, or entry while in possession aware of such information is reasonably foreseeable.

“(c) Standard and knowledge requirement

changed “(1) Standard—For purposes of this section, trading while in possession aware of material, nonpublic information under subsection (a) or communicating material nonpublic information under subsection (b) is wrongful only if the information has been obtained by, or its communication or use would constitute, directly or indirectly—

“(A) theft, bribery, misrepresentation, or espionage (through electronic or other means);

“(B) a violation of any Federal law protecting computer data or the intellectual property or privacy of computer users;

“(C) conversion, misappropriation, or other unauthorized and deceptive taking of such information; or

changed “(D) a breach of any fiduciary duty, a breach of a confidentiality agreement, a breach of contract, a breach of any code of conduct or ethics policy, or a breach of any other personal or other relationship of trust and confidence.confidence for a direct or indirect personal benefit (including pecuniary gain, reputational benefit, or a gift of confidential information to a trading relative or friend).

changed “(2) Knowledge requirement—It shall not be necessary that the person trading while in possession aware of such information (as proscribed by subsection (a)), or making the communication (as proscribed by subsection (b)), knows the specific means by which the information was obtained or communicated, or whether any personal benefit was paid or promised by or to any person in the chain of communication, so long as the person trading while in possession aware of such information or making the communication, as the case may be, was aware, consciously avoided being aware, or recklessly disregarded that such information was wrongfully obtained obtained, improperly used, or wrongfully communicated.

changed “(d) Derivative liability—Except as provided in section 20(a), no person shall be liable under this section solely by reason of the fact that such person controls or employs a person who has violated this section, if such controlling person or employer did not participate in, profit from, or directly or indirectly induce the acts constituting the a violation of this section.

changed “(e) Exempted transactionsAffirmative defenses

changed “(1) In general—The Commission may, by rule or by order, exempt any person, security, or transaction, or any class of persons, securities, or transactions, from any or all of the provisions of this section, upon such terms and conditions as it considers necessary or appropriate, if the Commission determines that such action is not inconsistent with the purposes of this section. The prohibitions appropriate in furtherance of this section shall not apply to any person who acts at the specific direction of, and solely for the account of, a person whose own securities trading, or communications purposes of material, nonpublic information, would be lawful under this section.title.

changed “(2) Automatic tradingDirected trading—The prohibitions of this section shall not apply to any person who acts at the specific direction of, and solely for the account of another person whose own securities trading, or communications of material, nonpublic information, would be lawful under this section.

changed “(A) In general—Not later than 180 days after the date of the enactment of this section, the Commission shall determine if any automatic trading transactions should be exempted from any of the provisions “(3) Rule 10b–5–1 compliant transactions—The prohibitions of this section and shall make such determination available not apply to the public, including on any transaction that satisfies the website requirements of the Commission.Rule 10b–5–1 (17 CFR 240.10b5–1), or any successor regulation.”

removed “(B) Interim application—During the period between the date of the enactment of this section and the date on which the Commission makes a determination pursuant to subparagraph (A), automatic trading transactions shall be exempted from the provisions of this section.

removed “(C) Automatic trading transaction defined—For the purposes of this paragraph, the term “automatic trading transaction” means any purchase or sale of a security, security-based swap, or security-based swap agreement that—

removed “(i) occurs automatically; or

removed “(ii) is made pursuant to an advance election.”