On Tuesday, the House passed the Insider Trading Prohibition Act, an effort to codify and clarify inconsistencies in the case law applying the anti-fraud provisions of the Securities Exchange Act of 1934 to insider trading. The bill now moves to the Senate. A potential sticking point is the bill's "personal benefit" requirement to hold tippers liable for insider trading. It remains to be seen whether the Senate will remove this requirement.
When the bill was passed in 2019, it included a last-minute amendment from Rep. Patrick McHenry, R-N.C., that requires a "personal benefit" provided by a tippee to a tipper to prove insider trading happened in certain situations. That disappointed John C. Coffee Jr., a Columbia Law School professor who helped write the bill . . . . The "personal benefit" requirement is still present in the current bill, Coffee told Law360 on Tuesday, which is a "regressive step backwards" from a recent Second Circuit ruling that found no such requirement exists under other federal fraud statutes.
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