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.
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House Passes The Insider Trading Prohibition Act
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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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