Yesterday, the full House of Representatives approved H.R. 2534,
otherwise known as the Insider Trading Prohibition Act. If
passed by the Senate and signed by the President, this legislation
would mark an important milestone in insider trading
jurisprudence. For decades, the Securities and Exchange
Commission ("SEC") and Department of Justice
("DOJ") have pursued insider trading violations through
general anti-fraud provisions, which has resulted in extensive
judge-made law and ambiguity as to when actors will be held liable
for insider trading. Indeed, insider trading remains one of
the few areas of the law that is based almost exclusively on common
law.
The Insider Trading Prohibition Act seeks to rectify these
issues by codifying the requirements of an insider trading
violation. Specifically, the bill would prohibit a trader
from buying or selling securities "while in possession of
material, nonpublic information . . . if such person knows, or
recklessly
