Insider Trading Prohibition Act
Floor Speech
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Mr. HUIZENGA. Madam Chair, I yield myself such time as I may consume.
Madam Chair, preventing fraud and abuse within our financial system and cracking down on bad actors for illegal insider trading is a nonpartisan priority. This kind of fraud and illegal activity hurts everyday investors, and it also makes our markets less efficient, accurate, and reliable.
Current law prohibits trading on material insider information in breach of a fiduciary duty under the antifraud provisions of the Federal securities law.
The Securities and Exchange Commission and the Department of Justice are the Federal agencies tasked with enforcing insider trading. Both agencies regularly use their authority by bringing insider trading cases against bad actors who violate our insider trading laws.
The SEC has not asked for this bill, however, unlike other bills that Republicans have voted for out of this House in the past month. Moreover, Democrats have not fully identified a problem within the current body of the law that inhibits the prosecution of bad actors who illegally trade on material, nonpublic information.
As it is written before us on the floor at this moment, this bill could potentially create more confusion and uncertainty within the law of insider trading. It could even expand liability for good faith traders, which would hurt the efficiencies of our markets, chill vital information gathering, and weaken investor confidence.
Republican and Democrat SEC chairs alike, with vastly different approaches to enforcement matters, have expressed concern over Congress codifying a prohibition on insider trading into one single statute. Specifically, they voiced concerns that Congress would write a law that could be both overly broad and too narrow at the same time.
I share their concerns with the bill as drafted before us today, and I am pleased to hear that the chair has indicated that the majority will be accepting the ranking member's amendment shortly.
I am concerned that the current version of the bill, however, does not include an explicit personal benefit test, as set forth by the Supreme Court precedents. I am troubled that an unclear phrasing such as ``relating to the market'' is overbroad and will allow judges and prosecutors to expand the law.
I am also concerned that the bill, as drafted, lacks an exclusivity provision that would make this bill the exclusive law of the land.
Finally, the rule of construction section before us is troubling, because the Financial Services Committee has not even had a chance to debate this specific language. I fear that this language could add more confusion and uncertainty around insider trading laws, with rogue judges and prosecutors using the language to expand the bounds of insider trading law.
I do believe that the ranking member's amendment goes a distance in clarifying that, but, as I will talk about, I will be having an amendment later on as well that I believe further clarifies that.
Drafting a statute that appropriately and accurately captures the subtleties of insider trading case law and regulations that have been shaped and finessed over decades into one single statute isn't easy, to say the least.
Achieving bipartisan support also isn't easy, especially when it involves nuanced and technical substance such as the body of insider trading law.
My colleague, Ranking Member McHenry, will be offering his amendment momentarily that represents a bipartisan agreement with the author to improve the bill by including some Republican priorities and improving the bill to better track current insider trading law.
As I had mentioned, I will be offering an amendment as well in an attempt to further clarify and improve this proposal.
So, while we are unsure exactly what the final product is going to look like here, I do want to commend both Mr. Himes and Ranking Member McHenry for working together to attempt to reach a bipartisan agreement to improve this bill with the amendment and to make it clear that it is Congress' intent to codify existing law without broadening it into new areas. I hope that the author of the legislation will accept my amendment as well.
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Mr. HUIZENGA. Madam Chair, I yield such time as he may consume to the gentleman from Wisconsin (Mr. Steil), the newest member of the Investor Protection, Entrepreneurship, and Capital Markets Subcommittee.
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Mr. HUIZENGA. Madam Chair, I yield such time as he may consume to the gentleman from North Carolina (Mr. McHenry), the distinguished ranking member.
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Mr. HUIZENGA. Madam Chair, I yield myself the balance of my time.
Madam Chair, I would like to take this time to, again, congratulate the work that has been done. I do believe that there is additional work that is before us.
I will be having an amendment that I will be offering a little later on, and at this point, I think, as it is coming together, there still is not going to be total agreement or total unanimity. You will see with the ranking member's amendment a number of Republicans who will join this bill. I believe that with the adoption of my amendment you would see even further Republican support of the underlying bill.
There will be some dissent. There is dissent within the industry. There is dissent within those prosecutors and the regulators. As I had noted, both Republican and Democrat chairs of the SEC and commissioners of the SEC have said that having Congress act on this particular issue will set off a new chain of events, a new set of legal challenges that will take years to settle in the courts, as well, and they are comfortable with the options that they have the way current law has settled.
Having said that, again, as the ranking member had said, in an attempt to codify a number of those Supreme Court rulings is commendable. I tend to be one who believes that Congress has a responsibility to review and look at and examine whether they should codify precedent.
I find it interesting that on both sides this happens and with the regulators, and that everyone seems to pick and choose a little bit as to what subject area they would like to codify and what subject area they would continue to like to have flexibility on, based on those lawsuits.
At this time the ranking member and his work with the gentleman from Connecticut has made significant progress, and I look forward to adopting the gentleman from North Carolina's amendment and the potential adoption of my amendment, as well, as we move forward.
Madam Chair, I yield back the balance of my time.
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Mr. HUIZENGA. Mr. Chair, I yield myself such time as I may consume.
Mr. Chair, I will be brief. I am concerned that the bill before us today focuses specifically on awareness of information rather than the use of wrongful information in connection with security trading.
Specifically, this bill defines trading while ``aware'' of material and nonpublic information or communicating material and nonpublic information as wrongful only if the information was obtained by way of, or its communication or use would constitute: theft, bribery, misrepresentation, espionage; a violation of Federal computer data and intellectual property protection and privacy laws; conversion, misappropriation, or other deceptive means; and any breach of a fiduciary duty, a contractual relationship, a code of conduct, or a personal confidence or trust.
A person violates the bill's prohibitions on trading with and communicating material on nonpublic information so long as this person ``knew'' the information was wrongfully obtained, actively avoided gaining such knowledge, or recklessly disregarded the wrongful use, communication, or obtainment of this information.
It does not matter, under the bill, whether they know the method by which the information was obtained or communicated or if any benefit actually came from communication of the information.
In short, Mr. Chair, I believe that this would, in turn, allow activist judges and prosecutors to go after individuals regardless of their intention or actual profit from wrongful actions.
That is why my amendment is very simple. It would strike all occurrences of the phrase ``aware of'' and insert the word ``using.'' In other words, you can be aware of something, but if you are not going to actually use that information, why would you be held to a criminal standard?
My amendment would have the effect of limiting who can be prosecuted under this bill to people who actually use wrongful information to gain a profit.
As we all know, in our lives, there are all kinds of rumors around us all the time, whether it is about our work life or our family or whatever might be going on, somebody in the neighborhood. It is hard to know what information is actually true or actually accurate.
What we have currently is this assumption that being aware of something makes you criminally liable versus actually using that information.
The current bill could allow prosecution of people who traded and are simply aware of information but perhaps would have traded regardless of their awareness of that information.
I am prepared to support this underlying bill with the adoption of my amendment.
I was pleased to see the adoption of the amendment from the gentleman from North Carolina (Mr. McHenry). I believe these are perfecting amendments. I believe that these are issues that need to be further addressed.
While I, too, have some concerns about exclusivity and some of the other things that the gentleman from North Carolina (Mr. McHenry) discussed, I believe that this particular issue is of significance, and it is sufficient enough and significant enough to pull my support across the finish line as we move forward on this.
Mr. Chair, I urge all of my colleagues to accept this perfecting amendment, and I yield back the balance of my time.
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Mr. HUIZENGA. Mr. Chair, I demand a recorded vote.
A recorded vote was ordered.
The vote was taken by electronic device, and there were--ayes 196, noes 231, not voting 9, as follows: [Roll No. 648] AYES--196 Abraham Aderholt Allen Amash Amodei Armstrong Arrington Babin Bacon Baird Balderson Banks Barr Bergman Bilirakis Bishop (NC) Bishop (UT) Bost Brady Brooks (AL) Brooks (IN) Buchanan Buck Bucshon Budd Burchett Burgess Byrne Calvert Carter (GA) Carter (TX) Chabot Cheney Cline Cloud Cole Collins (GA) Comer Conaway Cook Crawford Crenshaw Curtis Davidson (OH) Davis, Rodney DesJarlais Diaz-Balart Duncan Dunn Emmer Estes Ferguson Fitzpatrick Fleischmann Flores Fortenberry Foxx (NC) Fulcher Gaetz Gallagher Gianforte Gibbs Gohmert Gonzalez (OH) Gonzalez-Colon (PR) Gooden Granger Graves (GA) Graves (LA) Graves (MO) Green (TN) Griffith Grothman Guest Guthrie Hagedorn Harris Hartzler Hern, Kevin Herrera Beutler Hice (GA) Higgins (LA) Hill (AR) Holding Hollingsworth Hudson Huizenga Hurd (TX) Johnson (LA) Johnson (OH) Johnson (SD) Jordan Joyce (OH) Joyce (PA) Katko Keller Kelly (MS) Kelly (PA) King (IA) King (NY) Kinzinger Kustoff (TN) LaHood LaMalfa Lamborn Latta Lesko Long Loudermilk Lucas Luetkemeyer Marchant Marshall Massie Mast McCarthy McCaul McClintock McHenry McKinley Meadows Meuser Miller Mitchell Moolenaar Mooney (WV) Mullin Murphy (NC) Newhouse Norman Nunes Olson Palazzo Palmer Pence Perry Posey Ratcliffe Reed Reschenthaler Rice (SC) Riggleman Roby Rodgers (WA) Roe, David P. Rogers (AL) Rogers (KY) Rooney (FL) Rose, John W. Rouzer Roy Rutherford Scalise Schweikert Scott, Austin Sensenbrenner Shimkus Simpson Smith (MO) Smith (NE) Smith (NJ) Smucker Spano Stauber Stefanik Steil Steube Stewart Stivers Taylor Thompson (PA) Thornberry Timmons Tipton Turner Upton Wagner Walberg Walden Walker Walorski Waltz Watkins Weber (TX) Webster (FL) Wenstrup Westerman Williams Wilson (SC) Wittman Womack Woodall Wright Yoho Young Zeldin NOES--231 Adams Aguilar Allred Axne Barragan Bass Beatty Bera Beyer Bishop (GA) Blumenauer Blunt Rochester Bonamici Boyle, Brendan F. Brindisi Brown (MD) Brownley (CA) Bustos Butterfield Carbajal Cardenas Carson (IN) Case Casten (IL) Castor (FL) Castro (TX) Chu, Judy Cicilline Cisneros Clark (MA) Clarke (NY) Clay Cleaver Clyburn Cohen Connolly Cooper Correa Costa Courtney Cox (CA) Craig Crist Crow Cuellar Cunningham Davids (KS) Davis (CA) Davis, Danny K. Dean DeFazio DeGette DeLauro DelBene Delgado Demings DeSaulnier Deutch Dingell Doggett Doyle, Michael F. Engel Escobar Eshoo Espaillat Evans Finkenauer Fletcher Foster Frankel Fudge Gallego Garamendi Garcia (IL) Garcia (TX) Golden Gomez Gonzalez (TX) Gottheimer Green, Al (TX) Grijalva Haaland Harder (CA) Hastings Hayes Heck Higgins (NY) Himes Horn, Kendra S. Horsford Houlahan Hoyer Huffman Jackson Lee Jayapal Jeffries Johnson (GA) Johnson (TX) Kaptur Keating Kelly (IL) Kennedy Khanna Kildee Kilmer Kim Kind Kirkpatrick Krishnamoorthi Kuster (NH) Lamb Langevin Larsen (WA) Larson (CT) Lawrence Lawson (FL) Lee (CA) Lee (NV) Levin (CA) Levin (MI) Lewis Lieu, Ted Lipinski Loebsack Lofgren Lowenthal Lowey Lujan Luria Lynch Malinowski Maloney, Carolyn B. Maloney, Sean Matsui McAdams McBath McCollum McEachin McGovern McNerney Meeks Meng Moore Morelle Moulton Mucarsel-Powell Murphy (FL) Nadler Napolitano Neal Neguse Norcross Norton O'Halleran Ocasio-Cortez Omar Pallone Panetta Pappas Pascrell Payne Perlmutter Peters Peterson Phillips Pingree Plaskett Pocan Porter Pressley Price (NC) Quigley Raskin Rice (NY) Richmond Rose (NY) Rouda Roybal-Allard Ruiz Ruppersberger Rush Ryan Sablan Sanchez Sarbanes Scanlon Schakowsky Schiff Schneider Schrader Schrier Scott (VA) Scott, David Sewell (AL) Shalala Sherman Sherrill Sires Slotkin Smith (WA) Soto Spanberger Speier Stanton Stevens Suozzi Swalwell (CA) Takano Thompson (CA) Thompson (MS) Titus Tlaib Tonko Torres (CA) Torres Small (NM) Trahan Trone Underwood Van Drew Vargas Veasey Vela Velazquez Visclosky Wasserman Schultz Waters Watson Coleman Welch Wexton Wild Yarmuth NOT VOTING--9 Biggs Cartwright Gabbard Gosar Hunter Radewagen San Nicolas Serrano Wilson (FL)
Mses. McCOLLUM, FUDGE, Messrs. LOEBSACK, PETERS, SEAN PATRICK MALONEY of New York, PHILLIPS, DANNY K. DAVIS of Illinois, Mrs. LURIA, Mses. WASSERMAN SCHULTZ, MUCARSEL-POWELL, Messrs. MALINOWSKI, NADLER, ROSE of New York, CICILLINE, CLYBURN, PAYNE, Ms. BASS, and Mrs. HAYES changed their vote from ``aye'' to ``no.''
Messrs. BUCHANAN, LAMBORN and JOHNSON of Louisiana changed their vote from ``no'' to ``aye.''
So the amendment was rejected.
The result of the vote was announced as above recorded.
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