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Bill

S 5320

Insider Trading Prohibition Act

119th Congress Introduced by Angela Alsobrooks and 3 co-sponsors

Prohibits trading securities or related instruments while possessing MNPI and bans wrongful communications of MNPI to induce trades, with defenses and SEC exemptions.

Introduced in Senate
0
WeVote Research Nonpartisan
Bill Summary · S 5320

Overview

  • Bill: S. 5320, Insider Trading Prohibition Act
  • Session: 119th Congress, 2nd Session
  • Purpose: Amend the Securities Exchange Act of 1934 to prohibit trading and certain communications of material, nonpublic information (MNPI) by those who possess it, and to address related misconduct.
  • Introduced: August 6, 2026 by Sen. Reed (with sponsors Van Hollen, Kim, Alsobrooks, Blunt Rochester)
  • Status: Read twice and referred to the Senate Committee on Banking, Housing, and Urban Affairs

Main purpose

The bill creates a statutory prohibition on trading securities (and related instruments) while in possession of MNPI and on wrongful communications of MNPI. It aims to deter insider trading by criminalizing or enforcing penalties for traders who knowingly or recklessly act on MNPI and for those who knowingly or recklessly disclose MNPI to others who then trade.

Key provisions

  • Creation of new Section 16A to the Securities Exchange Act of 1934:
    • Prohibition on trading while aware of MNPI:
    • It is unlawful to purchase, sell, or engage in any security, security-based swap, or related swap agreement if, at the time of action:
      • The person has access to MNPI that is material and nonpublic and is aware (or reckless in disregarding) that the information is MNPI; and
      • The person is aware (or reckless) that MNPI was obtained unlawfully or that trading would constitute wrongful trading on that MNPI.
    • Prohibition on wrongful communications of MNPI:
    • It is unlawful to communicate MNPI in a way that would cause another to trade, if:
      • The communicator knows (or recklessly disregards) that such disclosure would cause trading; and
      • The recipient trades or engages in a security or swap based on that communication.
    • Standards of wrongful conduct:
    • A person commits wrongful trading or wrongful communication only if MNPI was obtained or the communication/trading would involve theft, cyber/theft-like breaches, misrepresentation, espionage, violation of federal data/privacy laws, misappropriation, or breach of fiduciary duty to shareholders for personal gain.
    • A knowledge requirement clarifies that a trader or communicator need not know the exact means by which MNPI was obtained or the exact personal benefit received, as long as they are aware or reckless regarding the wrongful nature of the information or action.
    • Affirmative defenses:
    • The Securities and Exchange Commission (SEC) may exempt persons, securities, transactions, or classes of them from all or part of the provisions.
    • Transactions compliant with Rule 10b5-1 (stand-alone affirmative defense for trades conducted pursuant to a pre-arranged plan) are exempt from the prohibitions.
    • Remedies and construction:
    • The new section provides additional rights and remedies beyond existing law for actions involving MNPI trading or communication.
  • Conforming amendments:
    • Minor editorial and cross-reference updates to the Securities Exchange Act to incorporate Section 16A and related references in other sections (e.g., sections 3, 21, 21A, 21C) to ensure consistency with the new insider trading regime.

Who would be affected

  • Individuals who possess material, nonpublic information about securities, security-based swaps, or related agreements.
  • Persons who trade on MNPI or engage in wrongful communications of MNPI.
  • Recipients of MNPI who trade or further disseminate it.
  • Entities and markets involving securities, derivatives (security-based swaps), and related financial instruments.
  • The SEC would have new authority to grant exemptions and regulate under Section 16A, with potential rulemaking and enforcement actions.

Procedural and timeline aspects

  • The bill would amend the Securities Exchange Act, requiring regulatory implementation, including potential rulemaking by the SEC.
  • It includes affirmative defenses tied to existing framework (Rule 10b5-1), indicating coordination with current insider trading defenses.
  • The introduction and referral indicate standard legislative process in the Senate; any passage would require alignment with the House (and ultimately the President) for enactment.
  • No specific enforcement timeline or effective date is stated in the text provided; typical implementation would follow when enacted and promulgated by the SEC.

Potential impact considerations

  • Strengthens insider trading prohibitions by explicitly criminalizing or sanctioning trading and communication based on MNPI beyond current statutes.
  • Creates a broader framework for accountability by tying wrongdoing to methods of obtaining MNPI (including potential cybersecurity or privacy violations) and misappropriation.
  • Might increase SEC oversight and enforcement actions related to MNPI and related communications.
  • Could influence corporate governance, trading compliance programs, and plan-based trading strategies due to enhanced risk of liability for even communicative wrongdoing.
  • The availability of exemptions (including Rule 10b5-1-compliant actions) provides carve-outs to prevent over-breadth in enforcement.

If you’d like, I can compare this proposal to existing insider trading laws or summarize potential enforcement scenarios and compliance considerations for firms.

Compiled from official sources — confirm details with the bill’s official record.

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