Insider Trading Prohibition Act

This bill, known as the "Insider Trading Prohibition Act," amends the Securities Exchange Act of 1934 by inserting a new Section 16A to strengthen prohibitions against insider trading. It makes it unlawful for any person to purchase, sell, or enter into securities or security-based swaps while aware of material, nonpublic information , if they know or recklessly disregard that the information was obtained wrongfully or that the trading itself would be wrongful. The legislation also prohibits the wrongful communication of such material, nonpublic information if the communicator is aware or recklessly disregards that it will lead to prohibited trading by the recipient. "Wrongful" acquisition or communication of information is broadly defined to include theft, bribery, misrepresentation, unauthorized access, violations of federal data or intellectual property laws, misappropriation, or a breach of fiduciary duty for personal benefit, such as pecuniary gain, reputational benefit, or a gift to a relative or friend. Crucially, the bill clarifies that a person does not need to know the specific means by which the information was obtained or the specific benefit received, as long as they are aware or recklessly disregard that the information was wrongfully acquired, traded upon, or communicated. The bill provides for affirmative defenses, including transactions that comply with Rule 10b5-1, and specifies that its provisions are in addition to other existing legal remedies.