Insider Trading Prohibition Act

Floor Speech

BREAK IN TRANSCRIPT

Mr. HUIZENGA. Mr. Speaker, I rise with my friend and colleague from Arkansas to acknowledge the work that has been put in by our colleague from Connecticut. This has been a long discussion that we have had various points where we have debated, and this is a positive thing.

Mr. Speaker, as you know, preventing fraud and abuse within our financial system and cracking down on bad actors for illegal insider trading is a nonpartisan priority. We all believe that this is a good thing. In fact, this kind of fraud and illegal activity hurts everyday Main Street investors. It also makes our capital markets less efficient, accurate, and fair to all investors.

Now, current law prohibits trading on material insider information in breach of a fiduciary duty under the antifraud provisions of the Federal securities laws. Let me just repeat that. Current law prohibits those activities.

The Securities and Exchange Commission and the Department of Justice are the Federal agencies tasked with enforcing insider trading laws. Both agencies regularly use their authority to bring insider trading cases against these bad actors who violate our insider trading laws.

However, the bill we are discussing here today, H.R. 2655, is flawed and could potentially create even more confusion and uncertainty within the law of insider trading. It could expand liability for good-faith traders, which would weaken investor confidence, chill vital information-gathering, and hurt the efficiency of our markets.

I believe it is important to note that, once again, the SEC is not asking for this bill or, frankly, any other legislative help on this issue. That is, the cop on the beat is not saying we need additional tools. Moreover, Democrats have not identified a problem within the current body of law that inhibits the prosecution of bad actors who illegally trade on material, nonpublic information. Again, the regulators have the tools that they need.

Republican and Democrat SEC chairs alike, with vastly different approaches to enforcement matters, have expressed concerns over Congress codifying a prohibition on insider trading into one single statute, as we are doing. Specifically, they voiced concerns that Congress would write a law that would be both overly broad, yet too narrow. Now, that is an odd phrase.

Former SEC Chair Mary Jo White, during 2015 testimony--by the way, she was President Obama's SEC chair--before our Financial Services Committee, when asked whether or not Congress should pursue an explicit statutory prohibition, stated: ``I think it is challenging to codify it clearly in a way that is both not too broad and retains the strength of the common law.''

Additionally, former SEC Chair Jay Clayton voiced similar concerns that Congress could write an insider trading law that is both too broad and too narrow.

I want to commend the gentleman from Connecticut for his dedicated work over the years on this issue, and I appreciate his efforts to try and codify a specific insider trading prohibition.

BREAK IN TRANSCRIPT

Mr. HUIZENGA. However, codifying very nuanced case law and regulations that have been developed over decades to prohibit insider trading is a significant task and undertaking. We all know that case law does oftentimes dictate the nuances. I fear that this bill could add more confusion and uncertainty around insider trading law with rogue judges and prosecutors using the language to expand the bounds of insider trading laws.

It was mentioned that this bill passed this body 410-13, and I was one of the 13.

We have to ask ourselves: Why was the bill ignored by the Senate?

There isn't a compelling problem to solve is why it was ignored. This is a solution in search of a problem.

I believe H.R. 2655, the Insider Trading Prohibition Act, which we are debating today, is both too broad and too narrow, just as former SEC Chair White warned was possible, and I continue to be opposed to the legislation.

BREAK IN TRANSCRIPT

Mr. HUIZENGA. Mr. Speaker, let me throw out one name--I guess it is actually, technically, two names: Dodd-Frank.

My friends on the other side wrote a massively expansive bill that did turn over all of that authority to come up and promulgate rules out of whole cloth.

What we are talking about here is a very key word: materiality.

We are having this exact debate about the environmental, social, and governance issues, the ESG of the Securities and Exchange Commission, and the boundaries of those rules. This is the balance between making sure that the legislature and our constitutional powers do not contradict the powers that are given to those regulators.

Yet, at the same time, we need to make sure that the regulators, based on case law, based on experience and the flexibility that they may need to go and do a law enforcement action, that they have those tools and that they are not pulled back from them.

If the gentleman's sort of example was to hold true, then we would have to eliminate all corporate law and every single publicly traded company that incorporates in Delaware. Delaware's entire corporate structure is based on case law and what has gone on. It is widely accepted throughout the United States that it is solid and positive, and that is what we are trying to do here today.

We are not trying to hand over more power to the bureaucrats. We are trying to make sure that the system that is in place, that everybody understands the rules of the road, that they then are going to be used to be enforced.

BREAK IN TRANSCRIPT

Mr. HUIZENGA. Mr. Speaker, on that I demand the yeas and nays.

BREAK IN TRANSCRIPT

Source