Clear as mud, right? That’s partly why, in May, Rep. Jim Hines (D-Conn.) introduced the bipartisan Act to clarify insider trading law. Under the Act, the DOJ and SEC may bring charges against anyone who “was aware, consciously avoided being aware, or recklessly disregarded” that MNPI was “wrongfully obtained or communicated.”
Importantly, the Act eliminates the personal benefit test articulated in over 30 years of case law. Because the Act does not require that defendants actually know how the information was obtained, it could lead to an increase in insider trading prosecutions.
The new standard extends the reach of insider trading liability because it narrows prosecutions to: Did you communicate or trade on inside information? If yes, did you know or should you have known that information was obtained illegally?
‘Enforcement 40’ for 2020
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