Statement of Administration Policy: H.R. 5133 - Insider Trading and Securities Fraud Enforcement Act

(House)
(Markey (D) Massachusetts and seven others)

The Administration strongly supports efforts to deter insider trading through the aggressive enforcement of existing securities laws and the strengthening of sanctions for those found guilty of violating such laws. Therefore, the Administration has no objection to House passage of H.R. 5133.

In particular, the Administration supports provisions of H.R. 5133 that would: (1) increase penalties for insider trading violations; (2) authorize the payment of awards to persons who provide information concerning certain violations of the securities laws; and (3) authorize the Securities and Exchange Commission to provide investigative assistance to foreign securities authorities.

However, the Administration will seek amendments in the Senate to:

—    eliminate overly-broad provisions in H.R. 5133 that may extend the bill's prohibitions on insider trading to encompass legitimate activities, thereby inhibiting market research, the exchange of legitimate marketplace information, and adversely affecting market decisions. (Legitimate activities which could be restricted by H.R. 5133 include trading conducted by employees at firms that possess material nonpublic information where adequate internal procedures exist to insulate such employees from the nonpublic information.);

—    amend provisions that, contrary to judicial precedent, would inappropriately broaden the class of persons who can bring suit against individuals trading on nonpublic information; and

—    remove certain limitations governing the imposition of civil penalties that are contained in H.R. 5133 (e.g., provisions that arbitrarily limit the penalties to an amount based on profit gained or loss avoided — the exact determination of which may be difficult to establish).