WASHINGTON: A group of former U.S. officials and lawyers is urging Congress to strengthen and clarify law around insider trading that has "generated confusion" and "failed to keep up with the times."
The United States needs a specific law to prohibit insider trading, rather than continuing to rely on rules against fraud and deception, a task force led by former U.S. attorney for the Southern District of New York Preet Bharara said in a report published on Monday.
The task force recommended a legislative fix that outlines elements of insider trading with a focus on material, nonpublic information that is "wrongfully" obtained or communicated, according to the report.
That would mark a shift as there is no current U.S. law that explicitly prohibits insider trading, according to the lawyers. Decades of cases, including a recent high-profile one against former Republican U.S. Representative Chris Collins, instead rely largely on previous court decisions and enforcement of restrictions against deceptions and fraud.
"If we move to a standard that talks about wrongfully obtaining information, it will cover conduct that unquestionably involves the same conduct as insider trading but do so more clearly," Joon H. Kim, vice-chair of the group and former acting U.S. Attorney for the Southern District of New York, said in a phone interview.
The U.S. House of Representatives last month passed a law to explicitly prohibit trading of securities by someone who is aware of material, nonpublic information. But the Senate has yet to act.
The House of Representatives' Insider Trading Prohibition Act goes a long way toward providing that clarity, though it kept a requirement for "personal benefit" that should be eliminated, Kim said.
It was not immediately clear how much weight the task force's recommendations might carry with U.S. lawmakers, but the panel includes many former enforcement officials besides Bharara and Kim.
The group also included Columbia University law school professor John Coffee, Jr.; former Justice Department official Katherine R. Goldstein; former SEC Commissioner Joseph A. Grundfest, former U.S. Attorney for the Northern District of California Melinda Haag, former SEC enforcement official Joan E. McKown, and senior U.S. district judge for New York District Judge Jed Rakoff.
(Reporting by Chris Prentice in Washington; Editing by Matthew Lewis)