The House on Thursday passed a bill to explicitly ban making financial trades based on confidential information, a process commonly known as insider trading.
Lawmakers approved the Insider Trading Prohibition Act by a near unanimous 410 to 13 vote, with just 12 Republicans and independent Rep. Justin Amash (Mich.) opposing the bill.
If passed by the Senate and enacted by President Trump, the bill would create the first direct ban on insider trading. Such transactions typically involve a person buying or selling shares of a company based on nonpublic information that will substantially affect the stock price upon release.
While federal regulators and law enforcement agencies commonly prosecute and convict individuals alleged to have traded on nonpublic information, defendants are typically accused of bank fraud, wire fraud or other explicit crimes.
The bill is the latest congressional effort to crack down on insider trading both nationally and within the halls of Congress. Despite their immense influence over U.S. commerce, lawmakers have few limits on the makeup of their financial portfolios as long as they disclose their assets.
Former Rep. Chris Collins (R-N.Y.) pleaded guilty in October to conspiring to commit securities fraud and making false statements after he was indicted in 2018 on 11 charges related insider trading of shares of an Australian pharmaceutical company.
Prosecutors alleged that Collins, who had served on the company’s board of directors, gave nonpublic information about drug trial results to his son to help him “make timely trades in Innate stock and tip others.”
Collins was unable to sell his shares of the company, Innate Immunotherapeutics, and lost roughly $17 million after damaging test results were announced. But his son allegedly avoided more than $570,000 in losses because of the alleged tip from the congressman.
Multiple Republican lawmakers told The Hill in 2018 that Collins had boasted about making money for other members of Congress by urging them to invest in the company.
The late Rep. Louise Slaughter (D-N.Y.), asked the Securities and Exchange Commission (SEC) and federal prosecutors in 2017 to investigate Collins under the STOCK Act, which she authored in 2012 banning members of Congress from insider trading.
Updated at 7:16 p.m.