Aug. 10, 1984 To amend the Securities Exchange Act of 1934 to

98 STAT. 1264

PUBLIC LAW

98-376—AUG.

10, 1984

Public Law 98-376

98th Congress

An Act

Aug. 10, 1984 To amend the Securities Exchange Act of 1934 to increase the sanctions against

trading in securities while in possession of material nonpublic information.

[H.R. 559]

Insider Trading

Sanctions Act of

1984.

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78a note.

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78u.

use

78aa.

Prohibition.

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78t.

Be it enacted by the Senate and House of Representatives of the

United States of America in Congress assembled,

SECTION 1.

ITiis

Act may be cited as the "Insider Trading Sanc-

tions Act of 1984".

SEC.

2. Section 21 of the Securities Exchange Act of 1934 is

amended by redesignating subsection (d) as subsection (d)(1), and

adding at the end thereof the following new paragraph:

"(2)(A)

Whenever it shall appear to the Commission that any

person has violated any provision of this title or the rules or

regulations thereunder by purchasing or selling a security while in

possession of material nonpublic information in a transaction (i) on

or through the facilities of a national securities exchange or from or

through a broker or dealer, and (ii) which is not part of a public

offering by an issuer of securities other than standardized options,

the Commission may bring an action in a United States district

court to seek, and the court shall have jurisdiction to impose, a civil

penalty to be paid by such person, or any person aiding and abetting

the violation of such person. The amount of such penalty shall be

determined by the court in light of the facts and circumstances, but

shall not exceed three times the profit gained or loss avoided as a

result of such unlawful purchase or sale, and shall be payable into

the Treasury of the United States. If a person upon whom such a

penalty is imposed shall fail to pay such penalty within the time

prescribed in the court's order, the Commission shall refer the

matter to the Attorney General who shall recover such penalty by

action in the appropriate United States district court. The actions

authorized by this paragraph may be brought in addition to any

other actions that the Commission or the Attorney General are

entitled to bring. For purposes of section 27 of this title, actions

under this paragraph shall be actions to enforce a liability or a duty

created by this title. The Commission, by rule or regulation, may

exempt from the provisions of this paragraph any class of persons or

transactions.

"(B) No person shall be subject to a sanction under subparagraph

(A) of this paragraph solely because that person aided and abetted a

transaction covered by such subparagraph in a manner other than

by communicating material nonpublic information. Section 20(a) of

this title shall not apply to an action brought under this paragraph.

No person shall be liable under this paragraph solely by reason of

employing another person who is liable under this paragraph.

"(C) For purposes of this paragraph 'profit gained' or 'loss avoided'

is the difference between the purchase or sale price of the security

and the value of that security as measured by the trading price of

the security a reasonable period after public disseminaton of the

nonpublic information.

PUBLIC LAW

98-376—AUG.

10, 1984 98 STAT. 1265

"(D)

No action may be brought under this paragraph more than Prohibitions.

five years after the date of the purchase or sale. This paragraph

shall not be construed to bar or limit in any manner any action by

the Commission or the Attorney General under any other provision

of this title, nor shall it bar or limit in any manner any action to

recover penalties, or to seek any other order regarding penalties,

imposed in an action commenced within five years of such

SEC.

3. Section 32 of the Securities Exchange Act of 1934 is

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amended by striking "$10,000" from subsection (a) and inserting in

lieu thereof "$100,000".

SEC.

4. Section

15(c)(4)

of the Securities Exchange Act of 1934 is

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78o.

amended to read as follows:

"(4) If the Commission finds, after notice and opportunity for a

hearing, that any person subject to the provisions of section 12, 13,

14,

or subsection (d) of section 15 of this title or any rule or

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78/,

regulation thereunder has failed to comply with any such provision,

78111-780.

rule,

or regulation in any material respect, the Commission may

publish its findings and issue an order requiring such person, and

any person who was a cause of the failure to comply due to an act or

omission the person knew or should have known would contribute to

the failure to comply, to comply, or to take steps to effect compli-

ance,

with such provision or such rule or regulation thereunder

upon such terms and conditions and within such time as the Com-

mission may specify in such order.".

SEC.

5. Section 20 of the Securities Exchange Act of 1934 is

i5USC78t.

amended by adding at the end thereof the following:

"(d) Wherever communicating, or purchasing or selling a security

while in possession of, material nonpublic information would vio-

late,

or result in liability to any purchaser or seller of the security

under any provision of this title, or any rule or regulation thereun-

der, such conduct in connection with a purchase or sale of a put,

call, straddle, option, or privilege with respect to such security or

with respect to a group or index of securities including such secu-

rity, shall also violate and result in comparable liability to any

purchaser or seller of that security under such provision, rule, or

regulation.".

SEC.

6. (a) Section 3(a)(39) of the Securities Exchange Act of 1934

(15 U.S.C. 78c(a)(39)) is amended—

(1) by inserting before the semicolon at the end of subpara-

graph (A) the following: ", contract market designated pursuant

to section 5 of the Commodity Exchange Act (7 U.S.C. 7), or

futures association registered under section 17 of such Act (7

U.S.C. 21), or has been and is denied trading privileges on any

such contract market";

(2) by inserting before the semicolon at the end of subpara-

graph (B) the following: ", or is subject to an order of the

Commodity Futures Trading Commission denying, suspending,

or revoking his registration under the Commodity Exchange

Act (7 U.S.C. 1 et seq.)"; and

(3) by inserting after "municipal securities dealer," in sub-

paragraph (C) the following: "or while associated with an entity

or person required to be registered under the Commodity

Exchange Act,".

(b) Section 15(b)(4) of such Act (15 U.S.C. 78o(b)(4)) is amended—

i5USC78o.

(1) by striking out "or fiduciary" in subparagraph (B)(ii) and

inserting in lieu thereof "fiduciary, or any entity or person

98 STAT. 1266 PUBLIC LAW

98-376—AUG.

10, 1984

required to be registered under the Commodity Exchange Act (7

U.S.C.

seq.)";

(2) in subparagraph

(C)—

(A) by inserting "entity or person required to be regis-

tered under the Commodity Exchange Act," before "or

municipal securities dealer"; and

(B) by inserting "entity or person required to be regis-

tered under such Act," before "or insurance company"; and

(3) by inserting "the Commodity Exchange Act," after "In-

vestment Company Act of 1940," each place it appears in

subparagraphs

(D)

and (E).

Effective

date.

SEC.

7. The amendments made by this Act shall become effective

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note,

immediately upon enactment of this Act.

Approved August 10, 1984.

LEGISLATIVE

HISTORY—H.R.

559 (S. 910):

HOUSE REPORT No. 98-355 (Comm. oh Energy and Commerce).

CONGRESSIONAL RECORD:

Vol. 129 (1983): Sept. 19, considered and passed House.

Vol. 130 (1984): June 29, considered and passed Senate, amended, in lieu of

S. 910.

July 25, House concurred in Senate amendment.

WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 20, No. 33 (1984):

Aug.

11,

Presidential statement.