Bill Overview
Title: Insider Trading Prohibition Act
Description: This bill generally provides statutory authority for the prohibition against securities trading, as well as related communications to others, by a person who has access to material, nonpublic information and is aware or recklessly disregards that the information is material and nonpublic. Further, that person must either be aware or recklessly disregards that the information has been obtained wrongfully or that the trading would be wrongful. The bill also provides, for purposes of establishing a violation of this prohibition, that it is not necessary for such a person to know specifically how such information was obtained or whether a personal benefit was paid or promised.
Sponsors: Sen. Reed, Jack [D-RI]
Target Audience
Population: People involved in global securities trading and investment
Estimated Size: 60000000
- The bill targets activities related to insider trading, which primarily involves stock market participants.
- The global stock market consists of professional traders, institutional investors, executives, and companies dealing with securities.
- Insider trading regulations aim to protect ordinary investors and maintain fair market conditions.
- This bill enhances prohibitions globally as financial markets and corporate structures are interconnected across borders.
Reasoning
- The Insider Trading Prohibition Act primarily affects individuals involved in or around securities trading, whether professionally or personally.
- Its direct financial impact is on those who might be currently engaged in using non-public information unlawfully.
- Indirectly, it reinforces market integrity, which is beneficial to retail investors.
- U.S. law enforcement agencies have a specific budget to combat insider trading, targeting improper activities on exchanges and involving insiders.
- The number of individuals directly affected by stopping illicit gains from insider trading is a small fraction of the total involved in the stock market.
Simulated Interviews
Hedge Fund Manager (New York, NY)
Age: 45 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 20.0 years
Commonness: 5/20
Statement of Opinion:
- This policy is essential to ensure fair trading practices, though it might increase our compliance costs.
- We need to adjust our internal controls to avoid inadvertent violations.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 8 |
| Year 2 | 7 | 8 |
| Year 3 | 7 | 8 |
| Year 5 | 8 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 8 | 8 |
Tech Startup Executive (San Francisco, CA)
Age: 32 | Gender: female
Wellbeing Before Policy: 9
Duration of Impact: 15.0 years
Commonness: 7/20
Statement of Opinion:
- It's good to have legal clarity, but this might complicate how we communicate internally about non-public information.
- I am supportive of measures that level the playing field for all investors.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 9 | 9 |
| Year 2 | 9 | 9 |
| Year 3 | 9 | 9 |
| Year 5 | 9 | 9 |
| Year 10 | 9 | 9 |
| Year 20 | 9 | 9 |
Financial Analyst (Chicago, IL)
Age: 29 | Gender: other
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 8/20
Statement of Opinion:
- The Act should deter unethical practices and make market movements more reliable.
- I'm optimistic about improved job security if the firm avoids scandals.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 8 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 9 | 6 |
| Year 10 | 9 | 6 |
| Year 20 | 9 | 6 |
Retired School Teacher (Miami, FL)
Age: 54 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 3/20
Statement of Opinion:
- I believe such laws are necessary, though I worry about unintended consequences affecting small investors.
- This makes me think my investments are safer from shady practices.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
Corporate Lawyer (Boston, MA)
Age: 40 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 20.0 years
Commonness: 10/20
Statement of Opinion:
- This Act presents more work for compliance departments, which benefits my line of work.
- I'm confident it will enhance transparency and trust in the markets.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 9 | 8 |
| Year 5 | 9 | 8 |
| Year 10 | 9 | 8 |
| Year 20 | 9 | 8 |
Retail Investor (Austin, TX)
Age: 26 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 3.0 years
Commonness: 12/20
Statement of Opinion:
- I hope this law brings more fairness to the markets and benefits small-time investors like me.
- I'm wary of how new policies might affect algorithmic trading, which I'm learning.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 7 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 7 | 5 |
| Year 10 | 7 | 5 |
| Year 20 | 7 | 5 |
CEO of a Public Company (Los Angeles, CA)
Age: 39 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 6/20
Statement of Opinion:
- Compliance costs will rise, affecting overhead and potentially impacting stock prices in the short term.
- Nonetheless, it's positive for market trust overall.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 7 | 6 |
University Professor (Seattle, WA)
Age: 47 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 0.0 years
Commonness: 4/20
Statement of Opinion:
- This legislation provides interesting case studies and enriches my curriculum.
- I strongly support policies that protect market integrity.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 8 | 8 |
| Year 5 | 8 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 8 | 8 |
Financial Journalist (Dallas, TX)
Age: 50 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 8/20
Statement of Opinion:
- This measure is a game-changer, leading to increased transparency and ethics in financial news reporting.
- It's a positive pressure on companies to be more transparent.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
Day Trader (Atlanta, GA)
Age: 34 | Gender: other
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 15/20
Statement of Opinion:
- This Act could change how fast information can be acted on, affecting daily trading decisions.
- I find its intentions good for the market, though adaptive strategies will be needed.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 6 | 6 |
| Year 10 | 6 | 6 |
| Year 20 | 6 | 6 |
Cost Estimates
Year 1: $300000000 (Low: $250000000, High: $400000000)
Year 2: $310000000 (Low: $260000000, High: $420000000)
Year 3: $320000000 (Low: $270000000, High: $430000000)
Year 5: $340000000 (Low: $290000000, High: $450000000)
Year 10: $360000000 (Low: $300000000, High: $480000000)
Year 100: $400000000 (Low: $350000000, High: $500000000)
Key Considerations
- The effectiveness of enforcement measures and the capacity of regulatory bodies to implement the act are critical.
- Global market interconnectivity means international cooperation may be necessary to adequately address insider trading issues.
- Costs associated with litigation and legal processes could be significant but may reduce over time as compliance improves.