Bharara Task Force on Insider Trading Publishes Report Recommending Reforms to Insider Trading Law

In its report, the Task Force lays out proposals for reform that bring greater clarity and certainty to insider trading law, including proposing new insider trading-specific legislation

NEW YORK--()--The Bharara Task Force on Insider Trading issued its report today making recommendations to improve and clarify U.S. insider trading laws. The report follows a year-long study conducted by the Task Force, made up of experts in the field and members of the judiciary, private practice of law, academics, and former prosecutors and regulators. In addition to studying the history and current state of insider trading law – both court decisions and efforts at legislative reform – the Task Force received input from various outside groups with expertise and interest. The report, as well as additional information about the Task Force, is available at

Preet Bharara, Chair of the Task Force and former U.S. Attorney for the Southern District of New York said: “Our nation’s insider trading laws have for too long lacked clarity, generated confusion, and failed to keep up with the times. This lack of clarity and certainty, in this important area of law and our securities markets, has benefited no one. After over a year of study, our Task Force has concluded that simple, clear, and understandable legislation that is specific to insider trading is long overdue. I want to thank the distinguished members of the Task Force for their commitment and expertise, as well as the different groups that provided input. We hope that our report helps move forward the push toward much-needed, sensible insider trading law reform.”

Summary of the Report

The Task Force’s report describes the work that it did over the last year to study and analyze the history and current state of insider trading law. It provides a summary of important court decisions that have developed the law in this area over the decades, as well as relevant insider trading-related legislation and regulation.

After studying and analyzing the law – and obtaining input from outside groups with expertise and interest – the Task Force has reached the following conclusions:

  • Reform that simplifies, clarifies, and modernizes insider trading law is necessary and long overdue.
  • A legislative solution, in the form of a new statute expressly setting out the elements of an insider trading offense, would be the best vehicle for such reform. While other measures, including regulatory rule-making, could provide incremental benefits, any steps short of a new statute will continue to be burdened by the uncertainty that accompanies existing common law.
  • To improve upon the current insider trading regime and to confront its most significant problems, the Task Force believes any new legislation should seek to apply the following key principles:
    • The language and structure of any statute should aim for clarity and simplicity.
    • The law should focus on material nonpublic information that is “wrongfully” obtained or communicated, as opposed to focusing exclusively on concepts of “deception” or “fraud,” as the current case law does.
    • The “personal benefit” requirement should be eliminated.
    • The law should clearly and explicitly define the knowledge requirement for criminal and civil insider trading enforcement, as well as the knowledge requirement for downstream tippees who receive material nonpublic information and trade on it.

The Task Force believes that new legislation applying these principles would help eliminate areas of uncertainty and confusion in insider trading law and provide greater clarity for courts, practitioners, and market participants.

Model Language Proposed in Report

Applying the principles set forth above, the Task Force set forth in the report the following draft language that could be used as a template for potential legislation.

  • Operative Language

“It shall be unlawful for any person, (a) directly or indirectly, to purchase or sell any security, while in possession of material, nonpublic information relating to such security, knowing that such information had been obtained or communicated wrongfully, or (b) to wrongfully communicate or communicate wrongfully-obtained material, nonpublic information knowing that such information will be used in the purchase or sale of any security.”

  • Definition of “Wrongfully”

“Wrongfully shall mean obtained or communicated in a manner that involves (a) deception, fraud, or misrepresentation, (b) breaches of duties of trust or confidence or breach of an agreement to keep information confidential, express or implied, (c) theft, misappropriation, or embezzlement, or (d) unauthorized access to electronic devices, documents, or information.

  • Knowledge Requirement

“Any person who willfully violates this statute shall be sentenced to a fine not to exceed $5,000,000 or imprisonment of not more than 20 years, or both, except that when such person is a person other than a natural person, a fine shall not exceed $25,000,000. The Securities and Exchange Commission shall be authorized to enforce violations of this statute involving the reckless disregard of the fact that material nonpublic information was wrongfully obtained or communicated.”

Task Force Members

The Task Force members are:

Preet Bharara (Chair)

  • Distinguished Scholar in Residence, NYU School of Law
  • Co-Chair, National Task Force on Rule of Law and Democracy, Brennan Center for Justice
  • Former U.S. Attorney for the Southern District of New York

Joon H. Kim (Vice-Chair)

  • Partner – Cleary Gottlieb Steen & Hamilton LLP
  • Former acting U.S. Attorney for the Southern District of New York

John C. Coffee, Jr.

  • Adolf A. Berle Professor of Law – Columbia Law School

Katherine R. Goldstein

  • Partner – Milbank
  • Former Chief of the Southern District of New York’s U.S. Attorney’s Office’s Securities and Commodities Fraud Task Force

Hon. Joseph A. Grundfest

  • Professor – Stanford Law School
  • Former SEC Commissioner

Melinda Haag

  • Partner – Orrick, Herrington & Sutcliffe
  • Former U.S. Attorney for the Northern District of California

Joan E. McKown

  • Partner – Jones Day
  • Former Chief Counsel of the SEC’s Division of Enforcement

Hon. Jed S. Rakoff

  • Senior U.S. District Judge for the Southern District of New York

For more information on the report and the Task Force, please visit


Peter Ottaviano
Cleary Gottlieb

Release Summary

The Bharara Task Force has released a report laying out proposals for reform that bring greater clarity and certainty to insider trading law.


Peter Ottaviano
Cleary Gottlieb