Applying the principles set forth in the report, the Task Force developed the following draft language that could be used in proposed legislation. While other variations in terms of language or format could also serve the principles discussed in the report, the Task Force concluded it would be useful to provide some model language that seeks to apply the general principles outlined in the report.

• 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.”