The law of insider trading has long been criticized as lacking clear standards for what constitutes a violation.  Unlike many aspects of federal securities regulations, insider trading is not defined by statute or regulation.  Instead, the contours of this complex area have for decades been drawn by shifting and sometimes conflicting judicial interpretations of the anti-fraud provisions of the Securities Exchange Act of 1934 and related rules.

In May, Congress took a big step toward clarifying this area of the law, when the Financial Services Committee of the U.S. House of Representatives unanimously approved the Insider Trading Prohibition Act.  If the bill becomes law, it would simplify an inherently complex area, but might also lead to regulators and prosecutors bringing more insider trading cases.