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Finance Glossary

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Insider Trading And Securities Fraud Enforcement Act Of 1988


The Securities and Exchange Act of 1934 (the '34 Act) made it illegal to use inside information to trade stocks. Since people could make a lot of money with insider information and thought they wouldn't get caught (who's going to know I overhead the CEO of Big Company talking about a merger in a Denny's washroom?), some folks pretty much ignored the law.

The 1988 law was basically Congress saying, "We're really serious about this." The 1988 legislation added some hefty penalties if you get caught.

People still trade on insider information though, so... yeah.