Insider Trading Sanctions Act Of 1984

Insider trading was made illegal during the reforms that followed the stock market crash of 1929 and the onset of the Great Depression.

The practice of insider trading involves using information that isn't available to the general public in order to profit in the stock market. So...you know that a company is about to announce that it's agreed to be purchased by its biggest rival. You buy the stock ahead of the general announcement. When the news hits, the stock skyrockets and you make a fortune.

Even though insider trading became illegal during the 1930s, the penalties weren't very stiff. For a long time, a person could use insider information to make money in the stock market, get caught, pay the fine, and still end up earning a profit on the whole transaction (even taking the amount of the fine into account).

The Insider Trading Sanctions Act Of 1984 was meant to change that. It was the 1980s, after all, the time of Gordon Gekko and Patrick Bateman. People were running around in boxy suit coats and slicked-back hair, yelling buy and sell orders into brick-sized cellular phones...just insider trading like crazy.

The 1984 update to the insider trading laws was meant to change that. It made it easier to prosecute insider trading, and increased the financial penalties related to conviction.

Just ask Charlie Sheen at the end of Wall Street.