UCLA School of Law

Congress intended that the Insider Trading Sanctions Act of 1984 should increase the deterrent effect of the insider trading prohibition without changing the substantive common law governing insider trading cases. Towards that end, the Act created a civil penalty of up to three times the profit gained, or loss avoided, through trading while in possession of material nonpublic information. This article examines the Act and considers its probable effect on insider trading. the article begins with an historical overview of the development of the insider trading prohibition. The article then discusses the adoption of the Act and examines its provisions in the context of then-existing law. Finally, the article criticizes the Act, suggesting that it will not have the deterrent effect anticipated by its drafters, and examines the possible effects of the ITSA on the further development of the federal insider trading prohibition.