Like getting rich, but hate doing "real" work? Got a bunch of money to bet on stocks, but have no clue what tech IPO to buy into?

Then the highly illegal, but poorly regulated crime of insider trading is for you. Just find yourself a pal who is a feeling-underpaid secretary or janitor at Goldman Sachs, and start leaving cash in envelopes under park benches (do not use Venmo or give away baseball tickets). Then wait for a stock ticker symbol on a Post-It note to arrive on a subway car seat way out in Yonkers.

You’ll want to buy that stock, because another, larger company is about to do so by using an excessive amount of debt (or other peoples' money). But don’t get too greedy. If you’ve only been making $900 a roll with every "stock sell," the SEC will get suspicious about five-figure gains in two weeks.

Insider trading is the trading on information that isn’t known to the public. So...let’s say that your buddy at Goldman knows that an airline company is going to get purchased next week, and he tells you because he worked on the merger. Neither he nor you can now own the stock. You shouldn’t/can't buy it, comment on it, or even look cross-eyed, saying nothing if someone asks you about it.

The SEC is in charge of investigating and charging white-collar criminals who bilk investors out of billions from insider trading.

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 and seemingly only rarely get caught. Cynically, everyone knows that if you make a huge bet on a roulette wheel, and it happens to stop at the exact moment it hits your number, well, you're probably cheating. And for a long time, everyone knew that people who had important information, or "insider info," would probably be the first people to put their fingers into the proverbial roulette wheel to their own profit.

Related or Semi-related Video

Finance: What are Insider Trading And th...11 Views

00:00

Finance a la shmoop what is insider trading and the securities fraud

00:06

Enforcement Act of 1988? all right well the Securities and Exchange Act of 1934

00:12

aka the 34 Act made it formally illegal to use inside information in trading

00:20

stocks amazingly that used to not be illegal or at least not explicitly so [People gambling]

00:26

and it wasn't enforced investing was well a clubby white man's insiders gig

00:31

and the boys took care of the boys well since people could make a lot of

00:35

money with insider information and thought they wouldn't get caught like [Boy peeing at a urinal]

00:39

well who's gonna know that I overheard the CEO of big company talking about a

00:45

merger in a Denny's washroom you know some folks pretty much ignored

00:49

the law well the 1988 law was basically Congress saying you guys were really [Congressman discussing the 1988 law]

00:54

serious about this so this new legislation added some hefty penalties

00:59

if you get caught as an inside trader people still trade on insider

01:03

information though and they still get caught and they go to jail and they lose [Jail door closes on man]

01:07

everything they have so he's got to realize some of us were just born to be

01:12

bad...

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