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The Securities Acts Amendments of 1975 gave the authority to the Municipal Securities Rulemaking Board (MSRB) to regulate the issuance and trading of municipal bonds. The MSRB has no enforcement division. Its rules are enforced by other regulators.


The Insider Trading and Securities Fraud Enforcement Act of 1988 established guidelines and controls for the use and dissemination of nonpublic material information. Nonpublic information is information that is not known by people outside of the company. Material information is information regarding a situation or development that will materially affect the company in the present or future. It is not only just for insiders to have this type of information, but it is required for them to do their jobs effectively. It is, however, unlawful for an insider to use this information to profit from a forthcoming move in the stock price. An insider is defined as any officer, director, 10 percent stockholder, or anyone who is in possession of nonpublic material information, as well as the spouse of any such person. Additionally, it is unlawful for the insider to divulge any of this information to any outside party. Trading on inside information has always been a violation of the Securities Exchange Act of 1934, but the Insider Trading Act prescribed penalties for violators, which include:

• A fine of 300 percent of the amount of the gain or 300 percent of the amount of the loss avoided for the person who acts on the information.

• A civil or criminal fine for the person who divulges the information.

• Insider traders may be sued by the affected parties.

• Criminal prosecutions that may result in a fine of up to $1,000,000 and 20 years in prison.

Information becomes public information once it has been disseminated over public media. The SEC will pay a reward of up to 10 percent to informants who turn in individuals who trade on inside information. In addition to the insiders already listed, the following are also considered insiders:

• Accountants

• Attorneys

• Investment bankers

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