Final answer:
The Insider Trading Sanctions Act of 1984 is a law that aims to prevent unfair trading practices in the stock market by penalizing individuals who engage in insider trading.
Step-by-step explanation:
The Insider Trading Sanctions Act of 1984 is a law that was enacted to prevent insider trading in the stock market. Insider trading refers to the buying or selling of company stocks by individuals who have non-public information about the company, which gives them an unfair advantage in trading. The act imposes sanctions, such as fines and imprisonment, on those found guilty of insider trading.
To give an example, let's say an employee of a corporation learns about an upcoming merger that will significantly affect the company's stock price. Instead of keeping this information confidential, the employee buys a large number of stocks before the merger is announced, making a substantial profit when the stock price rises. This would be considered insider trading and is illegal under the Insider Trading Sanctions Act of 1984.
In summary, the Insider Trading Sanctions Act of 1984 is a law that aims to prevent unfair trading practices in the stock market by penalizing individuals who engage in insider trading.