Earlier this year, for example, the SEC launched one of the largest insider trading cases in its history against a secretary at International Business Machines Corp. and a coterie of her friends and acquaintances in the New York City area. Lotus Development Corp. So far, six people have agreed to settlements in the case. Mr. Sher of Bethesda, Md., similarly doesn't fit the image of the corrupt insider, popularized by actor Michael Douglas as Gordon Gekko in the 1987 movie Wall Street . He is neither a corporate executive nor a financier, but his case is typical of how the SEC's strategy of deterrence works. In 1997, Mr. Sher inadvertently spotted a draft press release about the imminent takeover of BDM International Inc. of McLean, Va., while visiting the home of public relations executive Lawrence Rosenfeld, 49.
Defendants are generally smart, well educated and ready to take the stand in their own defence.
David Bartone, Mr. Sher's lawyer, would not discuss how the SEC caught up with his client. Yet, cases such as this have created a widespread perception that illegal insider trading is high-risk behaviour. As Mr. Sher and Mr. Rosenfeld found out, the penalty for getting caught is severe. Equally important, the high-profile crackdown during the 1980s has prompted most major public companies and investment dealers to put in place rigorous internal policies to prevent illegal insider trading, securities lawyers say. People have not forgotten the eighties.