Can it be coincidence? A BUSINESS WEEK analysis of 100 of the largest 1994 merger or takeover deals shows that 34 were preceded by unexplained stock-price runups or volume surges--the telltale signs of insider trading. Nearly a decade after the Wall Street scandals, insider trading appears to be alive and well, active not in the screaming trading rooms of Manhattan but on the quiet streets of Middle America.

Today, inside traders are likely to be corporate executives and their friends and relatives. There is good reason for the change in venue. A 1988 law made brokerages liable in some cases for their employees' insider trading. Wall Street cracked down and that--plus the image of "masters of the universe" being led off in handcuffs--changed the risk-reward ratio in the minds of most investment bankers and brokers.

But corporate officials, their friends and kin, haven't gotten the message. For them, the risk-reward ratio continues to make insider trading tempting. One reason is that there is no specific law on the books against trading on inside information. Indeed, the whole concept of insider trading is murky.

Chances are, most people trading on inside information know full well that they are breaking the law. But the government has been defeated in court by a broker who got tips from a relative of a corporate titan and by an analyst who got inside dope from someone trying to expose corporate fraud. Apparently, neither case involved information that was stolen or violated company policies, either of which can get you in trouble.

Congress could help by drafting explicit legislation that states what is legal and what is not. And the Securities & Exchange Commission, which has favored vagueness over specificity in the past, should back the legislative effort. Investors rightly demand fairness in the markets, and that means clear rules of the game that stop trading on inside information.

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