You know that you’re either famous or infamous when you have a law named after you. In the case of Albert H. Wiggin, it’s definitely the latter. This wasn’t always the case. At one time, Wiggin was seen a well-respected member of the community. 

That all changed when Wiggin became the face of what would become known as insider trading. The reality is that prior to Wiggin’s actions, insider trading was largely ignored by the U.S. government. But that all changed with the 1933 Securities Act that is known by its nickname, the “Wiggin Act.”

What Happened?

During the roaring 1920’s, it was an open secret that investing was not a transparent process. In fact, this was a time that gave birth to the “greater fool” theory. The idea was that riding the coattails of other investors and capitalizing on a stock’s momentum were the only way to make a profit. 

The problem was that eventually the “smart money” exits the investment and the fools are left holding the bag. But when the market was charging higher it was a risk that many investors were willing to take. 

That changed with the crash of 1929 as investors began to understand how rigged the game was. At the time the practice of short-selling was completely unregulated. By way of a quick explanation, short selling is the act of selling a security in anticipation of its price falling. An investor engages in short selling to capitalize on the anticipated price movement as an opportunity to repurchase the shares later and collect the difference in price as a profit. 

Today, short selling is commonplace. However today, there would be strict disclosure rules that prevent someone like Jamie Dimon for example for shorting shares in Chase Bank. This wasn’t the case in 1929 and Wiggin made $4 million from selling 40,000 shares of Chase. In an effect, he was like a player on one team betting on the other team to win. 

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Wiggin, however, must have known his activity was unethical at best and he sought to hide the activity by using companies owned by family members to hide his trades. When investors exited their positions in Chase stock after the 1929 crash, Wiggin made a profit that was completely legal at the time. 

How was the fraud discovered?

In the years following the market crash there was an outcry to investigate its causes. This led to the formation of the Pecora Commission. Wiggin was called as a witness before the committee and that was when the evidence of his short selling became evident. 

The commission found that Wiggin was not alone in engaging in short selling. However Ferdinand Pecora of the Senate Banking Committee who led the investigation said, “In the entire investigation, it is doubtful if there was another instance of a corporate executive who so thoroughly and successfully used his official and fiduciary position for private profit”

What Were the Consequences For Albert Wiggin?

Some would say Wiggin got off with a “slap on the wrist” and they may not be wrong. The profit that Wiggin made was not illegal at the time. However, at the time Wiggin was receiving a $100,000 pension for life from Chase Bank. The outcry from the controversy became such that Wiggin declined the pension. 


You could make a case that Albert H. Wiggin was the godfather of insider trading. You could also say he was a cautionary tale for future generations of investors. There is no question that as a result of Wiggin’s actions (and others like him to be fair), securities laws were changed for the better.

The Wiggin Provision of the 1933 Securities Act prevents company directors from short selling their own stocks and profiting from their company’s misfortune.