We examine the market and firm-level effects of the effective insider trading prohibition recently initiated in South Africa – the Trading Act of 1999. We find that the law has increased the awareness and abhorrence of insider dealing as both criminal and illegal. Further, we find that the average publicly traded firm in South Africa experienced significant improvements in equity value efficiency and corporate governance post the initiation of the law (2000-2004). Importantly, we find that upon controlling for other determinants of cost of capital, effective prohibition of insider dealings still explains reduction in the cost of equity by about 6% per annum. In fact, the mere initiation of the law does not reduce cost of equity instead the reduction in cost of equity occurs due to enforcement. These findings suggest that similar emerging markets in Africa and other regions of the world can benefit from enacting such capital market governance laws.