Civil remedies the SEC can seek
In a civil case, the SEC can seek disgorgement of the profit gained or loss avoided, interest, and a civil penalty that can reach a multiple of that amount. It can also ask a court for an injunction and, for executives and directors, a bar from serving as an officer or director of a public company. People who controlled someone who traded can face penalties of their own in some situations. Under a Supreme Court decision, SEC fraud claims seeking civil penalties generally must be brought in federal court, where a jury is available, rather than before the agency's own judges. Courts have also limited disgorgement to net profits awarded for the benefit of investors, which can affect how the figure is calculated.
Criminal exposure
Criminal insider trading cases are brought by federal prosecutors and can result in prison, fines, and forfeiture, with sentences driven largely by the gain involved and the person's role. Prosecutors must generally show that the trading was willful, a higher standard than in an SEC civil case, and cases involving tips also turn on what benefit the person passing the information received and what the person trading knew about it. Related charges such as securities fraud, wire fraud, conspiracy, or lying to investigators are often added. A criminal case and an SEC case frequently proceed in parallel, and resolving one does not end the other.
Consequences after the case
Beyond fines and sentences, an insider trading case can end a career in the securities industry, lead to industry bars, cost a professional license, and prompt an employer to terminate and claw back compensation. Shareholder suits may follow in some cases. The SEC has also ended its policy of barring settling parties from publicly denying the allegations, which can change how a resolution is weighed. When we first meet, we look at the trade, the source of any information, and whether the SEC, a prosecutor, or both are involved, because the exposure differs greatly depending on who is asking. An accurate early picture of the potential penalties is the basis for deciding whether to cooperate, negotiate, or contest the case.
