Anyone found liable for trading on inside information must pay the federal government an amount equal to any profit made or loss avoided. Under Section 21A of the Securities Exchange Act of 1934, he or she may also face a penalty of up to three times that amount. You can be barred from serving as an officer or a director of a public company. In addition, you also face a greater likelihood of criminal penalties for insider trading, and also the possibility of shareholder lawsuits for securities fraud.

The SEC settlement against Martha Stewart provides an example of disgorgement for losses avoided, payment of penalties and prejudgment interest, and a five-year bar from serving at a public company as an officer, as a director, or even (for certain roles) as an employee. For examples of recent cases and penalties involving insider trading and/or tipping, see the SEC's webpage on selected insider-trading enforcement actions.

Novel Civil Enforcement

An insider-trading case in 2016 involving professional golfer Phil Mickelson and a corporate director (see the related SEC press release and SEC public statement) shows that when the SEC finds insider trading somewhere in a chain of events, all who profited will be forced to pay back their gains, even if they did not know that the information in question was tainted. In the SEC's action, Mr. Mickelson was named as a "relief defendant," i.e an individual who must turn over ill-gotten gains arising from schemes perpetrated by others. Without admitting or denying the allegations in the SEC's complaint, Mr. Mickelson agreed to pay the full disgorgement of his trading profits, which totaled $931,738.12 plus interest of $105,291.69.