What is the difference between criminal and civil penalties for insider trading violations?

Insider trading violations can result in both criminal and civil penalties, and it is essential to understand the difference between the two.

Civil penalties for insider trading violations typically involve monetary fines and disgorgement of profits made from the illegal trades. Disgorgement refers to the requirement that individuals return the profits made from insider trading back to the company or to the SEC. Civil penalties can also include injunctive relief, which is a court order that prohibits an individual from engaging in future illegal conduct.

In contrast, criminal penalties for insider trading violations can include fines, imprisonment, and probation. Criminal charges are typically brought by the Department of Justice and can result in significant prison sentences for individuals found guilty of insider trading.

The decision to pursue civil or criminal charges often depends on the severity of the violation, the impact on the markets and public, and the individual's intent to commit the crime. Civil penalties are often sought for unintentional or negligent violations, while criminal penalties are reserved for intentional or egregious violations.

It is important to note that both civil and criminal penalties can have significant consequences for individuals found guilty of insider trading violations. These consequences can include reputational damage, loss of professional licenses, and difficulties in securing future employment or investment opportunities. Therefore, it is essential to understand and comply with insider trading regulations to avoid potential legal and financial consequences.