Penalties for Insider Trading

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Chapters in this video

  1. 0:00 The 5/25/20/3x memory aid for criminal and civil caps
  2. 2:28 Treble damages math: disgorgement plus 3x penalty
  3. 3:55 Controlling person penalties without personal trading
  4. 4:51 Contemporaneous trader private lawsuits
  5. 5:57 FINRA bar vs. expulsion terminology
  6. 6:37 Rapid-fire exam recap

What this video covers

  • The criminal penalty tiers for individuals and entities: $5 million, $25 million, and up to 20 years imprisonment, plus which other crime shares these same caps
  • How civil treble damages work: 3x the profit gained or loss avoided, and why this is calculated on top of disgorgement for a total 4x cost
  • The two-step penalty math the Financial Industry Regulatory Authority (FINRA) loves to test: disgorgement first, then the 3x civil penalty
  • Controlling person liability: why supervisors and firms face the greater of $1 million or 3x the profit/loss even without personal trading
  • Who contemporaneous traders are, what private lawsuits they can bring, and why these are separate from government actions
  • FINRA sanctions terminology: barred for individuals versus expelled for member firms
  • Why the same underlying facts can trigger criminal prosecution, SEC civil penalties, FINRA discipline, and private lawsuits simultaneously

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