Four federal bodies investigate insider trading in the United States, and they usually work the same cases from different angles. The Financial Industry Regulatory Authority (FINRA) watches the markets and flags suspicious trades. The Securities and Exchange Commission (SEC) runs civil investigations and files civil cases. The Federal Bureau of Investigation (FBI) handles criminal investigative work. The Department of Justice (DOJ) brings the criminal charges in court. A single tip or trading pattern can move through all four.
FINRA: Where Most Cases Start
FINRA is typically the first to notice something is wrong. Its Insider Trading Detection Program uses automated surveillance to monitor 100 percent of trading in stocks, options, and bonds for suspicious activity around material news events such as earnings announcements, mergers, and regulatory approvals.1FINRA. Insider Trading Detection Program Update Through regulatory service agreements with the U.S. equity and options exchanges, that surveillance covers roughly 99.5 percent of U.S. stock market trading volume.2FINRA. Equity Market Surveillance Today and the Path Ahead
The Consolidated Audit Trail, a centralized database that tracks all activity in national market system securities across U.S. markets, feeds much of the work. It captures the full lifecycle of every order from placement through execution and links transactions to the broker-dealers handling them.3U.S. Securities and Exchange Commission. Additional Oversight and Monitoring of the SEC’s CAT Usage Is Needed, Report No. 585 Data arrives in near real time, so investigators see suspicious trades quickly.
When FINRA’s algorithms flag something odd, such as a burst of options purchases right before a merger announcement, its investigators dig in. The referral that goes to the SEC and other regulators is a detailed document, often 10 to 30 pages long, mapping out the suspicious traders, their possible connections to people with inside information, and the trading pattern leading up to the news event. FINRA sends hundreds of these referrals each year.1FINRA. Insider Trading Detection Program Update FINRA can also bring its own disciplinary actions against broker-dealers and their employees for rule violations.4FINRA. Enforcement
A quick note on what these investigators are looking for. Insider trading is buying or selling a security based on material nonpublic information: facts about a company that haven’t been shared with the public and would likely move the stock price if they were. Liability reaches both the classic corporate insider (an officer, director, or employee trading on confidential information) and outsiders like lawyers or consultants who misuse information entrusted to them. Tippers and tippees can both be charged.
The SEC: Civil Investigation and Enforcement
The SEC is the primary federal regulator for securities markets, and its Division of Enforcement handles civil cases. The division files hundreds of enforcement actions each year across all types of securities violations.5U.S. Securities and Exchange Commission. Division of Enforcement Its cases run on the civil burden of proof: the SEC only needs to show a violation was more likely than not to have occurred.
Once the SEC opens a formal investigation, it can issue subpoenas compelling the production of phone records, bank statements, brokerage records, and email communications.6U.S. Securities and Exchange Commission. Division of Enforcement Manual Those tools let investigators trace the flow of information from corporate insiders to traders.
Its legal authority for insider trading cases comes primarily from Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, which prohibit fraudulent or deceptive conduct in connection with buying or selling securities. When the SEC wins, several remedies are on the table:
- Disgorgement, which forces the violator to return all profits gained through the illegal trading.7U.S. Securities and Exchange Commission. Enforcement and Litigation
- Civil penalties of up to three times the profit gained or loss avoided.8Office of the Law Revision Counsel. 15 USC 78u-1 – Civil Penalties for Insider Trading
- Permanent bars from serving as an officer or director of a public company.
- Injunctions and cease-and-desist orders.
The reach isn’t limited to the trader. The SEC can also seek penalties against any person who controlled the violator if that person knew or recklessly disregarded the likelihood of the illegal trading. The maximum penalty for a controlling person is the greater of $1 million or three times the profit gained or loss avoided.8Office of the Law Revision Counsel. 15 USC 78u-1 – Civil Penalties for Insider Trading
Many SEC actions end in settlements where the defendant pays a financial penalty without admitting or denying the allegations, which lets the agency resolve cases faster and return money to harmed investors.
The FBI: Criminal Investigative Muscle
On the criminal side, the FBI’s white-collar crime units do the investigative work. Agents reach for tools that go well beyond a regulatory audit:
- Confidential informants inside trading rings or corporations who can describe firsthand how information was leaked.
- Search warrants to seize computers, phones, and internal documents from suspects’ homes and offices.9Federal Bureau of Investigation. A Brief Description of the Federal Criminal Justice Process
- Court-authorized wiretaps to capture phone calls and electronic communications as inside information is being passed.
- In-person interviews of suspects, colleagues, and other witnesses to fill gaps that electronic evidence leaves behind.
When a case reaches across borders, the DOJ’s Office of International Affairs works with foreign governments on arrests and extraditions. In a 2025 case involving a global insider trading network, that cooperation produced an extradition from Switzerland.10United States Department of Justice. Eight Members of Global Insider Trading Network Charged With Securities Fraud and Money Laundering Offenses
The DOJ: Criminal Prosecution
The DOJ brings the criminal charges. These cases carry a much higher bar than the SEC’s civil work: prosecutors must prove guilt beyond a reasonable doubt. Criminal prosecutions tend to involve large-scale schemes, repeated violations, or coordinated efforts to conceal illegal activity.
Two federal statutes supply the main penalties. Under the Securities Exchange Act, a willful violation can bring up to 20 years in prison and fines of up to $5 million for individuals or $25 million for companies.11Office of the Law Revision Counsel. 15 USC 78ff – Penalties A separate securities fraud statute carries up to 25 years.12Office of the Law Revision Counsel. 18 USC 1348 – Securities and Commodities Fraud Prosecutors pick the statute that fits the facts, and a defendant can face charges under both.
How the Civil and Criminal Tracks Run Together
The same conduct can trigger an SEC civil case and a DOJ criminal prosecution at once. Federal securities laws expressly allow the SEC to share information from its investigations with the DOJ, so the two agencies can coordinate from the start. The SEC’s civil investigation often begins first, because its lower burden of proof and broad subpoena power give it early access to documents, and the evidence it gathers can help build the criminal case in parallel.
For a defendant, parallel proceedings are uncomfortable. Information given in response to SEC subpoenas or depositions can be shared with criminal prosecutors. The Fifth Amendment right against self-incrimination still applies and can be invoked in the civil proceeding, though the civil court may draw a negative inference from silence.
How to Report Suspected Insider Trading
Anyone with information about insider trading can report it to the SEC through its whistleblower program. Tips are submitted electronically through the SEC’s online Tips, Complaints and Referrals Portal or by mailing a Form TCR to the Office of the Whistleblower.13U.S. Securities and Exchange Commission. Information About Submitting a Whistleblower Tip Anonymous submissions are allowed, but you must be represented by an attorney to stay eligible for an award if you don’t disclose your identity.
If your tip leads to a successful enforcement action with monetary sanctions exceeding $1 million, you can receive an award of 10 to 30 percent of the amount collected.14U.S. Securities and Exchange Commission. Whistleblower Frequently Asked Questions In fiscal year 2025, the SEC awarded more than $60 million to 48 individual whistleblowers.15U.S. Securities and Exchange Commission. Annual Report to Congress – Office of the Whistleblower, Fiscal Year 2025
Whistleblowers also get protection against retaliation. Under the Dodd-Frank Act, an employer cannot fire, demote, suspend, or harass an employee who reports possible securities law violations to the SEC. To qualify, you must submit your report to the SEC in writing before the retaliation occurs. If retaliation happens anyway, you have a private right of action in federal court and can seek double back pay with interest, reinstatement, and reimbursement of attorneys’ fees.16U.S. Securities and Exchange Commission. Whistleblower Protections
Time Limits Investigators Work Under
Insider trading enforcement is bound by statutes of limitations that differ by track. Criminal charges must be brought within six years of the offense.17Office of the Law Revision Counsel. 18 USC 3301 – Securities Fraud Offenses The SEC’s general civil limitations period is five years for penalties or disgorgement. After the Supreme Court’s 2017 decision in Kokesh v. SEC, disgorgement is treated as a penalty subject to that five-year clock, so the SEC cannot reach back indefinitely to recover profits from old trades. Complex schemes can take years to uncover, which is one reason the SEC and DOJ tend to open investigations promptly after a FINRA referral lands.