Several agencies regulate insider trading in the United States, and they split the work by remedy and market. The Securities and Exchange Commission is the primary civil regulator, bringing lawsuits that strip profits and impose fines. The Department of Justice, working with the FBI, prosecutes insider trading as a crime and can send offenders to federal prison. FINRA polices brokerage firms and their employees. The stock exchanges run the real-time surveillance that catches suspicious trades in the first place. The Commodity Futures Trading Commission covers commodities and derivatives rather than stocks. And Congress subjects its own members to a separate disclosure regime under the STOCK Act. A single suspicious trade can pull in more than one of these at the same time.
The Securities and Exchange Commission
The SEC is the frontline enforcer. Its authority comes from the Securities Exchange Act of 1934, and its main tool is Rule 10b-5, which prohibits deceptive schemes and material misstatements in connection with buying or selling securities. When the SEC suspects insider trading, it can open a formal investigation, issue subpoenas, and compel testimony. If the evidence supports a case, it files a civil enforcement action in federal court.
The financial exposure is significant. A court can order disgorgement of the trader’s net profits, a remedy the Supreme Court confirmed in Liu v. SEC (2020) but capped at actual net gains. On top of that, the court can impose a civil monetary penalty of up to three times the profit gained or loss avoided.1Office of the Law Revision Counsel. 15 USC 78u-1 – Civil Penalties for Insider Trading A trader who pocketed $500,000 could face a $1.5 million penalty on top of surrendering the original gain. Courts can also enter permanent injunctions barring individuals from ever serving as officers or directors of a public company.2Office of the Law Revision Counsel. 15 USC 78u – Investigations and Actions Through administrative proceedings, the agency can separately revoke the licenses of investment professionals.
One limit matters: the SEC cannot send anyone to prison. Its toolkit is civil and administrative. When conduct is severe enough to warrant incarceration, the SEC refers the case to the Department of Justice.
Whistleblower Tips
The SEC pays for inside knowledge of violations. Under its whistleblower program, individuals who provide original information leading to an enforcement action with sanctions above $1 million can receive between 10% and 30% of the money collected.3U.S. Securities and Exchange Commission. Whistleblower Program In fiscal year 2025, the agency paid more than $170 million in whistleblower awards.4U.S. Securities and Exchange Commission. Office of the Whistleblower Annual Report to Congress, FY 2025 Many of the SEC’s biggest insider trading cases now start with a tip rather than a pattern in the data.
The Department of Justice and the FBI
When insider trading crosses from regulatory violation to crime, the Department of Justice takes over prosecution. The stakes jump. Under 15 U.S.C. ยง 78ff, a person convicted of willfully violating the securities laws faces up to 20 years in federal prison, a fine of up to $5 million, or both. Corporations and other entities face fines of up to $25 million.5GovInfo. 15 USC 78ff Prosecutors must prove the defendant acted “willfully,” a higher bar than the SEC faces in civil cases. That intent element is why the FBI plays such a central role.
FBI agents build these cases with the same techniques used against organized crime: court-authorized wiretaps, confidential informants, forensic analysis of encrypted messages, and surveillance of trading accounts. The Raj Rajaratnam prosecution in 2011, which produced an 11-year prison sentence, was built largely on wiretap evidence. Joint investigations with the SEC are common. The SEC handles the civil side while the DOJ pursues imprisonment and criminal fines in parallel.
FINRA
The Financial Industry Regulatory Authority is a private, self-regulatory organization that oversees brokerage firms and their registered representatives. It is not a government agency, but Congress has authorized it to create and enforce rules for its members. FINRA operates surveillance systems that process billions of market events daily, scanning for anomalies like unusual trading volume before a major announcement or clusters of profitable trades in a single account.6FINRA. Rules and Guidance
FINRA also holds firms responsible for what happens on their watch. Under FINRA Rule 3110, every member firm must maintain a supervisory system reasonably designed to comply with securities laws, and that system must specifically include procedures to review transactions for insider trading.7FINRA. Supervision A firm that fails to catch an employee trading on tips can face discipline even if the firm itself knew nothing about the underlying information.
When FINRA finds evidence of insider trading, it can fine, suspend, or permanently bar members from the securities industry. What it cannot do is sue in federal court or seek prison time. Instead, it refers cases to the SEC or DOJ for formal prosecution. Many SEC cases begin with a FINRA referral.
Stock Exchange Surveillance
The New York Stock Exchange, Nasdaq, and other exchanges run their own surveillance teams that monitor trading on their specific platforms in real time. Analysts watch for sudden spikes in volume, unusual options activity, and large, well-timed bets placed shortly before market-moving news. When a stock that normally trades a few hundred thousand shares a day suddenly sees millions change hands the afternoon before an acquisition announcement, exchange surveillance is usually the first to notice.
Exchanges function as the early warning system. They collect granular data on every trade execution, including exact time, the brokerage firm involved, and the order size, and they share that intelligence with the SEC and FINRA. An exchange referral gives federal investigators a running start with high-quality evidence.
The Commodity Futures Trading Commission
Insider trading is not limited to stocks. The Commodity Futures Trading Commission regulates markets for physical commodities and financial derivatives under the Commodity Exchange Act.8Office of the Law Revision Counsel. 7 USC Ch 1 – Commodity Exchanges That covers crude oil, natural gas, gold, agricultural products, and a growing range of derivative instruments. Someone who trades oil futures on advance knowledge of a government supply report or a pipeline disruption falls under the CFTC’s jurisdiction, not the SEC’s.
The CFTC’s enforcement division investigates and prosecutes violations of the Commodity Exchange Act, including misappropriation of confidential information. Recent enforcement actions reflect an expanding reach into digital assets: in early 2026, the CFTC brought a case against a Texas resident for misappropriating confidential information, producing penalties above $14 million.9CFTC. Enforcement Actions As digital commodities like Bitcoin claim a larger share of derivatives trading, the CFTC’s insider trading role in these markets is growing.
Congress and the STOCK Act
Members of Congress and their staff have access to market-moving information through briefings, committee work, and regulatory oversight. The Stop Trading on Congressional Knowledge Act of 2012 confirmed that members of Congress are not exempt from insider trading laws and added disclosure requirements. Any securities transaction exceeding $1,000 must be reported on a Periodic Transaction Report within 30 days of becoming aware of the transaction, and no later than 45 days after the trade itself.10House Committee on Ethics. Instruction Guide Financial Disclosure Statements and Periodic Transaction Reports
The penalty for filing late is $200, a figure widely criticized as too small to deter noncompliance. Enforcement has been inconsistent, and legislative proposals to ban congressional stock trading outright have drawn bipartisan support without passing. For now, the STOCK Act remains the primary mechanism, and its reporting requirements at least make congressional trades publicly visible.
How Long Regulators Have to Bring a Case
Time limits shape what any of these regulators can actually do. The SEC must bring a civil penalty action within five years of the illegal purchase or sale.1Office of the Law Revision Counsel. 15 USC 78u-1 – Civil Penalties for Insider Trading The general federal statute of limitations for criminal cases is also five years. Those clocks put pressure on investigators to move quickly, especially in complex schemes that take years to unravel. The civil limitations period does not block every remedy, though; the SEC and the Attorney General can still pursue disgorgement or injunctions under separate provisions.