The maximum penalty for insider trading under federal law is 20 years in prison and a $5 million fine for an individual, or a $25 million fine for a company. That is only the criminal ceiling. The SEC can separately pursue a civil penalty of up to three times the profit gained or loss avoided, force the trader to give back every dollar of gain, and ask a court to ban the person from ever serving as an officer or director of a public company. Both tracks can run at the same time against the same defendant.
Criminal Maximum: 20 Years and $5 Million
The Department of Justice prosecutes insider trading under the Securities Exchange Act. Section 78ff of Title 15 sets the ceiling: anyone who willfully violates the Act faces a fine of up to $5 million, imprisonment for up to 20 years, or both. When the violator is a company rather than a person, the maximum fine climbs to $25 million.1GovInfo. 15 USC 78ff – Penalties
Prosecutors have a second option that carries an even higher prison cap. The federal securities fraud statute, 18 U.S.C. § 1348, allows a maximum sentence of 25 years. The government sometimes charges this statute instead of, or alongside, the Securities Exchange Act when the conduct supports it.2Office of the Law Revision Counsel. 18 US Code 1348 – Securities and Commodities Fraud
Prison time doesn’t end the government’s reach. Because insider trading under the Securities Exchange Act is a Class C felony, a judge can tack on up to three years of supervised release after the sentence is served. Standard conditions include no new crimes and cooperation with any restitution order, and judges often add restrictions on securities trading or financial-industry employment.3Office of the Law Revision Counsel. 18 US Code 3583 – Inclusion of a Term of Supervised Release After Imprisonment
Civil Maximum: Three Times the Profit
The SEC pursues insider trading separately through civil enforcement in federal court. Under 15 U.S.C. § 78u-1, the SEC can seek a civil penalty of up to three times the profit gained or loss avoided from the illegal trades.4Office of the Law Revision Counsel. 15 US Code 78u-1 – Civil Penalties for Insider Trading
A simple example shows how fast the number grows. If a trader profited $200,000 on inside information, the SEC can ask for a civil penalty of up to $600,000. That amount sits on top of disgorgement, which forces the trader to hand back the original $200,000. The total civil exposure in that scenario is $800,000 before prejudgment interest is added.
Controlling Person Liability
The same statute reaches supervisors and firms that fail to prevent insider trading by people under their control. A controlling person who knew or recklessly disregarded the likelihood that a subordinate would trade on inside information faces a civil penalty equal to the greater of $1 million or three times the subordinate’s profit.4Office of the Law Revision Counsel. 15 US Code 78u-1 – Civil Penalties for Insider Trading
Broker-dealers, investment advisers, and corporate compliance departments can be on the hook for millions even when no senior executive personally made a trade. The provision pushes firms to maintain real compliance controls rather than paper ones.
Disgorgement and Interest
Disgorgement is separate from the civil penalty and comes on top of it. The SEC routinely asks courts to strip away all profits from illegal trades, putting the defendant back where they would have been without the violation.5U.S. Securities and Exchange Commission. Enforcement and Litigation
The Supreme Court set limits on this power in Liu v. SEC (2020). Disgorgement cannot exceed a wrongdoer’s net profits, so courts must deduct legitimate expenses first, and the recovered funds generally must be returned to harmed investors rather than kept by the Treasury.6Justia U.S. Supreme Court. Liu v. Securities and Exchange Commission
Prejudgment interest gets added on top. The SEC calculates it at the IRS underpayment rate, compounded quarterly, running from the month of the violation through the month before payment. In cases that take years to resolve, the interest alone can rival the disgorged amount.7eCFR. 17 CFR 201.600 – Interest on Sums Disgorged
Officer and Director Bars and Professional Fallout
Federal courts can ban anyone who violated Section 10(b) from serving as an officer or director of any public company. The ban can be permanent or for a set period, depending on how the conduct reflects on the person’s fitness to serve.8Office of the Law Revision Counsel. 15 USC 78u – Investigations and Actions
Licensed professionals face additional consequences from their own regulators. FINRA can bar brokers. State bars can disbar attorneys. Licensing boards can strip CPAs of their credentials. For many defendants, losing the ability to work in their field inflicts more lasting damage than the fine.
How Far Back Enforcement Can Reach
Civil enforcement has a five-year window. Under 28 U.S.C. § 2462, the SEC must bring a civil action within five years of the violation, and the Supreme Court confirmed in Kokesh v. SEC (2017) that disgorgement counts as a penalty subject to the same limit. The clock starts when the violation occurs, not when the SEC discovers it.9Office of the Law Revision Counsel. 28 USC 2462 – Time for Commencing Proceedings
Criminal prosecution has a longer runway. The Dodd-Frank Act extended the statute of limitations for securities fraud to six years from the date of the offense. When prosecutors charge a conspiracy, they can reach further still, because the conspiracy charge covers every trade made during the scheme.
What Sentences Actually Look Like
Few defendants ever face the 20-year maximum. Federal judges work from the U.S. Sentencing Guidelines, which produce a recommended range based on the facts of the case.10United States Sentencing Commission. 2001 Federal Sentencing Guideline Manual – 2B1.4 Insider Trading
The dollar amount drives most of the calculation. A trader who profited $50,000 faces a far lower range than one who netted $5 million. The defendant’s role matters, too: a corporate executive who ran the scheme draws a harsher sentence than a tippee who received a single call. Someone in a position of special trust, such as an attorney handling a takeover, gets an additional enhancement. Cooperation with prosecutors can cut the number down through a motion for downward departure, and first-time offenders start in the lowest criminal history category.11United States Sentencing Commission. Annotated 2025 Chapter 4 – Criminal History and Criminal Livelihood
Recent sentences bear this out. A federal banking supervisor who traded on confidential regulatory information in 2025 received 24 months and was ordered to pay more than $650,000 in disgorgement. A pharmaceutical employee who traded ahead of drug trial results got two months in prison, disgorged over $290,000, and was permanently barred from serving as an officer or director. A head of equity trading at an investment firm received two months in prison, 18 months of supervised release, and a $300,000 fine.
Sentences of one to three years are common for mid-level schemes. The longest sentences get reserved for repeat offenders, very large profits, or defendants who obstruct the investigation. The 20-year ceiling functions mostly as deterrent and plea-negotiation leverage, while the civil side, disgorgement, interest, and the career bars often do the heavier work in any given case.