How does the SEC catch Insider Trading
violators?
Let’s start with the truth. Not all crimes are caught. Perhaps only a small minority. But the SEC will
prioritize two types of Insider Trading schemes. The first is of course when large amounts of money are
involved. Those are conveniently easier to catch anyway. The second is when the crime involves one or
more celebrities where the mass media will plaster the news all over the TV and internet.
They do have a great deal of information gathering experience and technical expertise, especially after 9-
11 resulted in the passing of the Patriot Act some 20 year ago. The same technology used by the FBI,
NSA, Homeland Security, FBI and local police forces, is available to the SEC to gather cell phone
records, texts, social media posts, wire taps, use high powered microphones, interview associates, and of
course every stock transaction is now computerized and they look for patterns and timing.
Usually the Insider, when caught, will claim it was just luck. The SEC’s job is to prove it was an intentional
disregard for the law and there are rules that certain investors must follow when their own company is
involved. Penalties can hit the millions plus 4-5 times the value of the trade(s) and jail time.