15 U.S.C. § 78u–1 — Civil penalties for insider trading

(a) Authority to impose civil penalties (1) If the SEC believes someone traded a security or security-based swap agreement while possessing material, nonpublic information — or tipped that information to someone else — in a trade on a national exchange or through a broker or dealer, and it wasn't part of a public offering (other than standardized options or security futures), the SEC can sue in federal court. (A) The SEC can seek a civil penalty against the person who committed the violation. (B) Subject to subsection (b)(1), the SEC can also seek a civil penalty against a person who, at the time, directly or indirectly controlled the violator. (2) The court decides the penalty on the violator based on the facts and circumstances, but it can't be more than 3 times the profit gained or loss avoided. (3) The penalty on a controlling person, also set by the court based on the facts, can't be more than the greater of $1,000,000 or 3 times the profit gained or loss avoided. If the controlled person's violation was just tipping someone off, the profit/loss figure used here is limited to what the person who received the tip gained or avoided. (b) Limitations on liability (1) A controlling person is only liable if the SEC proves either (A) they knew, or recklessly ignored the fact, that the person they controlled was likely to violate this law, and they failed to take reasonable steps to stop it beforehand; or (B) they knowingly or recklessly failed to set up, maintain, or enforce a required compliance policy, and that failure substantially contributed to the violation. (2) Simply employing a violator doesn't make an employer liable, unless the employer is liable as a controlling person under paragraph (1). Section 78t(a) of this title does not apply to actions under this section. (c) Authority of Commission The SEC can exempt any person, transaction, or class of persons or transactions from this section — fully or partly, with or without conditions — by rule, regulation, or order, if it decides that's necessary or appropriate for the public interest or investor protection. (d) Procedures for collection (1) Penalties are paid into the U.S. Treasury, with limited statutory exceptions. (2) If someone doesn't pay on time, the SEC can send the matter to the Attorney General to collect it through a federal court case. (3) These actions can be brought in addition to any other action the SEC or Attorney General is entitled to bring. (4) For jurisdiction and venue purposes, these are treated as actions to enforce a duty created by this chapter. (5) A lawsuit under this section must be filed within 5 years of the purchase or sale. This doesn't otherwise limit SEC or Attorney General actions — including actions to recover or set penalties — brought within that 5-year window. (e) Definition For this section, "profit gained" or "loss avoided" means the difference between the price the person paid or received for the security and the security's trading price a reasonable time after the nonpublic information was made public. (f) Limitation on Commission authority The SEC's authority under this section over security-based swap agreements is limited by section 78c–1(b) of this title. (g) Duty of Members and employees of Congress (1) Solely for purposes of the insider-trading rules in this chapter — including section 78j(b) and its Rule 10b–5 — each Member of Congress and each employee of Congress owes a duty of trust and confidence to Congress, the federal government, and U.S. citizens, regarding material, nonpublic information they get from their position or official duties. This is subject to the rule of construction in section 10 of the STOCK Act. (2) "Member of Congress" means a Senator, a Representative, a Delegate to the House, or Puerto Rico's Resident Commissioner. "Employee of Congress" means (i) anyone (other than a Member) paid through the Secretary of the Senate or the Chief Administrative Officer of the House, and (ii) any other legislative-branch officer or employee as defined in title 5, section 13101(11). (3) Nothing here limits the existing antifraud rules in the securities laws or the SEC's authority under them. (h) Duty of other Federal officials (1) Under the same STOCK Act rule of construction and solely for insider-trading purposes, each executive branch employee, judicial officer, and judicial employee owes that same duty of trust and confidence to the federal government and U.S. citizens, regarding material, nonpublic information from their position or official duties. (2) "Executive branch employee" has the meaning given "employee" in title 5, section 2105, and also includes the President, the Vice President, and employees of the U.S. Postal Service and Postal Regulatory Commission. "Judicial employee" and "judicial officer" have the meanings given those terms in title 5, section 13101(9) and (10). (3) Nothing here limits the existing antifraud rules in the securities laws or the SEC's authority under them. (i) Participation in initial public offerings An individual covered by title 5, section 13103(f) can't buy IPO securities in any way that isn't available to the general public.