InsidersTradesSigma
Insider Trading & Regulation
A regulatory or court-ordered penalty requiring an insider trader or market abuser to return all profits gained from illegal securities transactions, typically imposed by the SEC or equivalent authority independent of criminal penalties.
Disgorgement serves as a civil remedy designed to deprive wrongdoers of economic benefit derived from violations of securities laws. The amount is calculated as the net profit obtained from the illegal transaction, including any gains from subsequent hedging or offsetting positions. Disgorgement is non-punitive in nature, meaning it aims to restore victims and markets to their pre-violation state rather than to punish. The SEC frequently pursues disgorgement in tandem with civil monetary penalties, and the total remedy package may exceed the illegal profit itself when combined with interest and prejudgment accruals.
In quantitative compliance and insider-trading detection platforms, disgorgement exposure is a critical risk factor. Quant models incorporating insider-activity-concentration, form-4 filing patterns, and rule-10b5-1 plan analysis can flag traders whose position sizing and transaction timing suggest illicit gain accumulation. The calculation of potential disgorgement liability requires precise profit attribution across all affiliated accounts and trading vehicles, especially for complex strategies involving options, index derivatives, or cross-venue execution. Modern enforcement actions document trading forensics with nanosecond-level precision, making position reconstruction and profit quantification increasingly granular.