Disgorgement
Disgorgement is the legal requirement to return illegally obtained profits from insider trading violations. The SEC can require insiders to disgorge profits made from illegal trades, plus interest.
The Trader's Take
The Signal
Disgorgement actions by the SEC signal enforcement of insider trading laws. Companies and insiders facing disgorgement can experience reputational damage and stock price impacts.
The Noise
Disgorgement is a legal remedy, not a trading signal—it occurs after violations are discovered.
Actionable Insights
- 1SEC disgorgement actions can impact company reputation and stock price.
- 2Understanding disgorgement helps appreciate the consequences of illegal insider trading.
- 3Disgorgement amounts can be significant, including profits plus interest.
- 4The threat of disgorgement helps deter illegal insider trading.
Regulatory Context & Context
Common Misconceptions
Disgorgement is not a fine or penalty—it's returning illegally obtained profits.
Disgorgement can include interest on the profits, making the total amount larger.
The SEC must prove violations occurred before requiring disgorgement.
Frequently Asked Questions
What is disgorgement?
Disgorgement is the legal requirement to return illegally obtained profits from securities violations, plus interest, to the SEC or affected parties.
How is disgorgement different from a fine?
Disgorgement returns illegally obtained profits, while fines are additional penalties. Disgorgement is meant to prevent unjust enrichment, not punish.