> Isn't the settlement with SEC to avoid the criminal record?
No. The SEC is a civil agency which brings civil actions. Settling with the SEC does not prohibit the DoJ, or any state enforcement agency, from bringing criminal charges.
You're right, my mistake. Insider trading can be charged criminally. To be precisely correct on this case, we'd need to read the plea filing. The defendant's name is also public record, so while a criminal record search may not ding him, a regular search engine query sure will. :)
Yes insider trading can be charged criminally, but there's no actual statute prohibiting it, surprisingly:
"For example, Section 16 of the Securities Exchange Act of 1934 requires the disgorgement of short-swing profits by named insiders—directors, officers, and 10% shareholders. The 1934 Act’s general antifraud provision, Section 10(b), is frequently used in the prosecution of insider traders. Although the statute does not specifically mention insider trading but, instead, forbids the use of “manipulative or deceptive” means in buying or selling securities, case law has made clear that insider trading is the type of fraud that is prohibited by Section 10(b)" (https://fas.org/sgp/crs/misc/RS21127.pdf, emphasis added)
In other words, everybody has just basically decided that insider trading is wrong and people should go to jail for doing it, and caselaw reflects that, but there's no actual statute in place anywhere.
There are plenty of victimless crimes on the statute books.
The dispute over who might be theoretically harmed by insider trading relates to the legal theories proposed by courts and the SEC to justify the prohibition. Who might be harmed is of particular concern, particularly in the criminal domain, because we're dealing with an agency-created rule, and the courts are more-or-less following common law methodologies for specifying and circumscribing the rule. The applicable common law domain is Torts, and in Tort law there needs to be a breach of a duty to someone. Only once you identify that person (or persons) can you understand the scope of the duty owed them and by whom.
The two competing theories are (1) that insider trading violates a fiduciary duty to the company from which the information came or (2) that insider trading violates a duty to the public at large, the so-called Fraud on the Market theory. The Fraud on the Market theory is what the SEC still clings to, but courts won't buy it because it's just too broad and doesn't really comport with established common law principles. An important self-constraint to fashioning non-statutory law is limiting oneself to extending pre-existing legal principles.
The legislature isn't constrained by arcane legal technicalities. Their only constraint is the Constitution, which doesn't necessarily require shoe-horning laws into theoretically consistent buckets. The Fraud on the Market theory is too distant from any pre-existing legal principle, too distant from the plaintext of the existing statutes[1], and so only the legislature should be allowed to explicitly promulgate such a rule.
[1] This is why we're talking about common law principles and not more recent administrative law principles. These days courts probably would never have allowed an administrative agency to invent something like insider trading, particularly as a crime, and so wouldn't have needed to make recourse to foundational common law principles. The courts accepted the prohibition prior to the modern development of administrative law.
Market manipulation is not a victimless crime. Money does not condense in the stock market from thin air, all of the realized funds are coming from a place and going to a place...
Confidence is a big factor, whenever someone manipulates the market they're shaving a few thousandths of a cent off of everyone's funds in stock exchanges by lowering the general public confidence in the stock exchange - and if that ever dips low enough all our futures could evaporate.
Realized gains is another big factor, the stock market is large and nebulous and terrible to try and understand, but money goes in whenever money comes out - when your stock goes from 10$ to 11$, good for you, have a party... but you haven't realized those gains yet - when you actually sell your stock there is a buyer buying them from you, often times you'll sell to a mutual or index fund which constantly allow market liquidity, when you do so your benefit is coming out of someone else's pocket. The idea is that the other person has made an informed decision with all the information available to both of you to take a certain level of risk - when you add in insider trading the information available becomes unequal and you are selling them a risk of quantity x and they're expecting to buy quantity y, where x > y, these damages end up (generally) being pretty wide spread, but they slightly lower the margins on your mutual fund return or index fund or what-have you.
Criminals love to minimize the impact of their crimes so don't buy into it here you wouldn't believe that a burgler that broke into your house to steal a broken TV should only be liable for the lock (or even that he saved you money in the disposal fee).
There are real consequences for insider trading and they are serious ones.
The person on the other side of the trade. This would be the person who wrote the puts in this case and the entity harmed is more than likely the market maker for Equifax. If he just shorted the traditional way by borrowing and selling the stock, then its hard to argue who he harmed.
No. The SEC is a civil agency which brings civil actions. Settling with the SEC does not prohibit the DoJ, or any state enforcement agency, from bringing criminal charges.