I'm sure the vast majority goes unpunished. But they do make an effort. It is relatively easy to find suspicious trades using statistical methods. Once the regu

I'm sure the vast majority goes unpunished. But they do make an effort. It is relatively easy to find suspicious trades using statistical methods. Once the regulators decide to pursue a particular trade or event, they are quite exhaustive in establishing ties between insiders and the suspicious trading activity. For example, as a young lawyer, I played a small part on an M&A deal where there was suspicious trading by some UK-based hedge funds. All the lawyers, bankers, and principals on the deal received a letter from the SEC asking for a list of every person who may have had knowledge of the deal, what they knew, and when they first knew it. That went as far as listing secretaries who were physically stationed near our office, whether or not they worked on the transaction. Nothing came of that investigation, which as far as I know may be the usual result. There are certainly stories where the SEC or DOJ have managed to establish amazingly tenuous connections between tippers and tippees. Presumably the badguy will not just volunteer "hey I give stock tips to my college buddy". But I think if the suspicion is high enough, the regulators can be quite systematic in tracking down leads.