It is simply false to say that people are allowed to keep any profits from insider trading. That's not true. The criminal fines themselves could be higher, sure.
I smoked too much crack and bought 1000 contracts instead of 10, and it happened to move in my favor. Is that plausible?
The idea being that cases against institutions (i.e. dealers) that do huge volume in all kinds of securities every day are harder to prove. End clients for those trades (i.e., hedge funds) were reviewed and I would assume they're reviewed more closely now since the technology to sort through huge amounts of data rapidly has improved quite a bit in the last ten years.
When you generate 3000+ option volume in a security that normally has a couple hundred, they're not going to "overlook" it.
Why would the exchanges care? As long as ppl are executing orders there, that's all that matters to them. The mm's on the other hand, are the one's crying foul. Being short all those wings into a takeover has blowout written all over it.
I do think it's a mistake for the SEC to play things so close to the vest re investigations. It frustrates people who think they're not doing anything and it helps all kinds of dummies think they can trade off of inside info and get away with it because the many busts don't make the news.