You know the definition of chutzpah? The kid who kills his parents and then pleads for mercy because he is an orphan.

Well, the Securities and Exchange Commission frequently engages in a variation of this exercise. If, for example, it sues and subsequently fines an individual for illegal insider trading, it is not uncommon for the regulator to waive the fine, citing the person's inability to pay. This is no joke.

Last week we saw how it plays out with even a relatively puny sum of money.

Here's what happened. The Securities and Exchange Commission settled insider trading charges against four people-John A. Foley, an employee benefits specialist at Deloitte between July 2005 and May 2007, and three others for their roles involving the trading of four small, obscure public companies over a 22-month period. Total illegal profits: just $210,580.62. (Separately, a fifth individual was named in a related administrative proceeding instituted and simultaneously settled.)

In any case, Foley agreed to pay disgorgement of $125,538.61, plus prejudgment interest of $18,697.89. However, the SEC said there would be no civil penalty imposed against him based on his demonstrated inability to pay.

Another defendant, Timothy L. Vernier, would pay disgorgement of $50,285.08, plus prejudgment interest of $6,320.29 and a civil penalty of $23,138.07, with no further civil penalty being imposed based on his demonstrated inability to pay.

Aaron M. Grassian would pay disgorgement of $34,756.93, plus prejudgment interest of $4,768.39 and a civil penalty of $34,756.93. However, no civil penalty would be imposed upon Bradley S. Hale, based on his demonstrated inability to pay.

Sounds odd for several reasons. Most people don't realize you can simply not be fined for something most people are fined for simply because you don't have much money. So, crime almost pays for people of modest means.

Except, this provision also applies to seemingly well-to-do, successful people. Several years ago several key WorldCom people were excused from paying $1 million penalties due to their inability to pay. This is no joke.

Back in July 2006, former Worldcom CFO Scott Sullivan settled civil charges with the SEC stemming from the fraud at the telecom company. The SEC said that, pending court approval, it would waive payment of disgorgement and prejudgment interest and would not impose a civil penalty against Sullivan and two of the accountants - David Myers and Buford Yates, Jr. - based on their demonstrated inability to pay.

Sullivan earlier had agreed to be liable for $10 million in disgorgement, representing a retention bonus, and $3,591,889 in prejudgment interest. Yates had consented to the entry of a final judgment holding him liable for $263,809 in disgorgement, representing a retention bonus and other payments, and $94,757 in prejudgment interest.

The other two accountants - Betty Vinson and Troy Normand - were not liable for disgorgement, according to the SEC, because neither received ill-gotten gains from their participation in the fraud. The SEC also said at the time it was not seeking civil penalties against Vinson or Normand, who also had no funds to pay them.

Myers, WorldCom's former controller, was found liable for about $1 million in disgorgement, representing bonuses he received. However, the US District Court for the Southern District of New York waived this payment and did not impose a civil penalty based on his inability to pay.