The former chairman of collapsed Tasmanian timber company Gunns, John Gay, will not be made to hand back the almost $1 million he made from insider trading.

The Australian Federal Police will not pursue a proceeds of crime action against Gay.

Last year, the 71-year-old was fined $50,000 and banned from running companies for five years after being convicted of insider trading.

He was found guilty of illegally sold 3.4 million Gunn shares in 2009 while he had price sensitive information.

The AFP were also looking at using Commonwealth proceeds of crime laws to pursue Gay for an estimated $800,000 he made from the sale.

But an AFP spokeswoman has told the ABC that after evaluating the material, a decision was made not to continue with any proceeds of crime action.

The Australian Investments and Securities Commission is opposing an application Gay made to the Supreme Court last month to be able to manage companies again.