NEW YORK (CNNMoney.com) - Martha Stewart faces a deadline Thursday to respond to charges in a civil suit that she illegally used non-public information when she sold 4,000 shares of ImClone Systems in late 2001, according to a published report Thursday.

The New York Times reported that the Securities and Exchange Commission (SEC) initiated the civil case alleging insider trading charges against Stewart three years ago. Stewart spent five months in prison for lying to prosecutors over the stock sale.

According to the report, contesting the SEC's accusations, as opposed to negotiating a settlement, would help give Stewart the opportunity to not only clear her name but also to win back her title as chairwoman and CEO of the company she founded, Martha Stewart Living Omnimedia (Research).

If she loses, she could still afford any financial penalty, the paper said. And while she no longer serves on the company's board, her current role as editorial director still gives her considerable influence, the report said.

A last-minute settlement is possible, the report said. However, if she denies the allegations and asserts her innocence, which she has done from the outset, then preparations for a civil trial will begin starting with her deposition.

Separately, Peter Bacanovic, the former Merrill Lynch broker who regulators contend fed Stewart privileged information that other large investors were selling their ImClone shares, is on the verge of reaching an agreement with the SEC that would bar him from the securities industry, the paper said, citing people familiar with the matter.

Shares of Martha Stewart Omnimedia closed marginally higher Wednesday.

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