NCJ Number
231927
Journal
American Criminal Law Review Volume: 47 Issue: 2 Dated: Spring 2010 Pages: 1015-1087
Date Published
2010
Length
73 pages
Annotation
This review of Federal laws that govern securities transactions outlines the elements of the offenses under the law, potential defenses against alleged securities violations, enforcement mechanisms, penalties, and recent developments affecting securities law.
Abstract
Although there are six Federal statutes that govern securities transactions, securities fraud is regulated primarily under the Securities Act of 1933 and the Securities Exchange Act of 1934. These two acts target different markets; the 1933 act regulates the primary market, and the 1934 act regulates the secondary market. The objective of both acts, however, is to ensure vigorous market competition by mandating full and fair disclosure of all material information in the marketplace. Two main types of securities fraud constitute the basis for violations: material misrepresentations, omissions, or both; and insider trading. The most common securities fraud actions involve material misrepresentations and omissions. Any person who uses a deceptive device or makes a false statement or omission of material fact linked to the purchase or sale of securities may be criminally or civilly liable. The topics addressed in discussing elements of the offense of material misrepresentations and omissions pertain to the nature of misstatements and omissions; materiality; intent; and definitions and concepts that come into play when examining the legality of the purchase or sale of a security. Features of the offense of insider trading are also discussed. The discussion of potential defenses against charges of securities fraud focuses on intent-based defenses and reliance-based defenses. A description of enforcement mechanisms addresses enforcement by the Securities and Exchange Commission (SEC) and through Federal criminal courts. After specifying the penalties for securities fraud under the law and U.S. Sentencing Guidelines, the article concludes with a discussion of recent developments regarding Internet securities fraud disclosure of information to the public and executive stock options. 480 notes