NCJ Number
239991
Journal
American Criminal Law Review Volume: 49 Issue: 2 Dated: Spring 2012 Pages: 1213-1286
Date Published
2012
Length
74 pages
Annotation
This overview of Federal securities law addresses elements of related offenses, potential defenses against charges brought under securities law, enforcement mechanisms, penalties, and recent developments related to securities law.
Abstract
Although seven Federal statutes govern securities transactions, securities fraud is primarily regulated through the Securities Act of 1933 ("1933 Act") and the Securities Exchange Act of 1934 ("1034 Act"). The 1033 Act and 1934 Act target different markets; the 1933 Act regulates the primary market, and the 1934 Act regulates the secondary market. Still, the objective of both acts is the same, i.e., to ensure vigorous market competition by mandating full and fair disclosure of all material information in the marketplace. Both the 1933 Act and the 1934 Act make various types of conduct illegal. The key provisions used in criminal prosecutions are Rule 10b-5 and section 32(a) of the 1934 Act. Rule 10b-5 was promulgated under section 10(b) of the 1934 Act; it provides the foundation for a securities fraud claim. Section 32(a) imposes criminal liability for willful violations of section 10(b) of the 1934 Act, the Securities Exchange Commission (SEC) rules promulgated under that provision, and other provisions of the Act. This article is limited to Federal securities law. State "blue sky laws" regulate the offering and sale of securities in each State. Topics discussed as elements of the offense are material misrepresentations and omissions, as well as insider trading. Defenses examined against such offenses are categorized as intent-based defenses and reliance-based defenses. Enforcement mechanisms described pertain to SEC enforcement and criminal violations. Penalties for securities fraud are then described, followed by a discussion of recent developments related to Internet securities fraud, disclosure of information to the public, and executive stock options. 480 notes