NCJ Number
62056
Journal
American Criminal Law Review Volume: 17 Issue: 1 Dated: (SUMMER 1979) Pages: 121-152
Date Published
1979
Length
32 pages
Annotation
THE STATUTORY LANGUAGE OF THE FEDERAL SECURITIES LAWS IS EXPLORED AS A PRELUDE TO THE EXAMINATION OF THE PRIMARY AREAS OF LITIGATION, AND THE INVESTIGATIVE AND REFERRAL PROCEDURES ARE DESCRIBED.
Abstract
AN ANALYSIS OF THE STATUTORY LANGUAGE IN CURRENT SECURITIES LAWS SHOWS THE FOLLOWING AREAS OF INCONSISTENCY: (1) WHETHER A FALSE STATEMENT IN A FILING SUBMITTED TO THE SECURITIES AND EXCHANGE COMMISSION (SEC) MUST BE MADE BOTH WILLINGLY AND KNOWINGLY, OR WHETHER WILLFULLY MAKING A FALSE STATEMENT IS SUFFICIENT TO IMPOSE CRIMINAL LIABILITY; (2) THE CAUSE OF THE MISLEADING OR FALSE STATEMENT; AND (3) THE EFFECT OF THE DEFENDANT'S KNOWLEDGE OF THE RULES AND REGULATIONS PROMULGATED UNDER THE RESPECTIVE ACTS. IN DRAFTING THE FEDERAL SECURITIES LAWS, CONGRESS DEFINED INTENT IN TERMS OF EITHER 'WILLFUL' ACTION OR 'WILLFUL AND KNOWING' ACTION. THE PRECISE MEANING OF THESE TERMS HAS ELUDED THE COURTS. THE DIVISION OF ENFORCEMENT, WHICH IS AN OPERATING DIVISION OF THE SEC, FUNCTIONS WITHIN THE PRESENT FRAMEWORK OF THE FEDERAL SECURITIES LAWS. THESE LAWS PROVIDE THREE ENFORCEMENT MECHANISMS: (1) SELF-REGULATION BY THE SECURITIES EXCHANGES, (2) AVAILABILITY OF A PRIVATE CAUSE OF ACTION, AND (3) ENFORCEMENT BY THE SEC. EACH OF THE FEDERAL SECURITIES LAWS (SECURITIES ACT, SECURITIES EXCHANGE ACT, PUBLIC UTILITY HOLDING COMPANY ACT, TRUST INDENTURE ACT, INVESTMENT COMPANY ACT, AND INVESTMENT ADVISERS ACT) CONTAINS A GENERAL CRIMINAL PROVISION. WITH THE EXCEPTION OF THE INVESTMENT ADVISERS ACT, THESE PROVISIONS CONTAIN THREE DISTINCT OPERATIVE CLAUSES: (1) THE FIRST MAKES A CRIME OF THE WILLFUL VIOLATION OF ANY PROVISION IN THE RESPECTIVE STATUTE, OR THE RULES OR REGULATIONS PROMULGATED THEREUNDER; (2) THE SECOND CLAUSE IMPOSES CRIMINAL LIABILITY FOR THE WILLFUL, OR IN SOME INSTANCES, THE WILLFUL AND KNOWING, MAKING OF A FALSE STATEMENT IN A FILING SUBMITTED TO THE SEC; AND (3) THE SETTING OF MAXIMUM PENALTIES TO BE IMPOSED UPON CONVICTION. ENFORCEMENT TOOLS AVAILABLE TO THE SEC CAN BE SEPARATED INTO BASIC CLASSES OF ADMINISTRATIVE SANCTIONS, INJUNCTIVE PROCEEDINGS, AND REFERRALS TO THE DEPARTMENT OF JUSTICE FOR CRIMINAL PROSECUTION. FOOTNOTES ARE PROVIDED. (RCB)