NCJ Number
138890
Journal
American Criminal Law Review Volume: 29 Issue: 4 Dated: (Summer 1992) Pages: 1349-1369
Date Published
1992
Length
21 pages
Annotation
This note tracks the current application of Rules 10b-5 and 15c2-6 in the areas of corporate misrepresentations and omissions, insider trading, and penny stock fraud.
Abstract
In 1942 the Securities and Exchange Commission adopted Rule 10b-5 to "ensure investors greater protection against the harmful effect of manipulative or deceptive practices." Since then, Rule 10b-5 has evolved to become the single most widely used provision in the prevention of securities fraud. Recently, Rule 10b-5 has been applied most often in cases where a corporation conveys to the public a false impression or omits disclosing information that it has a duty to disclose and in cases of insider trading. In addition, the Securities and Exchange Commission recently adopted Rule 15c2-6 to combat penny-stock fraud. Part I of this note focuses primarily upon developments in the courts' definitions of misrepresentations and omissions in Rule 10b- 5 cases. Part II focuses on how the courts have redefined insider trading to encompass the nontraditional insiders, with emphasis on recent definitional theories. Part III discusses Rule 15c2-6, which "imposes sales practice requirements on broker-dealers who recommend purchases of certain low priced, non-NASDAQ, over-the-counter securities, to persons who are not established customers." 156 footnotes