The object of Securities Fraud, like other forms of white collar fraud, is to accomplish the desired result by concealment, deception, trickery, or dishonesty

Corporate or business fraud is a financial crime that since May 27, 1993, has been statutorily regulated. Federal law violations under today’s statutes include:

1. Buying or selling securities not registered with the SEC (Securities and Exchange Commission)


2. Insider trading


3. Filling documents with the SEC that deliberately contain false statements or omissions of fact.


4. Communicating interstate with prospective purchases of securities, where the communications employ a scheme, a device, or contain false statements or artifice to defraud, or ommisions of fact that are calculated to mislead.

To be convicted of securities fraud an Assistant United States Attorney (AUSA) must prove beyond reasonable doubt when presented to a jury or judge:

The defendant’s acts were, or their failure to disclose was, in correlation with the purchase or sale of securities.
The defendant use a scheme or device to defraud someone, failed to disclose a material fact, made an untrue statement of a material fact which, resulted in making the defendants statements misleading
The defendant used telephone or mail in conjunction with these acts or failure to disclose
The sole purpose of the defendant’s actions was to defraud buyers or sellers of securities.

The Court’s interpretation of Security Fraud Violations

Securities fraud conviction can be reached if false or misleading statements are employed to secure a proxy. United States v. Pope, 189 F. Supp. 12, 16-7 (S.D. NY 1960).
Fraudulent intent can be inferred from the facts and circumstances surrounding a defendant’s actions and does not need to be proved directly. (United States v. Flynn, 196 F.3d 927, 929 (8th Cir. 1999).
The government must show the defendant had intent to manipulate, defraud or deceive, though it doesn’t need to prove the defendant intended to cause harm to the victim of the fraud, to convict the defendant of securities fraud.

Possible Punishment

If found guilty of a felony, the sentence is typically up to 10 years and a fine of $1 million dollars. Corporate securities fraud may be fined up to $2.5 million
Often, the prosecuting AUSA will not only charge the defendant with securities fraud, but also wire fraud, mail fraud, bank fraud, money laundering, RICO crimes and conspiracy to commit the before mentioned crimes. It should be noted that parole in the Federal System has been abolished since 1987 and that removal of the conviction from public records (expungement) is not available.