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SECURITIES FRAUD (15 U.S.C. § § 77a & 78a)

Securities Fraud is much like other forms of white collar fraud in that the objective is to accomplish a desired result through deception, trickery, concealment, and/or dishonesty. Business or corporate fraud is a financial crime and has been statutorily regulated since May 27, 1933.

Violations of federal law under today's applicable statutes include such acts as: 1) insider trading, 2) buying or selling securities not registered with the Securities and Exchange Commission (SEC), 3) willfully making false statements or omissions of fact in documents filed with the SEC, and/or 4) engaging in interstate communications with prospective purchasers of securities, where such communications employ any device, scheme, or artifice to defraud, or contain false statements or omissions of fact calculated to mislead. In most federal jurisdictions, to be convicted of securities fraud, an Assistant United States Attorney (AUSA) must present evidence that when submitted to a jury or judge would prove beyond a reasonable doubt:

1. That the defendant used a device or scheme to defraud someone, made an untrue statement of a material fact, or failed to disclose a material fact which resulted in making the defendant's statements misleading;2. that the defendant's acts were, or failure to disclose was, in connection with the purchase or sale of securities;3. that the defendant used the mail or telephone in connection with these acts or this failure to disclose; and4. that the defendant acted for the purpose of defrauding buyers or sellers of securities.

So how have the courts interpreted security fraud violations?A. One can be convicted of securities fraud if misleading or false statements are employed to secure a proxy. United States v. Pope, 189 F. Supp. 12, 16-7 (S.D. NY 1960).B. Fraudulent intent need not be proved directly and can be inferred from the facts and circumstances surrounding a defendant's actions. United States v. Flynn, 196 F.3d 927, 929 (8th Cir. 1999).C.

To convict a defendant of securities fraud, the government must show that the defendant had intent to deceive, manipulate, or defraud, though it need not prove that the defendant intended to cause harm to the victim of the fraud. United States v. Dixon, 536 F.2d 1388, 1396 (2d Cir. 1976).Potential Punishment:One may be found guilty of a felony, imprisoned up to 10 years and fined up to $1,000,000.00.

A corporation committing securities fraud may be fined up to $2,500,000.00.Frequently, the prosecuting Assistant U.S. Attorney (AUSA) will secure a Federal Indictment from a Federal Grand Jury and charge a defendant not only with securities fraud, but also with mail fraud, wire fraud, bank fraud, money laundering, RICO crimes, and conspiracy to commit the aforementioned crimes. One should also be aware that since 1987 parole has been abolished in the Federal System. Expungement (removal of conviction from public records) is also not available.

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