Stock Lawyer SEC Enforcement and Litigation 2

Question 1

What is the primary statute the DOJ uses to criminally prosecute securities fraud?

Accepted Answer

18 U.S.C. § 1348 (the Sarbanes-Oxley securities fraud statute) and wire/mail fraud statutes

Answer

The Securities Act of 1933

Answer

The Securities Exchange Act of 1934

Answer

The Investment Advisers Act of 1940

Question 2

What does it mean for the SEC to issue a 'cease and desist' order?

Accepted Answer

An administrative order directing a respondent to stop violating securities laws and not commit future violations

Answer

An order requiring a company to stop all trading in its securities

Answer

An order freezing a company's assets during investigation

Answer

An order requiring a company to cease operations pending an audit

Question 3

What is the 'cooperation credit' in SEC enforcement and why is it significant?

Accepted Answer

Reduced penalties or charges for individuals or companies that voluntarily cooperate with SEC investigations

Answer

A credit given to companies that allow SEC inspectors to access their offices without subpoenas

Answer

A financial credit given to informants who testify against defendants

Answer

An exemption from enforcement for first-time violations

Question 4

What is 'market manipulation' under Section 9 of the Securities Exchange Act?

Accepted Answer

Intentional conduct designed to artificially affect the price or volume of securities, such as wash sales or matched orders

Answer

Any trading activity that moves stock prices more than 5% in one day

Answer

Any short selling of securities within 30 days of an IPO

Answer

High-frequency trading strategies that affect market prices

Question 5

What is a 'Deferred Prosecution Agreement' (DPA) in the context of securities enforcement?

Accepted Answer

An agreement where the DOJ agrees to defer criminal prosecution if a company meets certain conditions including compliance reforms and cooperation

Answer

An agreement to delay prosecution until a second violation occurs

Answer

An SEC agreement allowing a company to settle without admitting wrongdoing

Answer

A court order deferring sentencing for a securities fraud defendant

Question 6

What is an 'SEC Monitor' or 'Compliance Monitor' and when is one typically imposed?

Accepted Answer

An independent third party appointed to oversee a company's compliance program following an SEC enforcement settlement

Answer

An SEC employee who reviews company disclosures quarterly

Answer

A court-appointed receiver who takes control of a company after securities fraud

Answer

A FINRA-appointed supervisor for broker-dealers on probation