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 DOJ primarily uses 18 U.S.C. § 1348 (securities fraud enacted by SOX), along with wire fraud (18 U.S.C. § 1343) and mail fraud statutes, which carry up to 20 years imprisonment for securities fraud.

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

A cease and desist order is an administrative remedy the SEC can issue requiring the respondent to stop current violations and refrain from future violations of securities laws, without going to federal court.

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

The SEC awards cooperation credit — in the form of reduced charges, penalties, or deferred prosecution — to individuals and companies who voluntarily provide substantial assistance to the SEC's investigation of securities 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

Section 9 prohibits specific market manipulation tactics, including wash sales (simultaneous buy and sell to create artificial trading volume) and matched orders (coordinated trades with others to manipulate 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

A DPA is a negotiated agreement between the DOJ and a company where prosecution is deferred for a set period in exchange for the company paying fines, admitting facts, cooperating with the government, and implementing compliance reforms.

Stock Lawyer Practice Test

Stock Lawyer Practice Test

Stock Lawyer SEC Enforcement and Litigation 2