White Collar Crime and Securities Fraud

What is a crime? Actus reus Mens rea Higher burden of Proof – beyond a reasonable doubt

What is “white collar crime”? Typically, a violation of law by a corporation or one of its managers. Some waive the mens rea requirement The “white collar” can be the perpetrator or the victim Examples include: Embezzlement Racketeer Influenced and Corrupt Organizations Act (RICO) Wire and Mail Fraud Fraud Economic Espionage Antitrust And last but not least, Securities Law Violations

Securities Law Violations 10(b) of the 1934 Act 10b-5 disclosure Elements: Interstate commerce component Material Misrepresentation Scienter (mens rea) Omission in connection with the purchase or sale or securities Reliance Misrepresentation the causation of the plaintiff’s losses

Securities Law Violations Section 17(a) – Insider trading which is trading by “insiders” – officers and directors typically – based on material nonpublic information Not illegal if the nonpublic info is disclosed first Tippees also sometimes insiders (derivative insiders)

So what’s been happening lately? http://www.cbsnews.com/sections/in_depth_business/main500154.shtml

How does punishment work? Federal Sentencing Guidelines Individuals Corporations Liability for others’ actions? Works like respondeat superior/ vicarious liability

What does the future hold? Sarbanes-Oxley Increased disclosure Increased Civil and Criminal Liability Increased focus on Ethics