Criminal securities fraud is charged under 18 U.S.C. § 1348, which reaches a scheme to defraud any person in connection with a security, or to obtain money or property by false pretenses in connection with the purchase or sale of one. It almost never travels alone: an SEC civil enforcement action commonly runs alongside, and each track affects the other.
Waxman Litigation acts for companies and their boards. Seth B. Waxman spent 13 years as an Assistant United States Attorney in the District of Columbia, roughly eight of them on fraud and public corruption.
What the statute reaches
Section 1348 reaches a scheme to defraud any person in connection with a registered security or a commodity for future delivery, or to obtain money or property by false pretenses in a securities transaction.
Whoever knowingly executes, or attempts to execute, a scheme or artifice— (1) to defraud any person in connection with any commodity for future delivery, or any option on a commodity for future delivery, or any security of an issuer with a class of securities registered under section 12 of the Securities Exchange Act of 1934 ( 15 U.S.C. 78 l) or that is required to file reports under section 15(d) of the Securities Exchange Act of 1934 ( 15 U.S.C. 78 o(d)); or (2) to obtain, by means of false or fraudulent pretenses, representations, or promises, any money or property in connection with the purchase or sale of any commodity for future delivery, or any option on a commodity for future delivery, or any security of an issuer with a class of securities registered under section 12 of the Securities Exchange Act of 1934 ( 15 U.S.C. 78 l) or that is required to file reports under section 15(d)
18 U.S.C. § 1348The SEC track
SEC enforcement is civil and seeks equitable relief; the criminal case is brought by the Department of Justice. The two tracks proceed on different timetables with different rules, and testimony given in one is available in the other. That interaction is the central strategic problem. See parallel criminal and civil proceedings.
The charges that usually travel with it
| Provision | Reaches |
|---|---|
| 18 U.S.C. § 1348 | Scheme to defraud in connection with a security |
| 18 U.S.C. § 1343 | Wire fraud — often charged for the same conduct |
| 18 U.S.C. § 1001 | False statements in a matter within federal jurisdiction |
| 18 U.S.C. § 1519 | Destroying or falsifying records to impede a federal investigation |
| 18 U.S.C. § 1956 | Money laundering, where proceeds are moved |
Frequently asked questions
Is an SEC inquiry the same as a criminal investigation?
No. They are separate proceedings by separate agencies, though they frequently concern the same facts and can run at the same time.
Should the company respond to the SEC while a criminal inquiry is open?
That is precisely the decision that requires the two tracks to be managed together.
What is the exposure for talking to investigators?
A false statement is its own crime, separate from whatever is being investigated. Statements in a matter within federal jurisdiction are covered by 18 U.S.C. § 1001, which is a separate offense from the underlying conduct.
Do we need to preserve documents immediately?
Yes, preservation should begin at once. The obstruction provision applies in contemplation of a federal matter, not only once one is formally open. See § 1519.
Who can be charged with criminal securities fraud?
Anyone who knowingly executes, or attempts to execute, the scheme — not only an officer or a registered professional. The provision covers a scheme to defraud any person in connection with a registered security or a commodity for future delivery, and one to obtain money or property by false or fraudulent pretenses in connection with the purchase or sale of such an instrument. See 18 U.S.C. § 1348.
Why do the SEC and the Department of Justice both appear?
Because the same facts support two tracks. SEC enforcement is civil and seeks equitable relief; a criminal case under § 1348 is brought by prosecutors and carries imprisonment. The tracks run on their own timetables and neither waits for the other.
When must a criminal securities fraud charge be brought?
The government has six years from the offense, which is a year longer than the period that applies to most federal offenses. See 18 U.S.C. §§ 3301 and 3282(a).
Where are federal securities fraud charges arising in Washington, D.C. brought?
They are brought in the United States District Court for the District of Columbia, which is one judicial district with court held at Washington. See 28 U.S.C. § 88.
How do parallel proceedings change the response?
They make sequencing the central question. What is said to the SEC is available to prosecutors, and a statement made in the civil track carries its own exposure under 18 U.S.C. § 1001.
How much can a securities fraud conviction cost?
The securities fraud provision sets the prison term but leaves the fine to the general fine statute, under which an individual found guilty of a felony may be fined up to $250,000, or the higher amount produced by the alternative measure based on gain or loss. That criminal fine is separate from whatever the Securities and Exchange Commission seeks on the civil track. See 18 U.S.C. §§ 1348 and 3571(b), (d).
Sources and legal authorities
General information about federal law, not legal advice, and not a prediction of any outcome. Federal criminal exposure turns on facts this page cannot assess. If your company has been contacted by investigators or has received a subpoena, take advice before gathering documents or interviewing staff.
Related: White-Collar Defense · Parallel Criminal & Civil Proceedings · Money Laundering · Government Subpoenas · Internal Investigations. Call (301) 901-3109 or use the contact page.