Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Sunday, June 17, 2007

Barnard on Securities Fraud Professionals

Securities Fraud Professionals, by JAYNE W. BARNARD, College of William and Mary - Marshall-Wythe School of Law, was recently posted on SSRN.  Here is the abstract:

This article examines the phenomenon of securities fraud professionals – the con artists who sell bogus stock on the Internet, orchestrate elaborate pump-and-dump schemes, and create a never-ending array of purportedly “risk free” investment opportunities. Collectively, and in a cruel mockery of capitalism, these offenders extract hundreds of millions dollars from investors every year.

The article explores some of the common characteristics of these offenders, with a particular focus on those who orchestrate fraudulent schemes three, four, or more times in their careers. I theorize that this group – much like sex offenders – are “hard wired” to engage in fraudulent behavior.

I then propose several changes to the Securities and Exchange Commission's approach to these offenders. The escalating use of civil sanctions, and the imposition of multiple “obey-the-law” injunctions, simply are not enough to deal with this population. I also propose a research agenda that would teach us much more about these harmful predators.

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