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Criminal Liability Under 1933 Act

39. What is the potential criminal liability for violations of ’33 Act?

Section 24 of the ’33 Act allows the Department of Justice (DOJ) to bring a criminal action against anyone who knowingly and willfully violates the ’33 Act. This normally only arises in situations where an issuer commits fraud in the sale of securities. The SEC cannot bring a criminal action itself, but it regularly works in hand with the DOJ to substantiate claims of securities fraud.

•    Note: Conviction under this provision allows for up to a $10,000 fine and up to 5 years in prison.

•    Discussion: How do you feel about this consumer fraud statute? Why do you think the DOJ, rather than the SEC, is charged with pursuing criminal charges in securities actions under Section 24?

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