Hell Hath No Fury Like an Investor Scorned: Retribution, Deterrence, Restoration, and the Criminalization of Securities Fraud Under Rule 10b-5

Abstract:     
This brief article focuses attention on the ineffectual nature of prosecutions of corporations and their insiders - generally, officers and directors - for securities fraud under Rule 10b-5. Specifically, the article begins by briefly summarizing the nature of enforcement actions and related penalties under Rule 10b-5. Next, the article argues that, as currently conceived and executed, criminal enforcement actions under Rule 10b-5 are ineffective as a means of achieving retribution, as deterrents of undesirable behavior, and as enforcement vehicles that vindicate the policies underlying Rule 10b-5. As a means of addressing these criticisms, the article suggests possible enhancements to Rule 10b-5 prosecutions, including more victim involvement in the proceedings. These enhancements, rooted in victims' rights initiatives and restorative justice principles, may better serve societal and regulatory aims.

Keywords: securities fraud, Rule 10b-5, theories of punishment, retribution, deterrence, restorative justice, victims' rights, allocution

JEL Classifications: K14, K22, K40, K41, K42, M14

Accepted Paper Series