The SEC and the Internet: Regulating the Web of Deceit

68 The Consumer Finance Law Quarterly Report 262 (2014)

20 Pages Posted: 30 Oct 2011 Last revised: 8 Nov 2017

See all articles by Lawrence J. Trautman

Lawrence J. Trautman

Prairie View A&M University - College of Business; Texas A&M University School of Law (By Courtesy)

George Michaely

Government of the United States of America - Division of Corporation Finance; University of Notre Dame

Date Written: March 31, 2014


The internet has created challenges for regulators of financial markets unimagined over eighty years ago by drafters of the Securities and Exchange Acts. The recent explosion in internet use has provided many benefits for investors and publicly-traded companies. The Internet has been a boon to entrepreneurs seeking to reach new markets and raise needed capital at minimal cost. Examples of the wealth of information available on demand and at little cost to the investing public includes: the reported financial results of issuers; press releases; product information; research reports of securities analysts; and easy and prompt access to information about corporate events. The SEC has provided guidelines to allow for an issuing company to disseminate to its shareholders the required periodic reports (10-k, 10-q, 8-k, proxy statements, etc.).

A series of new challenges face regulators of our securities markets. Cyber-securities fraud arises as a major threat to the evolution of the securities markets. A few of the creative tools available to today’s cybercriminals include: the relative ease of the data theft; transfer of money in the blink-of-an-eye across borders; and stolen identities facilitating market manipulation.

Capital formation is the very lifeblood of job creation. The internet has resulted in efficiencies, cost savings, and real productivity gains to all in the capital raising process. The Jumpstart Our Business Startups (“JOBS”) Act and associated changes to the securities laws should facilitate the ability of smaller companies to raise needed capital. This article provides an update regarding the growth and global availability of the internet, an abbreviated overview of the law of electronic transactions, brief discussion of jurisdictional challenges to the prosecution of internet fraud and wrongdoing, JOBS Act, a brief history of the U.S. Securities and Exchange Commission (“SEC’s”) incorporation of internet technology into the financial reporting process, identifies the evolving cyber-environment in which securities issuers must adapt to comply with regulatory requirements, and explores developing areas of cyberfraud.

Keywords: Capital Formation, Computer Fraud, Crime, Cybercrime, Cybersecurities Fraud, EDGAR, Enforcement, Entrepreneurship, ESIGN, Hacking, ICANN, Identity Theft, Information Technology, Internet, JOBS Act, Law, Regulation FD, SEC, Securities Disclosure, Securities Fraud, Society, UCITA, UETA, XBRL

JEL Classification: D73, E44, G10, G18, G20, G24, G28, G30, G34, G38, K14, K22, K40, K42, L51, M13, O16, O30, P10

Suggested Citation

Trautman, Lawrence J. and Michaely, George, The SEC and the Internet: Regulating the Web of Deceit (March 31, 2014). 68 The Consumer Finance Law Quarterly Report 262 (2014), Available at SSRN:

Lawrence J. Trautman (Contact Author)

Prairie View A&M University - College of Business ( email )

Prairie View, TX
United States

Texas A&M University School of Law (By Courtesy) ( email )

1515 Commerce St.
Fort Worth, TX 76102
United States

George Michaely

Government of the United States of America - Division of Corporation Finance ( email )

100 F Street, NE
Washington, DC 20549
United States

University of Notre Dame ( email )

361 Mendoza College of Business
Notre Dame, IN 46556-5646
United States

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