Securities Fraud in Cyberspace: Reaching the Outer Limits of the Federal Securities Laws

29 Pages Posted: 7 Oct 2013 Last revised: 18 May 2014

See all articles by Constance Z. Wagner

Constance Z. Wagner

Saint Louis University - School of Law

Date Written: 2001


This article discusses the increasing use of the Internet for securities transactions, the growth of securities fraud perpetrated through that medium and the Securities and Exchange Commission (“SEC”) enforcement program initiated to combat it. The author critiques the position taken by the SEC that the existing anti-fraud provisions of the federal securities laws can be stretched to cover Internet fraud. Using an enforcement action brought by the SEC against an online stock trading guru named Tokyo Joe as an example of the confused jurisprudence that results when pre-cyberspace law is applied to securities fraud in cyberspace, the author proposes a different regulatory model for online investment advisers like Tokyo Joe that takes the differences between the online world and the world of conventional communications media into account. The author proposes a new source of fiduciary duty in the online context, namely the formation of virtual stock trading communities, which duty would include good faith and fair dealing with investors over the Internet.

Keywords: securities regulation, securities fraud, Internet, cyberspace, fiduciary duty

Suggested Citation

Wagner, Constance Z., Securities Fraud in Cyberspace: Reaching the Outer Limits of the Federal Securities Laws (2001). 80 NEB. L. REV. 920 (2001), Saint Louis U. Legal Studies Research Paper No. 2013-28, Available at SSRN:

Constance Z. Wagner (Contact Author)

Saint Louis University - School of Law ( email )

100 N. Tucker Blvd.
St. Louis, MO 63101
United States

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