Substantive and procedural differences between criminal and civil treatment of conduct sounding in securities fraud combine to cause the following anomaly: certain false statements to investors may be actionable criminally-subjecting individual defendants to imprisonment-but not civilly-leaving victims without remedy. The imposition of criminal punishment for conduct that does not invoke civil liability risks disrupting the current scheme of securities regulation, at the expense of considerations deemed important by Congress and the courts. Moreover, the extension of criminal liability beyond the scope of civil liability debunks the assumption, which underlies the current scholarship on the civil-criminal divide, that criminal liability is a subset of civil liability in circumstances where the relevant conduct injures identifiable individuals. This article demonstrates that criminal liability is more expansive than civil liability in the context of securities fraud, analyzes the impact of this anomaly on the current scheme of securities regulation, and considers whether the rationales underlying the leading theories of the civil-criminal divide explain this unique liability configuration. This article concludes that, although this configuration has destabilizing effects, it is arguably consistent with many of the theories underlying the civil-criminal divide. Therefore, this article proposes a two-step solution to further the rationales of the civil-criminal divide while preserving the delicate balance of the current scheme of securities regulation.
72 Alb. L. Rev. 1 (2009)