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Copyright (c) 2008 Dickenson Law School. All Rights Reserved.
Penn State Law Review

Article: Securities Fraud, Recidivism, and Deterrence

Summer, 2008


113 Penn St. L. Rev. 189


Jayne W. Barnard*


I. Introduction
This Article is about people who commit securities fraud - men and women (though mostly men) who prey upon victims by selling them securities through materially misleading sales techniques. The frauds they commit are not the systemic, organizational frauds that command the attention of the popular press. Rather, these offenders engage in "retail" securities fraud - sales made to investors on a one-on-one basis and schemes (like "pump-and-dump" schemes) designed to induce individual trades. Retail securities fraud costs investors hundreds of millions of dollars each year. 1

This Article focuses on the population of offenders who engage repeatedly in retail securities fraud - securities fraud recidivists. Many of these offenders move from state to state and scheme to scheme over decades. Sometimes they engage in face-to-face schemes but increasingly they are conducting their frauds over the Internet. Securities fraud recidivists often thwart the best efforts of the Securities and Exchange Commission (SEC) to detect and deter them.

The securities fraud recidivists of particular interest here are those who have engaged in three, four, or even more fraudulent schemes - they are career con artists. Over the course of their careers, they have adapted to new technologies, new sales techniques, and multi-continent financial arrangements. They are smart, personable, crafty, and cruel.

I will make two points in this Article: (1) securities fraud recidivists are not merely economic opportunists - some of them may have an inherent psychopathology that compels them to defraud others and to recidivate after ...
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