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Section 1348: What is 'in connection with’ the sale of securities?
By Kathryn Keneally
White-Collar Crime columns.
The Sarbanes-Oxley Act, passed in
July 2002, added Section 1348, Title 18, to the U.S. Code, entitled as the
specific crime of securities fraud.1 This is one of several
provisions of Sarbanes-Oxley as to which it may be fairly argued that
previously existing remedies already addressed the conduct targeted by the new
legislation. Indeed, the state of the law before the enactment of Section 1348,
and the possible reach of Section 1348, must be viewed in light of the U.S.
Supreme Court decision in SEC v. Zandford,2 which was decided
nearly two months before the enactment of Sarbanes-Oxley.3
Section 1348: The newly created
Section 1348 provides for a fine,
and imprisonment of up to 25 years, for any person who “knowingly executes, or
attempt to execute, a scheme or artifice” either “to defraud any person in
connection with any security” or “to obtain, by means of false or fraudulent
pretenses, representations, or promises, any money or property in connection
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