Sentencing Commission Proposes Revisions To Guideline for Fraud-on-the-Market Crimes

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By Yin Wilczek

Jan. 9 — The U.S. Sentencing Commission Jan. 9 voted to publish proposed amendments to its economic crime guideline that would direct federal courts to consider gain, rather than loss, in imposing sentences for fraud-on-the-market offenses and for submitting false information to the Securities and Exchange Commission.

In its proposal, the commission noted that although stock price manipulation cases “occur infrequently,” commentators have observed that the cases are complex, resulting in “courts applying a variety of methods to determine the appropriate” sentence enhancement.

“We have heard criticism from some judges and members of the bar that the fraud guideline may be fundamentally broken, particularly for fraud on the market cases,” said Judge Patti B. Saris, who chairs the commission, in a release.

Not ‘Broken' for Most Frauds

“Based on our extensive examination of data, we have not seen a basis for finding the guideline to be broken for most forms of fraud, like identity theft, mortgage fraud, or healthcare fraud, but this review has helped us to identify some problem areas where changes may be necessary,” Saris said. “We believe our proposed amendment will help make the guideline clearer, more reflective of practical and legal realities, and more useful for courts and litigants.”

According to the commission, the median enhancement for fraud-on-the-market cases in fiscal years 2012 and 2013 was 14 levels, and the average sentence was 48 months.

The proposed amendments also involve the commission's past work to implement § 1079A(a)(1) of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The provision directed the commission to review and amend, if necessary, the guidelines applicable to individuals convicted of securities fraud to ensure they provide adequate deterrence and appropriately account for the harm suffered by the public and the financial markets.

In other amendments, the commission proposed revising the economic crime guideline's definition of “intended loss” and providing a new enhancement for cases in which one or more victims suffered substantial financial hardship.

Comments Sought

The commission is seeking comments on the proposed revisions, which are due March 18. The commission will hold a public hearing on the proposed amendments March 12 in Washington.

The commission's proposed revisions to the fraud guideline come after several years of studying sentencing data and other issues, and reaching out to criminal law experts and other stakeholders. According to a presentation at the commission's Jan. 9 meeting, in fiscal year 2012, embezzlement and theft were the most common crimes sentenced under the guideline, constituting 25.4 percent of the cases. Miscellaneous frauds categorized as “all other” were next at 13.1 percent, after which was mortgage fraud (11.4 percent).

Securities and investment fraud constituted 3.3 percent of the crimes sentenced under the guideline in FY 2012.

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To contact the editor responsible for this story: Ryan Tuck at

The proposed amendments are available at

The commission's release is available at