Harmonizing Civil and Criminial Enforcement of Federal Regulatory Statutes: The Case of the Securities Exchange Act of 1934

Many federal regulatory statutes (including those governing antitrust, securities, and the environment) are hybrid statutes: their prohibitions are enforceable in criminal actions as well as in private or governmental civil actions (or both). Courts have long divided over whether prohibitions in hybrid statutes can be construed differently in different enforcement contexts. Resolution of this uncertainty has become urgent now that criminal enforcement of federal regulatory statutes is relatively frequent. In this article, Professor Sachs argues that prohibitions in hybrid statutes should be limited to a single interpretation. How to apply this principle (referred to in this article as “the core principle”) is not self-evident, however, since the one interpretation that is chosen must be suitable for all enforcement contexts. Accordingly, Professor Sachs identifies rules that supplement the core principle. She extracts the core principle and rules from Supreme Court decisions that apply the core principle and rules but leave them unstated. Professor Sachs then examines the core principle and rules in relation to the Securities Exchange Act of 1934 (“Exchange Act”). Before 1980, lower federal courts construing the Exchange Act expressed support for the core principle. In the 1980s and thereafter, however, some courts abandoned the core principle to accommodate changes that were taking place with respect to Exchange Act criminal actions, implied private actions, and actions involving international securities fraud. Professor Sachs shows that courts adhering to the core principle enhance their ability to promote the Exchange Act\u27s policy of combating unscrupulousness in the securities markets