The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank” or the “Act”) creates new securities crimes and makes the prosecution of old crimes easier. By one count, the Act defines over two dozen criminal offenses, some new and others based on existing law. The Act also expands the extraterritorial jurisdiction of U.S. criminal law. Moving beyond traditional lines of criminal culpability, where an intentional or knowing mental state is usually required, the Act criminalizes reckless acts, such as recklessly revealing a Treasury Secretary determination that a financial company is in danger of default or the circumstances surrounding the possible liquidation of a company. In sum, “Dodd-Frank represents the most sweeping changes to the financial regulatory environment in the United States since the Great Depression.” While not as monumental as the Dodd-Frank legislation generally, its criminal provisions have the potential to capture the unwary.
Further, in amending the Commodity Exchange Act, Dodd-Frank broadens insider trading to prohibit federal employees from using “nonpublic information.” It broadens the definition of insider trading to include “information that may affect or tend to affect the price of any commodity in interstate commerce, or for future delivery, or any swap.” However, like the difficultly courts had for over two decades trying to divine the meaning of “honest services” in mail and wire fraud cases, courts might now also take a significant amount of time to interpret the meaning of Dodd-Frank’s information that may affect or tend to affect the price. In these new insider trading cases, the Act prohibits any person from knowingly using “such information to enter into . . . a contract of sale of a commodity for future delivery [or] . . . an option] . . . or . . . a swap.” This is an expansion of the current understanding of insider trading, where a person is liable only if he receives the inside information from someone with a fiduciary duty to the company. Moreover, Dodd-Frank provides for criminal liability regardless of how far removed a person is from the insider or the fiduciary (the tipper). That is, the use of the inside information is criminal under Dodd-Frank even if a person metaphorically or literally finds the information on the street. This Article describes the general reach of Dodd-Frank and, more specifically, its implications for criminal law.
