Although there are six Federal statutes that govern securities transactions, securities fraud is primarily regulated through the Securities Act of 1933 and the Securities Exchange Act of 1934. These acts target different markets, with the 1933 Act regulating the primary market and the 1934 Act regulating the secondary market; however, the objective of both acts is the same, i.e., to ensure vigorous market competition by mandating full and fair disclosure of all material information in the marketplace. The key statutory authorities used in criminal prosecutions of securities fraud are Rule 10b-5 and section 32(a) of the 1934 Act. Two main types of fraud may be the basis for securities violations: material misrepresentations, omissions, or both (the most common securities fraud actions); and insider trading. This article explains the violations in detail. There are two broad categories of securities fraud defenses: intent-based defenses and reliance-based defenses. Intent-based defenses attempt to show that the defendant acted without intent to deceive, manipulate, or defraud; and reliance-based defenses attempt to show that no market participant relied upon the defendant’s omissions or misrepresentations in deciding to purchase or sell a security. Federal enforcement mechanisms pertinent to securities fraud are the Securities and Exchange Commission (SEC), which has the authority to initiate civil and administrative enforcement; and the U.S. Justice Department, which has sole jurisdiction over criminal proceedings. Penalties for securities fraud involve a maximum fine of $5,000,000 and a maximum of 20 years imprisonment. 478 notes