If you are investigated by the Securities and Exchange Commission – the SEC – you need to be advised and represented by an experienced SEC investigations and litigation attorney. SEC investigations can lead to civil and criminal charges being brought against you whether the investigation is directed at you or not.
The SEC conducts confidential investigations of potential violations of federal securities laws, including investigations of:
SEC investigations are wide-ranging. They sometimes lead to charges against parties who had little or nothing to do with the conduct initially under investigation. The SEC can and often does share what it learns in its investigations with state and federal criminal law enforcement, state regulators, and self-regulatory organizations.
SEC investigations are typically far more complicated than ordinary commercial litigation cases, so it is imperative to be advised and represented by an attorney who has substantial experience dealing with the Securities and Exchange Commission and other regulatory agencies.
If you are investigated by the SEC, a good SEC investigations attorney can act early in the process to represent you before SEC investigators to avoid potentially disastrous results. SEC investigators have broad powers to obtain information via subpoenas for documents and testimony from you and from third parties like banks. SEC investigators can obtain your account records directly from your brokerage or advisory firm.
A Securities and Exchange Commission investigation may be opened based on a complaint from an investor, a tip from a whistleblower, or information from FINRA (the Financial Industry Regulatory Authority), state regulators, or other government agencies. It may be opened based upon information reported on blogs, in a chatroom, or by traditional news media.
SEC investigators may either launch an “informal” inquiry or seek an immediate “formal order of investigation” from the SEC Commissioners. A formal order lets investigators issue subpoenas to compel testimony and production of documents and other evidence.
If you receive a subpoena from the Securities and Exchange Commission, contact an experienced SEC investigations attorney at once. Your attorney can obtain a copy of the formal order of investigation and advise you about how to best respond. Your attorney can advise you as to whether you need the advice of a criminal defense attorney and whether you should testify at all.
An experienced SEC attorney can work with the SEC Staff to produce the information and documents the SEC is seeking. Sometimes the SEC Staff is primarily interested in receiving just a subset of the documents described in the subpoena. Usually, an experienced SEC attorney can reschedule the due date for production of documents and the date for testimony.
The SEC may contact you by phone – or in some other way – before or after a subpoena has been issued. It is important that you have the SEC talk with your attorney. Do not engage in a discussion with the SEC Staff about what documents you have, what you know, or anything else. Anything that you say to the SEC may be used against you by the SEC or by other law enforcement and regulatory agencies. Communicating with the SEC through your attorney protects you from saying anything that could be taken out of context and used against you. If you are under investigation by the SEC, do not discuss the investigation with anyone except your attorney unless you and your attorney agree that it is advisable.
You may be asked to provide additional documents or information after you testify and produce documents. You may be asked to again meet with the SEC for an interview or asked to appear again to provide testimony. SEC investigations can take many years while the SEC obtains information about a broad range of conduct from many sources. At some point the SEC will:
The SEC may bring charges against you for fraud or other violations of federal securities laws, or the SEC may not bring charges against you but require that you provide testimony to assist the SEC in pursuing charges against others.
Before a formal request to file charges is made, SEC investigators will typically send a “Wells” Notice to the parties involved. A Wells Notice is a notice that investigators believe federal securities laws have been violated and that they intend to seek permission to bring charges against you.
If you are the recipient of a Wells Notice, your attorney can enter into discussions with SEC investigators with the goal of reaching a settlement or dissuading the investigators from bringing charges.
If a settlement cannot be reached, the SEC will file charges in federal court or via its administrative proceedings. You have the right to dispute any charges against you in an SEC administrative proceeding or federal court action. In such cases, you and the SEC Staff can conduct pretrial discovery including seeking documents and taking depositions. At trial, your attorney can examine witnesses, cross-examine the SEC’s witnesses, and introduce evidence on your behalf.
If you are investigated by the Securities and Exchange Commission, you should not rely upon your firm’s attorneys to represent you. They represent the firm, not you.
You need an attorney who represents and looks out for you – not for your employer. Your employer and/or the SEC may tell you that you are not the focus of the SEC’s investigation of the firm, so you don’t need your own attorney. That is not true. When your firm’s attorneys prepare you for an SEC interview or accompany you for on-the-record testimony, they represent the firm – not you. Be wary of your firm making you a scapegoat and throwing you under the bus. If your firm’s attorneys will not put IN WRITING that they are representing you as an individual in the investigation, get your own attorney.
SEC investigations are not limited or restricted other than that they focus on potential violations of federal securities laws. SEC investigators often open an investigation of one allegation that branches into investigations of other completely different matters. SEC investigators could find something in the course of their investigation that leads them to focus on you or that leads them to provide information about other violations of laws to other criminal and civil law enforcement agencies.
An experienced SEC investigations and litigation attorney will be able to advise you throughout the process to ensure that your rights are protected.
A violation of federal securities laws can result in substantial fines and penalties. The SEC imposes civil fines and penalties on individuals and firms that have violated securities laws.
The SEC can also order the “disgorgement” of all profits earned as a result of the violation or violations. Disgorgement is similar to restitution and is considered remedial rather than punitive. The SEC generally cannot seek disgorgement or penalties for conduct that occurred more than five years ago. Fines and penalties are often based on the amount of disgorgement sought by the SEC. For example, the SEC has the authority to seek up to three times the disgorgement (or profits) that a person earned as a result of trading on material nonpublic information – insider trading.
The SEC obtains disgorgement, interest, and penalties either through a settlement agreement or through an order of a court or administrative law judge. Often your attorney can talk with the SEC about different methods to calculate disgorgement, interest, and fines/penalties before the SEC files its case.
The Securities and Exchange Commission can also bar someone from working in the securities industry, from serving as an officer or director of a publicly traded company, or from “appearing before the commission” as an accountant or attorney. These bars can substantially limit your future career prospects.
The stakes in SEC investigations are high, with the risk of steep financial penalties, the loss of professional licenses, and potentially irreparable damage to your professional reputation.
If you come under investigation by the SEC, contact Bragança Law LLC as early as possible in the investigation to ensure that your interests and your rights are protected.
As a former Branch Chief in the Division of Enforcement of the Chicago Office of the Securities and Exchange Commission, attorney Lisa Bragança has conducted SEC investigations and knows – from the inside – how they work.
As an SEC investigations attorney, Lisa Bragança has represented financial and investment professionals, officers, directors, employees of private and public companies, and other financial professionals in SEC investigations. She is ready to work on your behalf.
If you are involved in an SEC investigation, contact Bragança Law LLC at (847) 906-3460, or use the contact form here on our website. In an SEC investigation, attorney Lisa Bragança can advise and represent you and get the best possible result for you.