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SEC Investigations: The Process Explained

If you are under investigation for insider trading, offering frauds, Ponzi Schemes, or stock manipulations, by the Securities and Exchange Commission, it is critical that you understand the process by which SEC conducts its investigations, makes its charging decisions, prosecutes and settles its cases. It is also critical that you are represented by an experienced SEC defense lawyer who understands the process, and will protect you by strategically navigating you through this stressful, high-stakes legal process.

A SEC investigation typically begins with either the issuance of a subpoena for documents and/or testimony or, if the SEC does not yet have subpoena power, a voluntary request for information and/or testimony. While a recipient of a SEC Subpoena is legally obligated to comply, there is no such obligation with a voluntary request by the SEC.

Your initial response to an SEC request is extremely important. Whether you should produce documents and testify, cooperate or invoke your Fifth Amendment Rights, must be made up front. A seasoned SEC defense lawyer will be able to counsel you on this absolutely critical decision to ensure your rights are protected and that you are best positioned in the investigation. Unfortunately, often times individuals go at it alone in responding to SEC Subpoenas, not fully appreciating how dangerous flying solo is without an experienced SEC defense lawyer. In many instances, bad strategic decisions made early in the investigation by individuals without an SEC defense lawyer are irreparable.

Once you produce documents to the SEC, it will typically call you for testimony, where you will be asked questions under oath by SEC Staff about the subject matter of the investigation and relevant documents. It is of the upmost importance that you are prepared for SEC testimony, which is the most important phase of the investigation. In SEC testimony, your position on material facts will be locked-in, and your credibility will be assessed and judged. A competent SEC defense lawyer will ensure that you understand, and are ready, for this process.

After completion of your testimony and those of other witnesses in the investigation, and after the SEC Staff has reviewed all relevant documents produced, the SEC will either drop its investigation or, if it believes it has evidence that you violated the Federal Securities Laws, it will issue you a Wells Notification – a formal, written notice that it intends to charge you.

You have a right to respond to a Wells Notification through your SEC defense attorney. I have been successful in persuading the SEC to not pursue charges at the Wells Notification stage. If, however, the SEC is not convinced and insists on filing charges, the matter can either be settled, of if settlement can’t be reached, you have the right to contest the charges either in a SEC administrative proceeding or in Federal Court, where your SEC defense attorney can call witnesses, cross-examine the SEC’s witnesses and introduce evidence on your behalf.

SEC Defense Lawyer David R. Chase

The stakes in a SEC investigation are potentially huge, involving the risk of steep civil monetary penalties, injunctions, loss of licenses and significant damage to personal and business reputation. In some instances, the SEC refers its cases to the Department of Justice for criminal prosecution. It for these reasons you should engage David R. Chase, a seasoned SEC defense lawyer, early in the investigation to ensure your interests are protected and that you have the best chance to avoid being charged.