While no company or individual wants to be the subject of an SEC investigation, it can be helpful to understand what the SEC is and how it works.
Understanding the SEC and Its Investigative Process
The SEC is first and foremost a civil law enforcement agency charged with the enforcement of the federal securities laws and the policing of the financial markets. The SEC’s website provides further specifics of its various functions – SEC’s official government website. The SEC, through its Division of Enforcement, conducts its non-public investigations and prosecutes its civil and administrative enforcement actions against individuals (i.e. financial advisors and stockbrokers) and entities (brokerage firms, public companies and accounting firms) for injunctive relief and monetary damages.
How SEC Investigations Work
SEC investigations are non-pubic and are carried out by the SEC’s Division of Enforcement through its Washington, DC Office and its numerous regional offices located throughout the country. The SEC conducts investigations to determine if there have been violations of the federal securities laws and, if so, who is responsible for the violations. The SEC will develop evidence by taking the sworn testimony of individuals and requesting the production of documents, either voluntarily or through subpoena. The SEC may work closely with other agencies during the investigation (like the Department of Justice or FINRA) and may share the information it obtains with them.
Once the SEC staff has completed its investigation, it will then consider the evidence and determine if it believes it has a basis to make a recommendation to the SEC Commission for an enforcement action. If the Commission finds the evidence compelling, it has the power to authorize the filing of either a lawsuit in Federal Court or a proceeding in the SEC’s internal administrative forum.
Common Violations that Lead to Investigations and Enforcement Actions
While the mere fact that the SEC is investigating does not necessarily mean a case will be filed, the following are some of the common violations the SEC keeps a keen eye out for:
• Stock manipulation.
• Insider trading.
• Theft of client funds or securities.
• Fraud in the offering of securities.
• Selling unregistered securities.
• Ponzi schemes.
• Boiler-room activities and abusive retail sales practices.
The Law Firm of David R. Chase
If you are under investigation by the SEC, or are already facing formal charges, contact the Law Firm of David R. Chase. With an extensive, 20 year plus background in securities litigation and defense, David R. Chase, a former SEC Prosecutor, has the skills and judgment necessary to protect your interests.