The U.S. Securities and Exchange Commission (SEC) is a federal government agency charged with protecting investors and ensuring fair and efficient capital markets, making sure that investment advisors, stock exchanges and other market participants comply with U.S. securities laws.1
The agency also regulates the disclosures of publicly held companies to help investors make informed decisions as well as regulating a wide range of securities such as publicly traded stocks, investment funds and a wide range of bonds. The agency is one of the most active in the federal government when it comes to enforcement activity and relies heavily on its subpoena power.2
If you receive a subpoena from the SEC it can mean that you are being called to provide testimony or to produce documents about an individual or company that is connected to you or your company.
A SEC subpoena can also signal that something about you or your company triggered a red flag which the agency wishes to investigate further. Getting a subpoena means that a formal SEC investigation is underway and indicates that “SEC personnel have determined there are sufficient concerns to devote agency resources to a more in-depth inquiry.” 3
While not issued by a judge, if you fail to respond the SEC can engage the judicial system to initiate contempt proceedings and other legal consequences. The SEC can pursue civil or criminal penalties with civil penalties including mid-six-figure fines and jail time of up to five years.
Ignoring an SEC subpoena can damage your reputation in the securities industry and can lead to suspension or revocation of your professional license.4
Once you understand the gravity of an SEC subpoena it is time to take action. Determine the response date, which is stated under the caption on the first page of the SEC subpoena, along with the time and location where the response must be provided.
Read the subpoena to determine what type of response is required in terms of testimony and/or documentation. The SEC usually requests a large volume of documentation. A securities attorney can negotiate with SEC attorneys and will often be able to narrow the subpoena’s scope.5 Secure any documents requested. All documents requested in the subpoena must be preserved, so destroying or erasing them from computer files should not be attempted.
If you are requested to testify understand that during your interview you will be under oath and any statements made may be used in the investigation. Again, an experienced securities attorney will be vital to guiding you through any testimony.
SEC investigations can take months to years. When the investigation is concluded a Well’s Notice will be issued and will contain the SEC staff’s conclusions regarding any regulation violations. It will also indicate if enforcement proceedings against you will be recommended. If proceedings are specified, your attorney can draft a Well’s Submission disputing the SEC’s findings. That Well’s Submission is part of the public record and can be used as evidence in future civil litigation by private citizens.6 The SEC Commission will receive the findings of the SEC staff and may authorize the staff to file a case in federal court of instigate an administrative action which can vary from a fine, to a cease and desist order, to referral of the case to the Department of Justice.
Expert Securities Law Guidance for Michigan Investors
Our Royal Oak Securities Law Firm is deeply committed to maintaining integrity, trust, and accountability in the financial markets. As experienced securities fraud attorneys, we focus on combating investment fraud, protecting clients from scams, and seeking justice for those affected by broker misconduct.
If you have questions about your investments and how they are being managed, call and speak to a securities attorney today.
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1, What is the SEC? A Comprehensive Guide to the Securities and Exchange Commission by Aly J. Yale and Jake Safane, 10/28/2024
Link: https://www.businessinsider.com/personal-finance/investing/securities-and-exchange-commission
2, 3 10 Steps to Responding to an SEC Subpoena: What Do You Need to Know? by Dr. Nick Oberheiden, 2/2/2021
Link: https://natlawreview.com/article/10-steps-responding-to-sec-subpoena-what-do-you-need-to-know
4,5 What Happens If I Ignore an SEC Subpoena? by Mark J. Astarita
Link: https://seclaw.com/what-happens-if-i-ignore-an-sec-subpoena/