Are You Under Investigation For Securities Fraud? Contact An Experienced Brooklyn Defense Attorney
Last updated on August 8, 2024
If you are, you may not even be aware of it yet. It is well-known that the U.S. Securities and Exchange Commission (SEC) is one of the country’s most formidable enforcement agencies. Often, those under SEC investigation do not know their activity is being monitored. An SEC investigation can span months or years. Investigations are frequently triggered by:
- Investor complaints to the SEC
- Media reports
- Self-regulating agencies
- Market surveillance activity
- Other securities sources
The Enforcement Division of the SEC collects data in a way that preserves critical evidence and the reputations of those interviewed.
When the investigation is complete, the SEC may initiate an administrative action within the SEC or in federal criminal court. Depending on the nature of the violations, the SEC has the option to prosecute in both venues.
What Should I Know About Investigations Of Securities Violations?
The U.S. Securities and Exchange Commission (SEC) is one of the nation’s most sophisticated enforcement agencies and with years of experience. They are so good at what they do that most targets of SEC investigations seldom know they are being monitored until months or years after the investigation began. These investigations are conducted confidentially in order to preserve evidence and reputations.
The secretive nature of the investigation is maintained until it becomes part of the public record. Generally, during the secretive investigative stages, the SEC will not confirm or deny the existence of the investigation. The matter becomes part of the public record when the SEC files an action through an administrative proceeding or in a court of law.
Who Does The Investigating?
The Division of Enforcement is the arm of the SEC charged with evidence collection. After analyzing the gathered evidence, it determines whether there have been SEC regulatory violations. The SEC investigates whether there have been violations of:
- Insider trading
- Manipulation of market prices
- Misrepresentation/omissions of substantial facts relating to securities
- Client’s funds or securities theft
- Violations of the broker/dealer responsibility to treat clients fairly
They then will recommend whether to prosecute or not prosecute.
How Evidence Is Collected
Evidence is collected through security industry sources, market surveillance and investor complaints. For example, the division’s evidence gathering strategy may entail:
- Examining brokerage records
- Reviewing trading data
- Interviewing witnesses
- Discovering other documentary evidence
It is important to remember that if a formal order of investigation is issued, the division has authorized subpoena power to compel the release of the above information. Once all the relevant evidence is collected the division coordinates with the SEC Commission to prosecute. In some cases, the SEC may decide to forgo a trial in lieu of a settlement.
Why Does The SEC Prosecute Through Civil And Administrative Courts?
The SEC has the ability to investigate violations in a very sophisticated manner through their Enforcement Division. Once the Enforcement Division gathers and analyzes the collected evidence, they will make a recommendation to the SEC on whether to prosecute the alleged violations. The SEC will then decide whether to prosecute in the civil or administrative courts.
The SEC Commission does not take this decision lightly because the consequences for the defendant are dependent on the outcome of these two different types of proceedings. It is important to note that a qualified attorney experienced in both administrative and civil courts are essential to a successful defense. It is the SEC’s responsibility to take this recommendation and decide whether to move forward with a prosecution or not. The SEC has the option of either initiating an action within the SEC in front of an administrative law judge or in the federal courts. If warranted, in some cases the SEC may opt to prosecute in both.
What Does Civil Action From The SEC Look Like?
In a civil action, the SEC will file a complaint asking for sanctions or remedies in the U.S. District Court. For example, they can ask the court for an injunction which forces the alleged violator to discontinue any actions that led to the violations of the laws or rules. Penalties also include the possible suspension or barring of targets from serving as a director or corporate officer. The SEC can also seek the return of illegally obtained profits and ask for civil monetary penalties or imprisonment.
What Does Administrative Action From The SEC Look Like?
Here, a case is heard by an independent administrative law judge who is able to levy sanctions through administrative proceedings. After a decision is rendered the defendant or the Enforcement Division is allowed to appeal all or part of the decision to the SEC. The SEC will then reverse, affirm or remand the decision for further hearings. There are a number of sanctions that a defendant may be subject to. They are:
- Bars from associating with the securities industry
- Civil monetary penalties
- Disgorgement
- Cease and desist orders
- Revocation of broker-dealer and investment adviser registrations
SEC prosecutions must be taken seriously because they can ultimately affect your ability to work in the securities industry and damage your reputation.
How Can I Get Ahead Of A Confidential Investigation?
Confidential investigations preserving evidence and reputations are frequently replete with government overreach. You have a right to due process under the law pertaining to surveillance methods, searches and seizures of property. However, because the investigation begins informally, you may be blindsided by the time a formal order of investigation is issued.
Seek legal counsel in Brooklyn as soon as possible if whispers of price-fixing, insider trading, unfair client treatment or selling unregistered securities are sounding anywhere in the company from home offices to social media.
Contact Kushner Law Group, PLLC
The SEC’s Division of Enforcement is a formidable force. The SEC Enforcement Division has extensive resources for conducting investigations. If you are under investigation, it is critical to speak with an experienced attorney who is able to represent you with an assertive defense. At Kushner Law Group, PLLC, our team has the knowledge to take the steps necessary to mitigate losses and criminal prosecution with a strong defensive posture. Send us an email or call us now at 718-838-9341.