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SEC Investigations

Categories: Criminal Law & Process

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An SEC investigation may be triggered by a whistle blower, the appearance of insider trading, self-reporting, or simply based on a report in the media. An SEC investigation demands instant, truthful, and complete reporting of any misconduct and a sophisticated level of cooperation. If you have been informed that you are the target of an SEC investigation, it is imperative that you seek legal counsel as soon as possible.

The first notice you are likely to receive from the SEC is a letter that they have begun an “informal investigation” into you or your company. At this stage, the SEC does not have subpoena power and relies upon your voluntary cooperation. However, ignoring this initial notice could be a big mistake. At this stage, you have the opportunity to find out the parameters of the SEC’s concern and to keep the investigation from going any farther. Oberheiden & McMurrey, LLP has attorneys who are experienced in handling these investigations and can help you navigate the process.

In response to an informal investigation letter, we are likely to call the investigating attorney at the SEC to discuss the reason for the investigation and any facts the SEC may already know or any misinformation they may have. The next step is to negotiate a response to the letter and agree whether or not to provide the information and documents that the informal investigation has requested.

At the same time, we may advise you to undertake an internal investigation to discover whether or not there are problems in your organization that need to be addressed. This investigation may be conducted by us or by another outside consultant in conjunction with company officers and directors who are not implicated in the alleged wrongdoing. Such an investigation can both stop any misconduct that may be occurring and show the SEC that the company is committed to complying with the securities law.

At the conclusion of its informal investigation, the SEC may send what is known as a “Wells letter,” which informs the company that the SEC is considering recommending formal action, either through a civil lawsuit or an administrative proceeding. If you were not notified of the informal investigation, the Wells letter may be your first indication that the SEC is investigating you. While there is no legal requirement to send a Wells letter prior to instituting action, it is the practice of both the SEC and the NASD to send such a letter. The letter will inform you that you have the right to make a “Wells submission,” which is a memorandum explaining the defenses you have to the SEC’s charges. The answer to the question of whether to make a Wells submission is complicated and requires the advice of experienced attorneys. In some cases, the Wells submission may convince the regulators not to institute a formal action. On the other hand, Wells submissions are neither privileged nor confidential and can be used against you in any subsequent proceedings. They may also be subject to Freedom of Information Act requests.

Finally, the SEC may file a formal action against you and your company. Once this step occurs, you will be subject to subpoenas and may be required to give testimony to the agency. Our lawyers have experience in defending such actions and will be with you every step of the way to guide you through responding to subpoenas and mounting a defense in court. Contact us today for the legal representation you need.

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