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SEC Subpoena

securities and exchange commission
  • The Securities and Exchange Commission (“SEC”) is the federal agency that regulates and enforces the federal securities laws and protects U.S. security markets and U.S. investors.
  • The SEC investigates potential violations of the federal securities laws and has an arsenal of enforcement tools to help in its investigations—one of which is the subpoena power.
  • An SEC subpoena can either compel the witness to provide testimony (ad testificandum) or to produce documents (duces tecum).
  • Failure to respond to a subpoena by the stated deadline or ignoring a subpoena could lead to contempt charges as well as civil and criminal penalties and jail time.
  • A subpoena from the SEC could indicate either that you are under investigation for a violation of the federal securities laws or that the SEC believes that you have information that could assist it in its investigation into someone else.
  • Consider hiring an SEC defense attorney to advise you on the subpoena process, how to respond to requests for testimony or documents, and how to deal with any additional requests or charges.

Experienced SEC Defense Team

If you have received a subpoena by the SEC, now is the time to take prompt action in your defense.

The SEC regularly utilizes its subpoena power to investigate individuals and companies suspected of violating or knowing something about a violation of the federal securities laws.

Receiving an SEC subpoena can be a worrisome time whether you are a witness or a target of the SEC’s investigation.

Further, an investigation can quickly create serious consequences for your business relationships, your career, and reputation not to mention the needless costs and time of complying with a federal subpoena and an investigation.

You need an individualized defense strategy right away. It is critical that you are represented by an experienced SEC defense attorney with extensive knowledge of the SEC subpoena process.

At Oberheiden, P.C., our attorneys have this experience and knowledge as well as a highly successful track record in advising our clients on proceeding with SEC subpoenas.

Do not wait to get in touch with a qualified SEC defense attorney today. Put Oberheiden, P.C. on your side to fight for your freedom and reputation.

What is the Securities and Exchange Commission?

The Securities and Exchange Commission (“SEC”) is the federal agency responsible for regulating and enforcing the federal securities laws.

The SEC is empowered to investigate alleged wrongdoings of the federal securities laws in order to protect U.S. security markets and U.S. investors.

One of the enforcement tools the SEC uses as a part of its investigative powers is the subpoena. The SEC can issue a subpoena to anyone likely to elicit information relevant to the SEC’s investigation.

What is a Subpoena?

A subpoena is a court order requiring an individual to provide information. There are generally two types of subpoenas:

  • Subpoena ad testificandum:
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This is a command for the individual to provide testimony.

  • Subpoena duces tecum:
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This is a demand for the witness to produce documents, records, or other tangible evidence.

A subpoena will state the time and place to appear to provide the testimony. Failure to comply with the terms of the subpoena could result in fines and jail time.

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The testimony is given under oath and recorded either by a court reporter or tape recorder. Sometimes, in addition to the SEC attorney carrying out the terms of the subpoena, other SEC staff are present along with investigators.

For a subpoena duces tecum, the subpoena will provide instructions for where to send your documents and the deadline to do so. It will make the individual aware of the possibility of civil and criminal penalties for failing to preserve and retain evidence that is a part of the SEC’s ongoing investigation. It will also list those documents that the SEC regards as relevant and that the individual is to preserve and retain.

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Why Did I Receive a Subpoena from the SEC?

If the SEC has served you with a subpoena, it generally means that the SEC has accumulated enough evidence about you or your company that it believes is relevant to an SEC investigation.

In other words, either you are under investigation by the SEC or the SEC believes that you can provide testimony or other information related to its investigation of someone else.

Sometimes, individuals will not know the reason the SEC has issued them a subpoena. For instance, individuals will likely be unaware as to whether the SEC investigation is civil or criminal or whether that individual is being subpoenaed to appear or provide documents as a witness or potential target.

All the subpoena may mention is that the SEC is conducting an investigation, that you are a part of that investigation, and that the SEC is requiring you to provide testimony or produce documents.

This is why it is so critical to retain a qualified SEC defense attorney to guide you through the subpoena process.

The SEC Investigative Process

SEC investigations are initiated from many sources such as tips, complaints, or other information obtained from government agencies.

Witnesses and targets of an SEC investigation often learn of the investigation by a telephone call from an SEC attorney or investigator.

The SEC uses either an informal investigation or a formal investigation to gather evidence for its investigation.

Informal investigations normally entail voluntary requests for information that the SEC is accumulating with respect to an investigation that targets someone else. The subpoena power does not exist at this informal stage. It is merely an informal process that requests information from investors or employees of the company.

Sometimes, the SEC will open a formal investigation if the information revealed from the voluntary inquiries indicate that the need for more evidence is warranted.

For formal investigations, the primary objective is to determine the facts of the case surrounding the alleged violation that the SEC is investigating. The SEC will often issue subpoenas for testimony or requests for numerous documents—which the SEC has the power to do during formal investigations.

If subpoenas are issued, the individual subpoenaed will be required to appear at a given time and at a given place. That individual will provide testimony under oath. Any statements made during the subpoena can be used in the investigation.

At the end of the SEC’s investigation, a document called a Well’s Notice is issued that identifies the conclusions of the SEC staff.

These conclusions will describe whether the staff believes that any securities laws were violated and whether it intends to recommend that the individual or company have an enforcement proceeding brought against it.

After the staff shows the Commission its findings, the Commission may authorize the staff to initiate a civil suit in federal court against the individual or company, though the parties often settle the case without proceeding to trial.

Criminal securities violations are referred to the DOJ for prosecution.

Failure to Respond to an SEC Subpoena

The stakes of failing to respond to an SEC subpoena can be substantial. If the subpoenaed party ignores the subpoena, this could result in contempt of court.

If the party fails to respond truthfully during the subpoena, this could lead to criminal prosecution for lying to a federal agency. Imprisonment is also a possibility.

Even though the subpoenaed party has the right to object to the terms of the subpoena and also has the right to invoke their Fifth Amendment right against self-incrimination, the party must still respond to the subpoena by the stated deadline. If it does not, it risks the above penalties.

Additionally, U.S. Code § 1001 provides that whoever, in any matter within the jurisdiction of the executive, legislative, or judicial branch of the U.S. government, “knowingly and willfully —

  1. falsifies, conceals, or covers up by any trick, scheme, or device a material fact;
  2. makes any materially false, fictitious, or fraudulent statement or representation; or
  3. makes or uses any false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry;

shall be fined under this title, imprisoned not more than 5 years . . . or both.”

The key here is never to lie to a federal agency because lying—even during the subpoena process—is a felony.

Retaining an SEC defense attorney to advise you on the subpoena process and how to respond in a manner that protects your rights while fully complying with the law is the most important step you can take.

How to Respond to an SEC Subpoena

Below we offer several tips on how to respond to a subpoena by the SEC:

  • Comply with all deadlines outlined in the subpoena and requests for documents. Failure to do so or ignoring a subpoena will result in contempt charges as well as jail time.
  • If you have not been served with a subpoena, you have no legal obligation to provide testimony. A refusal to answer is not an admission of guilt at this preliminary stage.
  • Structure and maintain a work environment where everyone in the company is informed on how to deal with SEC staff during the investigative process. This is important because high officials can sometimes be held responsible for what their lower level employees say or do.
  • Understand that there is some information that is subject to privilege. For instance, the attorney-client privilege prevents certain information from being compelled by subpoena. Further, if the testimony compelled by the subpoena would incriminate you or otherwise expose you to criminal liability, you can assert your Fifth Amendment right against self-incrimination—unless you have been offered immunity. Hiring a lawyer would help you understand and utilize these rights.
  • Always consult your defense attorney on how to respond to a subpoena request or even a preliminary, informal request for information.

Need Advice with SEC Subpoenas?

Being investigated by the SEC or receiving a subpoena from the SEC could waste needless time, expense, and lead to many challenges for you and your company such as reputational harm and both civil and criminal penalties.

Having an attorney on your side to advise you on every step of the subpoena process—including providing testimony and producing documents—is essential to your success.

At Oberheiden, P.C., our attorneys can minimize the impact on your business that results from complying with the subpoena. Our team of SEC defense attorneys regularly speaks with SEC staff members to request clarification of vague standards in order to make the subpoena process more manageable for you.

One small mistake you inadvertently make in the SEC subpoena process could subject you to civil and criminal penalties as well as contempt charges. We can advise you through every step of this process.

Do not proceed without first contacting an attorney. Call us today or contact our office for a free consultation.

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