SEC Defense in Monte Sereno, California

Attorney John W. Sellers
SEC Defense Team Lead
Former DOJ Trial Attorney

California has been the focus of SEC oversight for many years because of the investment opportunities the state historically delivered. If you’re a securities professional or seller in Monte Sereno, California, the handy assistance of an SEC defense lawyer is critical, particularly if you’re aware of a possible SEC investigation against you or your company/firm.

An SEC investigation doesn’t target only legal entities, but also high-stake individuals in those entities. In the course of an investigative process, the SEC has the legal authority to trigger mechanisms that could entail the imposition of penalties or even a prison sentence. By getting early legal representation, individuals, companies, and financial firms can elude – or, at the very least, alleviate – the imposition of severe punitive measures on the part of federal authorities. At Oberheiden P.C., we have proven experience representing individuals and legal persons in the context of SEC matters, and many of our senior attorneys have a background in the prosecution of securities fraud cases to boot.

Industries Targeted for Enhanced SEC Enforcement

The SEC has expanded its scrutiny in recent times owing to the emergence of numerous investment alternatives and the apparent lack of regulatory certainty that plagues them. In many instances, this increased control could have political motivations, but, regardless, special due diligence should be applied when doing business in the following industries (apart from the traditional securities market):

Cryptocurrencies

This is an illustrative example of the law not catching up to novelty. Even though cryptocurrencies have been among us since at least 2009, they remain under a fog of legal uncertainty. To put it bluntly, most government agencies are oblivious as to how investments in blockchain technologies should be understood and treated.

As we witness widespread adoption of cryptocurrencies on a corporate level, the SEC decided to raise the alarm in relation to possible securities law violations in the offering of these assets, a fact coupled with already-existing suspicions arising from specific misconceptions about the purported “anonymity” of cryptocurrency transactions.

Mobile Trading Apps

In the wake of mobile trading apps, many people have been able to enter the securities markets without relying on a financial advisor or without the need to register as an accredited investor. This has opened the floodgates for lots of malpractices and deceitful actions targeted toward those uninitiated in the financial world, raising legitimate concerns on the part of the SEC.

Social Media

Social media has, unfortunately, become a hotbed for scammers and market manipulators, perhaps in reminiscence of the internet’s “wild west” days and the sense of unrestrained freedom it conveyed. More recently, social media posts have garnered a lot of attention from law enforcement agents in what, at times, could be seen as overreach on their part.

The SEC has also made efforts to investigate online content for signs of market manipulation, for it’s very easy nowadays for executives to affect the price movement of stocks with just 280 characters.

Cannabis and CBD Oil

Investment in cannabis-related companies is a new phenomenon that has seen a boost in popularity amidst the rising movement to legalize marijuana for medicinal and recreational purposes. The FDA and other federal agencies have shown extreme skepticism and contempt for these companies, and the SEC does not fall far behind, performing exhaustive surveillance of CBD stock offerings due to risk of prosecution and the lack of accuracy in the publicly available information about these companies’ operations.

Pharma and Biomedicine

Several developments in the healthcare and pharmaceutical industries, as well as the expectations set out by companies in the sector, have created lots of hype around pharma-related stocks, posing concerns for the well-being of the securities market in the event of unfulfilled promises, particularly in light of the overly technical nature of these innovations. For that reason, the SEC has shown special interest in the increasing demand for these securities.

Securities Laws and Conduct Covered by the SEC

The SEC is responsible for enforcing federal securities laws. Meanwhile, state securities laws – known as “Blue Sky Laws” – are under the purview of state authorities and mostly relate to securities offerings within that same state.

The SEC’s Enforcement Division has the duty to conduct investigations for possible instances of fraud and other malfeasances during the course of a securities transaction, in application of existing legislation on the matter. These are, in summary, the laws that underlie its activity:

The Securities Act of 1933
The Securities Exchange Act of 1934
The Foreign Corrupt Practices Act
The Dodd-Frank Act
The Sarbanes-Oxley Act

Under the pretext of protecting investors against novel fraudulent practices, the provisions included in these laws are fraught with vague wording so as to elicit the SEC’s involvement even in activities that, after in-depth analysis, should not be deemed harmful to investors’ interests.

With that in mind, the SEC can press, among others, the following charges:

The Sale of Unregistered Securities

In order to sell shares or stocks of a company, these should be registered with the SEC. Failure in this regard could prompt the imposition of severe penalties.

Notwithstanding, the definition of “security” has been a subject of debate, especially in light of recent innovations, The SEC has shown wariness, for example, about the status of ICOs (initial coin offerings) for, according to the agency, they can be considered securities offerings and should be registered under certain conditions.

Market Manipulation

Many actions undertaken by financial professionals and high-ranking company executives or insiders could fall under the umbrella of “market manipulation”, insofar as they aim to affect the price of their company’s stock to their own benefit. Some of the most common examples are the “pump and dump” schemes or the spreading of misleading information to drive market sentiment. Other strategies include the “poop and scoop” scheme, which is the opposite of “pump and dump” and consists of the diffusion of false, negative information or rumors about a company in the hopes of provoking selling pressure and to “scoop” or buy at lower prices.

Misrepresentation or Omission of Material Information

Misrepresentation or omission of material information is defined by the SEC as a form of investor fraud pursuable by law, including criminal law.

Omission, in this context, is the deliberate concealment of crucial material facts to the investor about a securities transaction, in a way that steers the decision-making process to the seller’s favor and the detriment of the investor’s interests.

A misrepresentation, though operating under the same principle, involves the action of providing deceptive information to lure the investor into entering a trade.

Theft or Embezzlement

Embezzlement refers to the deviation of funds placed in one’s trust and originally meant for investment purposes. These funds would normally end up in the bank account of the trustee or be used for personal purposes.

Frequently Asked Questions about SEC Defense in Monte Sereno, California

What Do I Do if I’m Under Investigation by the SEC?

If you are being investigated by the SEC, you should seek defense counsel immediately. Some of the most unfavorable consequences of these proceedings could be avoided with the backing of a legal team that can deliver the resources and expertise to counteract allegations on the part of SEC officers.

How Would I Know if I’m Selling a Security?

A security is loosely defined by the SEC as an investment instrument “such as a stock or bond”. According to the Securities Act of 1933, a security is described by a plethora of terms such as “certificate of interest or participation in any profit-sharing agreement” or “transferable share”. According to the CFTC’s glossary, a security is a transferable instrument that represents an ownership interest in a corporation or the debt of a corporation, municipality, or sovereign.

Pinpointing what exactly constitutes a “security” has led to substantial dissension between financial professionals and federal agencies. The Howey Test was adopted by the U.S. Supreme Court in 1946 in an attempt to implement a uniform criterion. Roughly speaking, according to this test, if the buyer invests the money in a common enterprise and expects profits solely from the efforts of the promoter or a third party, the agreement is equivalent to a “securities contract” and the asset should be registered beforehand.

What Are the Potential Consequences of an SEC Fraud Investigation?

Apart from resulting in civil penalties equivalent to copious sums of money, a criminal investigation is normally undertaken in parallel, with the potential to end with a prison sentence for the offender.

What Can Trigger an SEC Investigation?

An SEC investigation can be initiated through information provided by whistleblowers, discrepancies detected in the company’s public filings, complaints from investors, media reports, or by referral from other enforcement agencies.

Request an Appointment with a Monte Sereno SEC Defense Lawyer at Oberheiden P.C.

Our attorneys at Oberheiden P.C. have the qualifications necessary to handle allegations of securities law violations and fraud, with demonstrable expertise and success to boot. The majority of our clients can attest to these facts.

If you suspect that the SEC is investigating you or your company, you need to act fast. Contact an SEC defense lawyer at Oberheiden P.C. by calling 888-680-1745 or filling out our contact form. We provide free consultations and attend to queries during normal business hours and on the weekends.

You can rest assured that our consultations are confidential. Whether or not you decide to hire us, we will not disclose any information you have confided during our conversations.