SEC Defense: New York
While the Securities and Exchange Commission (SEC) sets the rules for buying and selling securities and complex financial assets, it is the SEC’s Enforcement Division that investigates and prosecutes potential violations of federal securities law. These violations can carry steep financial penalties, professional sanctions, and potentially lay the groundwork for criminal charges.
Securities professionals who learn that they are being investigated or even just monitored by the SEC should strongly consider hiring an SEC fraud defense lawyer from Oberheiden P.C. Our attorneys can help conduct an internal review to get ahead of the investigation and come up with an effective defense strategy that minimizes the civil or criminal liability that you or your firm may be exposed to.
The SEC’s Regional Office in New York
The SEC is based in Washington, D.C. However, it has 11 regional offices spread across the country, each with its own field of jurisdiction. The New York Regional Office is located at 100 Pearl Street, in the heart of the financial district of Manhattan and steps away from the New York Stock Exchange. While many other regional offices in the SEC’s Enforcement Division have jurisdiction over many states, the New York Regional Office only covers conduct in New York and New Jersey. Much of the activity that it regulates happens inside New York City, within sight of the office.
Securities Laws and Conduct Covered by the SEC
The SEC is tasked with enforcing a wide variety of federal securities laws, including the:
- Securities Act of 1933
- Securities Exchange Act of 1934
- Sarbanes-Oxley Act
- Dodd-Frank Act
- Foreign Corrupt Practices Act (FCPA)
These laws prohibit a wide variety of wrongful conduct in the financial industry. For the SEC, the main focus is on protecting investors from fraudulent conduct that is meant to deceive them and take their money. Fraudulent conduct can happen in a wide variety of ways.
Misrepresentation or Omission of Material Information
One of the most common allegations of financial misconduct involving investors is the misrepresentation or omission of material information. Companies seeking investment are legally obligated to provide potential investors with the information that they need to make an informed decision about whether to invest in the company or not. Misrepresenting or omitting important information can deceive investors. The SEC considers this to be a form of investor fraud and has shown a willingness to pursue even weak cases of misrepresentation against financial professionals.
Insider trading is another type of securities violation because it gives certain people an advantage over others, based on their inside knowledge of a company or potential investment. While the SEC has deemed this to be a securities violation, the definition of “insider information” is vague, at best, potentially leaving innocent brokers exposed to serious sanctions for doing their job.
Securities professionals can commit embezzlement if they take their clients’ money and promise to invest it, but then use the money for their own purposes. The SEC treats this as a securities violation, but state law enforcement agencies can prosecute it as a crime, as well. However, the line between a typical securities transaction and embezzlement is not always clear.
Financial professionals can also face penalties from the SEC for manipulating the market for their own gain. Market manipulation takes a wide variety of forms, from spreading false information about a company in order to increase or decrease its stock value to “pump and dump” schemes to wash trades that build activity and increase the price of the security.
Industries Targeted for Increased SEC Enforcement
In recent years, the SEC has shown an increased interest in certain industries and in certain methods of soliciting investment. While some of this additional scrutiny has been warranted due to a system of relaxed regulations or uncertainty in the law, some of it has also been due to political pressure and the desire to create the appearance of control.
The law still has not caught up to the developments and the novelty of cryptocurrencies. As a result, the SEC still sees investment solicitations in cryptocurrency as highly suspect. The agency is probably still concerned that the anonymity provided by blockchain technologies makes it easy for bad actors to solicit investment in projects that they never plan to develop.
Cannabis and CBD
In spite of the growing movement to legalize marijuana for medicinal and recreational purposes, law enforcement agencies still see the cannabis and CBD oil industry as nefarious. This includes the SEC, which oversees the calls for investment that many companies have to make in order to get off the ground in this industry, which has a surprisingly high barrier of entry.
Pharmaceuticals and the Biomedical Industry
Even before the coronavirus pandemic, the healthcare and pharmaceutical industries were innovating rapidly. The SEC, however, was concerned by the highly technical nature of these developments and the promises of life-changing care, which could create a lot of excitement for investors who had no way of knowing whether the company could fulfill the promises it was making.
The SEC has also started to investigate social media posts and online content for signs of investor or market manipulation. When all that it takes is one tweet from a powerful executive to send stocks soaring or crashing, it is extremely easy to run afoul of securities law on a social media platform.
Mobile Trading Apps
The rise of mobile trading apps has given retail investors the opportunity to buy and sell securities without the help of a financial advisor or a broker. While this has given lots of people access to financial markets, it has also inundated the industry with unsophisticated investors who are easier to deceive and defraud than securities professionals.
Frequently Asked Questions (FAQs) About SEC Defense in New York City
What are the Penalties of a Securities Violation?
The penalties of a securities violation are significant, and while the SEC can only levy professional sanctions and financial payments through administrative and civil actions, the SEC can, and frequently does, turn investigations over to other federal law enforcement agencies for criminal proceedings.
The professional repercussions of a securities violation can be as severe as a permanent ban from trading in securities. The SEC may also pursue an injunction that forbids a firm or individual from conducting certain types of activities in the future. Violating this court order can lead to jail time for contempt of court.
The financial penalties from civil actions by the SEC can be staggering. According to the SEC Enforcement Division’s Annual Report for 2020, the agency demanded $3.589 billion in disgorgement of allegedly ill-gotten funds and imposed an additional $1.091 billion in penalties.
What is a Securities Violation?
A securities violation is any action by a regulated securities professional that violates any of the U.S. securities laws. Because of the wide scope of these laws and the loose definitions of misconduct and fraud, there is no all-inclusive list of potential securities violations. Additionally, bad actors can always come up with new ways of deceiving investors. Because of this, the SEC heavily scrutinizes novel forms of conduct by regulated professionals.
What Can Trigger an Investigation?
SEC investigations can be triggered by information provided by whistleblowers, missing or incomplete data in a company’s public filings or statements, or by referral from other law enforcement agencies, like the Internal Revenue Service (IRS).
Why Doesn’t Oberheiden P.C. Call Itself the Best SEC Fraud Defense Firm?
Rules and regulations about legal marketing generally prohibit law firms from claiming that they are the best, or even that they specialize, in a particular practice area or field of law. However, Oberheiden P.C. prefers to let its strong record of success in SEC fraud defense to speak for itself.
Many of our attorneys came to Oberheiden P.C. after building a strong reputation as lead investigators and prosecutors of securities violations and financial fraud. Some of them worked with the DOJ and the SEC before becoming defense lawyers at our firm. That inside understanding of how SEC investigations work allows them to stay a step ahead of the enforcement agency. They understand how the SEC will likely react to the evidence that it uncovers in an investigation and can plan ahead appropriately. This can also help them formulate a defensive strategy that is most likely to limit a client’s potential for legal liability and sanctions.
What To Do If You Are Being Investigated by the SEC
The most important thing that you can do if you or your financial firm are being investigated by the SEC is to hire a securities litigation lawyer like those at Oberheiden P.C. Our lawyers can conduct an internal review to see if you are potentially exposed to professional, civil, or even criminal liability. Based on the findings, we can create a defense strategy that steers you free from sanctions or mitigates the damage of a securities violation.
Contact us online or call our law office at 212-970-9468.