SEC Subpoenas

Have you received a subpoena from the U.S. Securities and Exchange Commission (SEC)? We defend individuals and companies in SEC investigations nationwide.

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.

The scope of responsibility of the U.S. Securities and Exchange Commission encompasses all matters affecting individual and institutional investors, from public companies’ disclosure obligations to initial coin offerings (ICOs). In order to execute its enforcement duties, the SEC conducts both informal and formal investigations. When the SEC launches a formal investigation, it has the power to require testimony and the production of documents through the issuance of a subpoena.

Receiving an SEC subpoena is a serious matter. In order to launch a formal investigation, the SEC must already have evidence of one or more violations of the nation’s securities laws in its possession. The purpose of designating an inquiry as a formal investigation is to establish the subpoena power and endow SEC staff with certain other investigative powers so that they can collect the additional evidence needed to support civil or criminal charges.

However, receiving an SEC subpoena does not necessarily mean that you or your company is the target of the inquiry. In addition to issuing subpoenas to the targets of its investigations, the SEC also routinely subpoenas witnesses who are not under scrutiny. With that said, if you have received an SEC subpoena, you cannot assume that you are been subpoenaed as a witness; and, even if you are being treated as a witness, you need to make sure you do not disclose information that could get you into trouble with the SEC.

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.

More About the SEC’s Investigative Process

The SEC conducts an extraordinary volume of investigations. As more companies make securities offerings each year, as securities offerings continuously become more nuanced and complex, and as fraud artists continue to find increasingly sophisticated ways to exploit unsuspecting investors, the growth of the SEC’s enforcement burden is never-ending. However, rather than succumb to its insurmountable workload, the SEC’s Enforcement Division approaches it task head-on; and, in order to do so, it relies on a highly-systematic investigations process.

SEC investigations begin informally. When staff in the SEC’s Enforcement Division receive a tip or complaint, they begin by gathering information through informal means. This may include reviewing companies’ or investment firms’ filings, making phone calls, and requesting interviews or records, but Enforcement Division staff do not have the authority to issue subpoenas at this stage.

If an informal investigation reveals evidence of a securities law violation worthy of additional agency resources, then the SEC can launch a formal investigation. At this stage, authorized Enforcement Division personnel can issue subpoenas in order to compel testimony and the production of documents. As the SEC’s Enforcement Manual explains:

“The federal securities laws authorize the SEC, or any officer designated by the SEC, to issue subpoenas requiring a witness to provide documents and testimony under oath. . . . The Commission designates members of the staff to act as officers of the Commission in an investigation by issuing a Formal Order of Investigation (‘formal order’).”

SEC subpoenas are legally enforceable, and non-compliance can lead to judicial action: “If a person or entity refuses to comply with a subpoena issued . . . pursuant to a formal order of investigation, the [SEC] may file a subpoena enforcement action in federal district court, seeking an order compelling compliance.” If non-compliance continues following the issuance of a court order, then the subpoenaed individual or entity can face federal charges for contempt. As a result, there is a strong incentive to comply, and the SEC uses this to its advantage during the investigative process.

Put our highly experienced team on your side

Dr. Nick Oberheiden
Dr. Nick Oberheiden

Founder

Attorney-at-Law

John W. Sellers
John W. Sellers

Former Senior Trial Attorney
U.S. Department of Justice

Local Counsel

Joanne Fine DeLena
Joanne Fine DeLena

Former Assistant U.S. Attorney

Local Counsel

Joe Brown
Joe Brown

Former U.S. Attorney & Former District Attorney

Local Trial & Defense Counsel

Amanda Marshall
Amanda Marshall

Former U.S. Attorney

Local Counsel

Aaron L. Wiley
Aaron L. Wiley

Former Federal Prosecutor

Local Counsel

Roger Bach
Roger Bach

Former Special Agent (OIG)

Michael Koslow
Michael Koslow

Former Supervisory Special Agent (FBI)

Chris Quick
Chris Quick

Former Special Agent (FBI & IRS-CI)

Kevin M. Sheridan
Kevin M. Sheridan

Former Special Agent (FBI)

Ray Yuen
Ray Yuen

Former Supervisory Special Agent (FBI)

Dennis A. Wichern
Dennis A. Wichern

Former Special Agent-in-Charge (DEA)

Federal Defense Counsel for SEC Investigations

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., we have extensive experience representing individuals and corporations in SEC investigations. If you have received a subpoena from the SEC in your individual capacity or as a corporate representative, we can help you avoid costly mistakes while still fully meeting your legal obligations. We can utilize our experience on both sides of SEC investigations to help you make informed decisions, and we can execute a strategic defense on your (or your company’s) behalf.

All of our attorneys have senior-level experience, and many of our attorneys formerly served as government attorneys with the U.S. Department of Justice (DOJ) and the U.S. Attorney’s Office. As federal prosecutors, our attorneys handled complex white-collar investigations involving allegations of securities law violations and other white-collar offenses. As defense counsel, we use this prior experience to our clients’ advantage, and we take a practical, results-oriented approach to defending individuals and companies that have been served with SEC subpoenas.

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.

How to Respond to an SEC Subpoena

Given the risks of facing securities fraud allegations and the risks of facing contempt charges for non-compliance, how should you respond if you have received an SEC subpoena? The answer to this question depends on the specific circumstances at hand:

What Type of SEC Subpoena have You Received?

 

First, you need to determine what type of subpoena you have received. The SEC issues two types of subpoenas—one to secure testimony and one to secure documents:

  • Subpoena Ad Testificandum – A subpoena ad testificandum is an enforceable request for the recipient to provide testimony to the SEC. This may be testimony in the subpoena recipient’s individual capacity, or in his or her capacity as a representative of a corporate entity. A subpoena ad testificandum will specify the date and location where the testimony is to be provided, and will provide a general explanation of the nature of the SEC’s inquiry.
  • Subpoena Duces Tecum – A subpoena duces tecum is an enforceable request for the recipient to provide documents to the SEC. The SEC can subpoena records from both individuals and businesses, with subpoenas being issued to records custodians in the case of businesses. Similar to a subpoena ad testificandum, a subpoena duces tecum will specify a date and means by which the records need to be produced, and it will seek all documents that “relate” or “refer” to the matter in question.

If the SEC is demanding that you testify, you will need to prepare thoroughly in advance. You will need to work with your legal counsel to anticipate possible questions and craft appropriate responses, and you will need to have a clear understanding of what information (if any) might have the potential to be self-incriminating or is protected by the attorney-client privilege. If you have received a subpoena duces tecum, you will need to quickly gain a clear understanding of the scope of your production obligation, and you will need to develop a plan for producing responsive documents on time while also protecting any records you are entitled to withhold.

Are You (or Your Company) Being Targeted in the SEC’s Investigation?

 

When responding to an SEC subpoena, it is also important to discern whether you are being targeted in the investigation or you have been subpoenaed as a witness. This will not necessarily influence the testimony you provide or the records you disclose, but it will absolutely inform your overall defense strategy during the SEC’s inquiry.

In some cases, an SEC subpoena will plainly state that you or your company is the target of the agency’s investigation (i.e. if it is labeled “In the Matter of [Your Name]”). However, even if your name is not listed specifically, this does not necessarily mean that you are not being implicated. Allegations of securities fraud conspiracies and other crimes can target multiple individuals and entities, and you cannot assume that you are being treated as a witness simply because the subpoena references another individual or entity.

Are the Allegations Civil or Criminal in Nature?

 

Federal securities law violations can lead to either civil or criminal charges depending on the circumstances involved. Upon being served with an SEC subpoena, it is imperative to discern whether the investigation is civil or criminal in nature. Civil and criminal cases involve different allegations, different procedures, and different burdens of proof. In order to execute a targeted and strategic defense, you first need to know what you need to defend against.

Do You Have Grounds to Challenge the Subpoena?

 

While you might not be able to formally challenge the SEC’s subpoena in court, if the subpoena is overly broad, unduly burdensome, or otherwise unreasonable in light of the scope and nature of the SEC’s investigations and the burdens it imposes, it may be possible for your legal counsel to negotiate with Enforcement Division staff on your behalf. If, as a practical matter, you cannot comply with your SEC subpoena, this is an issue you will need to address proactively rather than missing your deadline or submitting an incomplete response.

Do You Have Grounds to Withhold Responsive Information or Records?

 

As referenced above, even if you have responsive information or records in your possession, there are certain circumstances in which you have the legal right not to testify or produce records in response to an SEC subpoena. In particular, you cannot be compelled to provide self-incriminating testimony or produce communications that are protected by the attorney-client privilege. As your SEC subpoena defense counsel, we can make sure that you do not disclose more than is absolutely necessary.


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 We Help Our Clients Avoid Risks During SEC Subpoenas and Investigations

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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