Have you received a subpoena from the U.S. Securities and Exchange Commission (SEC)? We defend individuals and companies in SEC investigations nationwide.
The U.S. Securities and Exchange Commission is responsible for enforcing the nation’s securities laws. Its scope of authority 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.
Federal Defense Counsel for SEC Investigations
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.
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.
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.
How We Help Our Clients Avoid Risks During SEC Investigations
If you need defense counsel for responding to an SEC subpoena, we encourage you to contact us promptly. To speak with one of our senior federal defense attorneys in confidence, call 888-680-1745 or request a complimentary consultation online now.