How Does a SEC Investigation Work?


There are various triggers that may lead to a SEC investigation. The SEC may notice discrepancies during its typical review of SEC reports, whistleblowers may tip off the SEC about illegal conduct, other government agencies may refer cases to the SEC, or the SEC may discover information in the course of its investigation of another matter. Whatever the case may be, SEC investigations can very quickly lead to federal charges for insider trading and other white-collar crimes.

SEC investigations are not public matters, and the first stage of any investigation process is an informal investigation referred to as a Matter Under Inquiry. In these investigations, SEC officials have no subpoena power; rather, they depend on the voluntary cooperation of a business to provide them with the requested information and documents. In some cases, the informal investigation ends the matter, but in other cases, it leads to a recommended enforcement action or a formal investigation.


How Does a SEC Investigation Work?

At the formal stage of investigation, the SEC Division of Enforcement investigates reports of securities violations pursuant to formal Orders of Investigation. These orders allow them to subpoena a broad range of information, documents, and even witness testimony in order to aid their investigation. An Order of Investigation contains a general description of the investigation and what securities law may have been violated. The Division of Enforcement has no prosecutorial powers, but instead will refer appropriate matters to the U.S. Attorney’s office for a criminal investigation and/or prosecution if necessary.

Following a formal investigation, the SEC may choose to begin an enforcement proceeding by issuing a notice of enforcement action. Those who receive the notice may respond to the notice within 30 days, but they are not required to do so, and sometimes, responding is ill-advised, depending on the situation. This notice can result in a civil action in federal court, an administrative proceeding in front of an administrative law judge, or, in some cases, no further enforcement action at all. If enforcement action is taken, the matter becomes public. The outcome of the action depends entirely on the severity and nature of the conduct at issue. A defendant could have assets frozen, large fines and monetary penalties, restitution of ill-gotten gains, and a referral for criminal prosecution in extreme cases.

The federal criminal defense lawyers of Peek Law Group have the experience and knowledge that are necessary to represent your interests when you are facing criminal court proceedings on any type of charges. We are here to gather evidence on your behalf, build a strong defense in your case, and develop the best strategy for achieving your goals. Take the first step by contacting us today and learning what we can do to help.

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