If you receive a subpoena from the SEC, then this can be the right time to take fast action in your defense. You see, the SEC usually uses its subpoena power to investigate companies and individuals they suspect of violating or knowing something that violates the federal securities laws. Receiving a subpoena can be overwhelming whether you are a target of the investigations or a witness.
Besides, an investigation can sometimes cause serious consequences for your career, business relationships, and reputation. This is the reason you need a good defense strategy immediately. It’s important to hire an experienced SEC defense lawyer who has knowledge of handling the SEC subpoena process. This post discusses what you need to know about an SEC subpoena.
Understanding the SEC subpoena
The Securities and Exchange Commission (SEC) refers to the federal agency that deals with regulating and enforcing all the federal securities laws. So the SEC has powers to investigate violations of the federal securities laws so that the United States investors and markets are protected.
A subpoena is one of the tools that the SEC uses to do its investigations. The SEC can usually issue a subpoena to people to get information relevant to the investigation.
A subpoena can state the place and time requiring you to appear so that you can give information. However, failure to follow the terms of the subpoena can lead to fines and jail time.
The testimony you give to the SEC is under oath and recorded by a tape recorder or court reporter. Besides, the SEC attorney carries out the terms of this subpoena and other SEC staff are also present together with investigators.
A subpoena will give instructions for where you can send the documents and the deadline for doing it. It can also tell you the possibility of receiving civil and criminal penalties if you fail to give the evidence required by the SEC to conduct its investigation. It can also list all the documents that the SEC considers to be relevant to the investigation.
If the SEC serves you with this subpoena, it means that the SEC may have enough evidence about your company or you, and it believes it’s relevant to the investigation. In other words, you can either be under investigation or the SEC thinks that you can offer testimony or other important information concerning its investigation of someone else.
In most cases, you may not know the main reason why the SEC has issued you a subpoena. For example, you can likely be unaware that the SEC investigation is either criminal, civil, or whether you are being subpoenaed to appear or even give documents as a potential target or witness.
All the subpoena can state is that the SEC is doing an investigation and you are part of this investigation. The SEC will also mention that it needs you to give testimony or even produce documents. This is why it’s important to hire a qualified SEC defense lawyer to guide you through this trying time.
The SEC investigative process
The SEC investigations can start from several sources like complaints, tips, or any other information they get from government agencies. Targets and witnesses of an SEC investigation can usually learn of this investigation through a telephone call that comes from an investigator or an SEC attorney.
The SEC utilizes either a formal investigation or informal investigation to get evidence for its investigation. Informal investigations usually involve voluntary requests for information needed by the SEC to gather evidence for an investigation that focuses on someone else. The subpoena power is not involved at this stage. This is because this is just an informal process that demands information from employees or investors of the company.
In some cases, the SEC can start a formal investigation once the information that comes from the voluntary inquiries shows that there is a need for more evidence. For formal investigations, the main aim is to determine the issues of the case involving the alleged violation that the SEC is interested in. The SEC can usually give subpoenas for requests for several documents or testimony, which the SEC happens to have the power to carry out during formal investigations.
If subpoenas are issued, it means you need to appear at a given place and time. You will have to give testimony under oath, but any statements that you make during the subpoena may be used in the investigation. Once the SEC investigation completes, there is a document known as a Well’s Notice that they issue to identify the conclusions of the investigators.
These conclusions can describe whether the investigators think that securities laws were violated. Also, they can state whether the investigators want to recommend that you or the company should have an enforcement proceeding that needs to be brought against it.
After the SEC’s staff give the commission its conclusions, the commission can ask the staff to start a civil lawsuit in any federal court against you or the company. There are several cases where the parties can sometimes settle the cases without going to trial.
As explained earlier, the stakes of failing to respond to a subpoena can be quite significant. If you ignore the subpoena, this can lead to contempt of the court. And, if you fail to respond truthfully during the subpoena, you can be prosecuted criminally for lying to the federal agency. Worse still, imprisonment can also be a possibility.
You have the right to refuse the terms of the subpoena and even the right to invoke the Fifth Amendment made against self-incrimination, though you need to respond to this subpoena by the given deadline. The best thing you can do is to respond to the SEC subpoena.
You need to comply with the deadlines stated in the subpoena and all the requests for documents. This is because failing to do this can result in contempt charges and even jail time.
If you have not received the subpoena, then there is no legal obligation to give testimony. So a refusal to answer cannot be an admission of guilt. And, if your company has been served with a subpoena, it makes sense to tell everyone how to handle the SEC staff, especially during the investigative process. This is important because senior managers can sometimes be held responsible for what the junior employees do or say.
