As a professional in the financial services industry, you are well aware of the responsibilities you carry as you make decisions on behalf of your clients’ best interests. This industry relies on trust, as the public depends on you to uphold your fiduciary duty to your clients and handle their investments with the utmost care and diligence. Unfortunately, allegations of misconduct or securities fraud can cause significant harm to a financial advisor’s professional reputation, jeopardizing their career and employment prospects. The Securities and Exchange Commission (SEC) vigilantly “protects investors from misconduct, promotes fairness and efficiency in the securities markets, and facilitates capital formation for those looking to hire, innovate, and grow.” To carry out these goals, the SEC’s investigation and enforcement division announces its annual examination priorities “to inform investors and the industry about key areas where we intend to focus our resources—those areas the Division believes present the highest risk areas to the markets.”
Whenever the SEC hears of a potential violation of a firm’s fiduciary duty or an individual financial advisor’s alleged act of securities fraud, SEC staff will assess the information and determine whether to launch an inquiry or investigation into the matter. As a securities advisor, receiving formal notice that you are under SEC investigation can be alarming and intimidating, especially when you have no idea what this process entails. Before you assume the worst, reach out to a highly experienced and caring SEC defense attorney to discuss the details of your situation and identify the most strategic path forward. This post will explore what happens during SEC investigations and how partnering with a skilled and trusted securities fraud defense lawyer can maximize your chances of moving through the investigation process with greater ease and confidence.
What Prompts a Securities Fraud Investigation?
The SEC relies on several sources to monitor investment activities and screen for potential issues or accusations of wrongdoing on the part of a member firm or individual advisor. For instance, Suspicious Activity Reports (SARs) that are filed by financial institutions, “red flags” that emerge in heavily monitored market trading data, and anonymous tips can all alert the SEC to possible ethical or professional violations. First, the SEC will assess the information and decide whether there is enough of a concern to open a “Matters Under Inquiry” (MUI), which is a preliminary investigation that gathers additional facts concerning the allegation. In other words, the SEC can pursue an MUI to determine whether launching a full SEC investigation would be an appropriate use of resources. When evaluating the seriousness of the complaint, the SEC will look at the credibility of the information, the severity of the allegation, and the potential for harm if this issue is not pursued. In most cases, the SEC will reach a decision as to whether to open an investigation within 60 days of opening an MUI.
Understanding the SEC Investigation Process
Should the MUI lead to an investigation, several steps will likely unfold. As the subject of an SEC investigation, it’s important to understand the general outline of this process so that you can anticipate each step and prepare for it accordingly. Enlisting the guidance of a highly experienced SEC defense lawyer is the best way for you to approach the investigation process with greater strength and understanding. Below is a brief overview of the SEC investigation process to help you get a clearer sense of the steps that are typically followed as the SEC moves forward with this matter.
Issuing an Order of Investigation
Once the SEC has decided that a full investigation is justified, it will issue an Order of Investigation that allows its staff to actively investigate the allegations of misconduct or securities fraud while accessing key materials and potential evidence that can shed light on the matter.
Using Subpoenas to Further the Investigation
The Order of Investigation gives SEC staff the authority to compel witnesses to provide testimony and hand over records, books, and other relevant evidence by court subpoena. Failure to comply with the subpoena can trigger consequences, so those who have been summoned to testify or produce records should consult with an experienced attorney to fully understand their legal rights and obligations in these matters.
Presenting Findings to the SEC Commissioner
When the SEC Investigations Division finalizes the investigation, staff will compile and present any findings to the SEC Commissioner. The Commissioner will then review these findings and decide how to proceed. Depending on the circumstances of the case, the Commissioner may decide to pursue a case in federal court or bring an administrative action against the member firm or individual advisor. In some cases, the Commissioner may refer the case to the Department of Justice for criminal prosecution. No matter which course your case may take, having a trusted and experienced SEC defense lawyer by your side is the best way to receive the support you need during this intimidating and confusing time.
Get Started With a Top SEC Defense Attorney Today
The SEC takes allegations of misconduct and ethical violations very seriously. SEC investigations often involve the possibility of serious penalties, such as fines of hundreds or millions of dollars. Additionally, the damage to your professional reputation can be irreparable, causing lasting harm to your future employability and livelihood. Now is not the time to leave your future up to fate. As soon as you learn that the SEC is conducting an investigation into allegations of misconduct or securities fraud, you need to contact a skilled and dedicated SEC defense lawyer right away. Together, you can evaluate your options and determine the most strategic course of action that keeps your future as bright as possible.
If you have been notified by the SEC that you are the target of an investigation, you need a highly qualified and experienced securities fraud defense lawyer by your side as soon as possible. Reach out to Judex Law, LLC, right away by calling (303) 523-4022 to get started with a knowledgeable and trusted SEC defense attorney who will support you at every step of the investigation process and protect your best interests at every turn.