Securities Enforcement Defense

Securities Enforcement Defense

Receiving a letter from the Securities and Exchange Commission (the “SEC”) or a civil complaint by a shareholder for securities law violations is a serious matter. Securities laws are enforced by the SEC or through private actions by shareholders. Not only may a company be held liable, its C-Suite executives, senior management, board members, and attorneys may be subject to personal liability and/or sanctions under securities laws. Even if no one is found guilty, the company may still face reputational and financial repercussions. Skilled legal representation helps navigate the intricate proceedings and provides a strong defense to mitigate the damage to the company.

SEC Investigations

Typically, the first step in an investigation is for the SEC to ask for information. Companies must comply with such requests and complying with this request for information is in their interest to reduce the risk that the SEC will take enforcement action.

The agency may also issue subpoenas, conduct record searches, ask for electronically stored information (ESI), and depose witnesses. If at the end of the investigation the SEC brings an enforcement action, the Commission will send a “Wells Notice” informing the company and/or individuals the Commission will bring charges for violating securities law and explain their reasoning. The recipient of the notice has thirty (30) days to dispute the charges in a legal brief. If the matter is not resolved, then the SEC may bring a civil action.

Consequences of an SEC Investigation and Enforcement Action

Securities law investigations and enforcement actions pose significant risks to a business. If a company is found liable, the company may be subject to fines and penalties. Its registration statement may also be revoked. Individuals who violate securities laws may be suspended from acting as directors or officers of the company, prohibited from owning penny stocks, held personally liable for damages, or referred to the Department of Justice for criminal prosecution. If the person subject to the enforcement action is an attorney, that attorney may also be barred from practicing law before the SEC.

Reputational damage may be severe since the SEC publicizes when it begins an investigation and enforcement action, but not when it concludes a matter in favor of the company. So, the ill effects often linger, potentially affecting the finances of the company.

Private Shareholder Actions

Securities law violations may also lead to shareholder suits. If the company did not comply with financial reporting and disclosure rules, the company increases the risk of allegations of fraud, deceit, or other misconduct. Such actions are costly to defend and can also damage the company’s reputation.

How We Help

The best defense against liability is to follow securities laws. Companies that follow the rules are less likely to be investigated or sued and if they are, the matter can be resolved quickly. However, if you need to mount a defense, it is essential to have experienced legal representation who can thoroughly evaluate your situation and develop a solid strategy to protect your interests. Our attorneys are well-versed in the intricacies of securities law and legal proceedings and have a strong track record of success obtaining favorable results whether through settlement, litigation, or appeal.

If you are facing a securities law investigation or enforcement action, contact us to discuss how we can help defend your business.