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What Can I Expect During a SEC Investigation?

Posted by Dan Cogdell | Apr 01, 2016 | 0 Comments

No matter how well-run your company is, a SEC investigation is always possible. Events such as a disgruntled employee, a business deal gone bad, lawsuits, and sharp changes in stock prices all can cause the SEC to begin looking into your business. While every investigation occurs differently, based on the allegations that led to the investigation, there are some consistent events that you can expect if the SEC comes knocking at your door.

The SEC's Division of Enforcement, which is primarily made up of accountants and attorneys, handles all SEC investigations from 11 different regional offices. The first step in any SEC investigation is simply an informal inquiry. Your company may receive notice of the inquiry either by a telephone call or letter from the SEC. At that time, the SEC also will advise you that you should immediately discontinue any automated document shredding practices that you have in place and preserve any evidence that may be related to the inquiry. Failure to do could have very serious consequences. At this point, the SEC may request certain documents and/or conduct interviews with relevant staff members from your company. While you are not required to comply with the SEC at this point, it is rarely advantageous to refuse to cooperate with the SEC.

An informal inquiry often quickly becomes a formal investigation. The SEC will issue a Formal Order of Investigation based on a written summary of suspected violations of federal securities laws and evidence pointing to those violations. This Order then permits SEC staff to issue subpoenas, administer oaths for sworn testimony, and compel the production of certain documents from the company. In most cases, subpoena power is extremely broad and can cover a lengthy period in time. The timeframe for this investigation can take many months, or even years. Some witnesses may be compelled to give testimony at SEC offices under oath, with a court reporter to transcribe the testimony. Other times, the SEC may enter into a cooperation agreement with crucial company staff members in order to conduct various informal, “off-the-record” interviews, which are not transcribed or memorialized in any way.

At the end of the SEC's fact-finding operation, investigating authorities will determine whether any violation of federal securities laws occurred, as well as if the company or any staff members will be charged. If the SEC finds the charges to be appropriate, then it will almost always issue a “Wells Notice” to the company, which gives the company at least some limited information about the charges against it and what laws the SEC thinks the company has violated.

The Cogdell Law Firm is a full service criminal litigation and appellate law firm that often handles high-level financial crimes. We provide client-focused representation at all stages of the process, whether our clients are seeking to avoid charges, have been charged, or are merely subject to an investigation by the SEC or another government entity. When results matter most, contact Texas criminal defense attorney Dan Cogdell at (713) 426-2244 or email him at [email protected]

About the Author

Dan Cogdell

Principal & Founder Principal and founding attorney at Cogdell Law Firm, Dan Cogdell, is often referred to by his contemporaries as a “Texas trial legend.” He has been practicing criminal defense law for 36 years, during which time he has handled some of the most complex and high-profile cases i...


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