Monday, July 05, 2004

Fraud/S.E.C. Investigations


Things to Know When Your Client Is Under Investigation

1. Federal criminal investigations are conducted by the U.S. Attorney's Office and the grand jury, and may or may not occur simultaneously with an SEC investigation.

2. As in a criminal case, generally, your client can assert the Fifth Amendment privilege against self-incrimination as to his/her statements in an SEC investigation or litigation. This may not be true with regard to responses to SEC discovery requests.

3. Securities and Exchange Commission ("SEC") investigations are civil enforcement actions and may result in a civil Complaint being filed in federal court.

4. Although SEC suits are enforcement actions, they are civil in nature and usually seek injunctive relief, disgorgement of ill-gotten gains, and civil money penalties.

5. Evidence obtained during an SEC investigation or litigation may be used in a criminal prosecution.

6. Statements made by a person during an SEC investigation or during litigation with the SEC may be utilized by the U.S. Attorney's Office for a criminal prosecution.

7. An SEC investigation does not automatically lead to a criminal, grand jury investigation.

8. You have an opportunity during the SEC's investigation to present reasons why your client should not be sued by the SEC.

9. An SEC investigation may also result in proceedings instituted administratively, which are heard before the SEC's administrative law judges.

10. In its administrative proceedings, the SEC sometimes seeks an order barring a client from working in the securities industry, e.g. broker-dealers, stock promoters, or other clients, who have participated in an alleged scheme to defraud or to manipulate stock prices.

11. The SEC can seek to bar company officers and members of boards of directors from serving in such capacity when filing suit against them based upon a fraudulent scheme or scheme to manipulate stock pricing.

For more information contact: Judge David Finn


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