Since brokerages are often responsible for making financial decision on behalf of their clients, managing trades and stock exchanges in an ethical manner is important. Any suspected violations to the rules and regulations that govern the securities sector could result in the launching of an SEC investigation.
Receiving notice that your brokerage is under SEC investigation can be frightening, but understanding how the process works will allow you to better protect your rights during the course of the investigation. Check out this post for more information.
Most investigations start with informal inquiries.
Before the SEC can justify a full investigation, it must gather facts and evidence supporting misconduct on the part of an independent brokerage. Facts and evidence are typically collected through an informal inquiry process.
During this stage of the investigation, you will become aware that the SEC is looking into your company's actions. It can be helpful to retain a corporate lawyer with experience working with the SEC to ensure you are complying fully with all inquiries while still protecting any information your brokerage should be keeping private.
A Formal Order of Investigation will be issued if sufficient evidence is found.
If an informal inquiry yields information that warrants a more thorough investigation, The SEC will issue a Formal Order of Investigation. This document provides the legal right for the SEC to subpoena witnesses and documents that will help them look into your brokerage's dealings.
It is imperative that you have the representation of an experienced attorney once a Formal Order of Investigation has been issued. Failure to comply with any of the SEC's demands during this stage could result in serious sanctions or fines, and an attorney can help you navigate a continuing SEC investigation with ease.
The SEC will make a decision once its investigation is complete.
Once a formal investigation has been completed, the SEC will determine if your brokerage's uncovered actions warrant punishment. In the event that serious misconduct is discovered, the findings of the SEC's investigation will be turned over to a prosecutor and a case will be filed against your brokerage in District Court.
You will need to hire an experienced trial lawyer to represent your brokerage's interest should a court case be filed against you. An attorney will be able to help you create a viable defense strategy and file pleadings on your brokerage's behalf to help mitigate any damages that might be associated with a District Court case.