The Securities and Exchange Commission (SEC) is an independent agency of the United States government responsible for protecting investors, maintaining fair and orderly securities markets, and facilitating capital formation. The SEC has a broad range of enforcement powers, and it actively investigates and prosecutes violations of the federal securities laws.
Here are some of the key facts about SEC investigations and enforcement actions:
Types of Violations Investigated:
Fraud: This includes a wide range of activities, such as Ponzi schemes, insider trading, and market manipulation.
Registration and Reporting Violations: Public companies and other entities are required to register with the SEC and file periodic reports with the agency. Failure to comply with these requirements can result in enforcement action.
Broker-Dealer and Investment Adviser Misconduct: The SEC also regulates the activities of broker-dealers and investment advisers. Misconduct by these entities can include charging excessive fees, making unsuitable investment recommendations, and churning accounts.
Investigation Process:
Initial Inquiry: The SEC may begin an investigation based on a variety of sources, such as complaints from investors, tips from whistleblowers, or referrals from other regulators.
Formal Investigation: If the SEC believes that it has uncovered sufficient evidence of wrongdoing, it will initiate a formal investigation. This may involve issuing subpoenas, interviewing witnesses, and reviewing documents.
Enforcement Action: If the SEC concludes that a violation of the law has occurred, it may bring an enforcement action. This may involve filing a civil lawsuit, seeking an injunction, or imposing a fine.
Recent SEC Enforcement Actions:
In 2022, the SEC filed 760 total enforcement actions, a 9 percent increase over the prior year.
The SEC brought a series of enforcement actions in fiscal year 2023 addressing the alleged rampant noncompliance in the crypto asset intermediary space, including actions against Beaxy, Bittrex, Binance, and Coinbase.
The SEC has also been active in investigating and prosecuting insider trading, with a number of high-profile cases in recent years.
If you or your firm is subject to an investigation or enforcement action, contact us to discuss your legal options.