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Criminal Violations of Federal Securities Laws

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We Defend Clients in SEC and DOJ Matters Involving Allegations of Criminal Securities Law Violations

While most U.S. Securities and Exchange Commission (SEC) investigations are either administrative or civil in nature, SEC investigations will lead to criminal allegations in some cases. When the SEC uncovers evidence of criminal securities law violations, it refers cases to the U.S. Department of Justice (DOJ) for prosecution. Criminal prosecution by the DOJ can lead to substantial fines, federal incarceration, and other penalties, so targeted entities and individuals need to defend themselves by all means available.

Our attorneys have significant experience representing clients in all types of SEC matters. This includes criminal investigations and allegations referred to the DOJ. We have successfully represented clients facing charges under the Securities Act of 1933, the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002 (“SOX”), and numerous other statutes, and we rely on this experience to represent our clients as effectively and cost-efficiently as possible.

Put our highly experienced team on your side

Dr. Nick Oberheiden
Dr. Nick Oberheiden

Founder

Attorney-at-Law

Joe Brown
Joe Brown

Former U.S. Attorney
& Former District Attorney

Local Counsel

John W. Sellers
John W. Sellers

Former Senior Trial Attorney
U.S. Department of Justice

Local Counsel

Joanne Fine DeLena
Joanne Fine DeLena

Former Assistant U.S. Attorney

Local Counsel

Lynette S. Byrd
Lynette S. Byrd

Former Assistant U.S. Attorney

Partner

Amanda Marshall
Amanda Marshall

Former U.S. Attorney

Local Counsel

Aaron L. Wiley
Aaron L. Wiley

Former Federal Prosecutor

Local Counsel

Roger Bach
Roger Bach

Former Special Agent (OIG)

Chris Quick
Chris Quick

Former Special Agent (FBI & IRS-CI)

Kevin M. Sheridan
Kevin M. Sheridan

Former Special Agent (FBI)

Ray Yuen
Ray Yuen

Former Supervisory Special Agent (FBI)

Dennis A. Wichern
Dennis A. Wichern

Former Special Agent-in-Charge (DEA)

When Do the SEC and DOJ Pursue Criminal Charges for Violations of Federal Securities Laws?

The SEC and DOJ pursue criminal charges for violations of federal securities laws under two main scenarios. The first is when an SEC investigation uncovers evidence of criminal misconduct. Generally, federal securities laws provide for criminal enforcement in cases involving knowing or intentional violations, so investigations focused on statutory violations can turn criminal in nature if emails, internal memos, other documents, or someone’s testimony indicates that a suspected violation involves something more than an oversight or compliance failure.

The second scenario in which the SEC and DOJ will commonly pursue criminal charges is when one of these agencies receives information about a crime from an external source. This external source could be a whistleblower, investor, the Financial Industry Regulatory Authority (FINRA), or another government agency such as a state securities regulator or the Federal Bureau of Investigation (FBI). When the SEC or DOJ receives credible information about a potential criminal securities law violation, they may bypass the typical investigative process and move quickly toward seeking an indictment from a federal grand jury.

Examples of Possible Criminal Federal Securities Law Violations

Since the criminal element of federal securities law violations typically centers on the issue of knowledge or intent, the same violations that can lead to administrative or civil enforcement action can lead to criminal prosecution in many cases as well. With that said, there are certain violations (i.e., embezzling customer funds) that will typically have criminal implications by their nature. With this in mind, some examples of possible criminal federal securities law violations include:

  • Corporate accounting fraud
  • Embezzling customer or company funds
  • Falsifying customer records (i.e., backdating trades or fabricating returns)
  • Insider trading
  • Making false statements to the SEC during an audit or investigation
  • Market manipulation (i.e., pump-and-dump schemes)
  • Ponzi schemes and pyramid schemes
  • Registered investment advisor (RIA) fraud
  • Selling unregistered securities and conducting unregistered IPOs and ICOs
  • Using a “manipulative or deceptive device” to defraud (Section 10(b) and Rule 10b-5 violations)

These are just examples. The Securities Act of 1933, the Securities Exchange Act of 1934, SOX, and other federal securities laws contain a host of prohibitions for publicly-traded companies, private companies, registered investment advisors and RIA firms, corporate executives and board members, and other individuals. In many cases, the DOJ will pursue charges for money laundering, mail fraud, conspiracy, and other federal crimes as well. When facing a criminal federal securities law investigation, it is imperative to have a comprehensive understanding of the allegations at issue, the underlying facts, and the defenses that are available.

Penalties for Common Criminal Federal Securities Law Violations

In criminal federal securities law cases, the penalties that are at stake depend on the specific statutory violation (or violations) at issue. Generally, however, the criminal penalties for federal securities law violations are severe. For example, the penalties for some of the most common criminal allegations against company insiders, RIAs, their companies and firms, and others include:

  • Violations of Section 5 – Section 5 of the Securities Act of 1933 imposes criminal penalties for entities and individuals that willfully commit securities registration violations. For individuals, potential penalties include fines of $10,000 per violation and up to five years of federal imprisonment.
  • Violations of Section 10(b) and Rule 10b-5 – Violations of Section 10(b) and Rule 10b-5 are among the most common allegations in criminal federal securities law cases. Under Section 10(b), criminal violations carry fines of up to $5 million for individuals and $25 million for corporations, and individuals can also face up to 10 years behind bars.
  • Violations of Section 17(a) – Section 17(a) of the Securities Act of 1933 imposes criminal penalties for willfully offering or selling securities through a device, scheme, or artifice to defraud. Potential penalties include fines of $10,000 per violation and up to five years of incarceration.
  • Violations of Section 1348 – Under Section 1348 of SOX, corporate executives can face criminal prosecution for participating in any intentional efforts to defraud investors. Convictions under Section 1348 can carry statutory fines and up to 25 years of federal imprisonment.
  • Violations of Section 1350(c) – Under Section 1350(c) of SOX, corporate executives who certify a corporate report knowing that it does not comply with the law can face up to a $1 million fine and 10 years behind bars. Willfully certifying a non-compliant statement carries up to a $5 million fine and 20 years behind bars.

Defending Against Criminal Allegations of Federal Securities Law Violations

Defending against criminal allegations of federal securities law violations requires a comprehensive and strategic approach. This is true regardless of the scope and severity of the allegations, and regardless of whether the SEC and DOJ are targeting your firm, your company, or you personally.

When facing the prospect of criminal prosecution, it is imperative to engage experienced defense counsel promptly. At Oberheiden P.C., our senior attorneys have centuries of combined experience handling high-stakes federal securities law matters. This includes not only extensive experience as defense counsel for companies, firms, and individuals, but also prior experience prosecuting criminal securities fraud cases at the DOJ.

For targets of criminal federal securities fraud investigations, quickly implementing a comprehensive and cohesive defense strategy is crucial for avoiding unnecessary consequences. By taking this approach, we have been able to help the substantial majority of our clients avoid facing criminal charges and penalties. When engaged as defense counsel in criminal federal securities law matters, our approach typically includes:

  • Intervening in the SEC’s or DOJ’s investigation
  • Implementing a legal hold and advising internal personnel accordingly
  • Conducting a comprehensive internal investigation
  • Using the information uncovered during our internal investigation to formulate a defense strategy
  • Working with the SEC or DOJ as warranted while asserting privileges and other protections as necessary
  • Thoroughly assessing the enforceability of subpoenas and other investigative demands
  • Preparing responsive documents and testimony
  • Working to steer the investigation toward a favorable pre-charge resolution

We also provide defense representation for federal grand jury proceedings and criminal trials as necessary. But, in our experience, it will often be possible to avoid the inherent risks of these proceedings with a proactive approach. Measured cooperation will be beneficial in many cases as well, although targets of criminal investigations must be extremely careful to avoid being too cooperative and inadvertently increasing their risk of prosecution.

FAQs: Defending Against Allegations of Criminal Federal Securities Law Violations

Q: What Makes a Federal Securities Law Case Criminal in Nature?


In most cases, the key factor distinguishing between a criminal federal securities law case and a civil case is the element of knowledge or intent. If federal prosecutors believe they have sufficient evidence to prove that a securities law violation was committed knowingly or intentionally, they may choose to pursue criminal charges under the Securities Act of 1933, the Securities Exchange Act of 1934, SOX, or any of a variety of other potentially applicable laws. With this in mind, a key defense strategy is often to challenge the element of knowledge or intent—though targeted individuals and entities must be careful to avoid exposing themselves to civil liability as well.

Q: How Do I Know if an SEC Investigation is Civil or Criminal?


Determining whether an SEC investigation is civil or criminal requires a careful examination of various factors. The language SEC agents use, the investigative tools they use, and whether they are working alongside the DOJ or FBI are just a few examples of factors that can indicate the nature of an SEC inquiry.

Q: What Should I Do if I Am Facing a Criminal Federal Securities Law Investigation?


If you are facing (or if your company or firm is facing) a criminal federal securities law investigation, it is imperative that you engage an experienced defense team promptly. You must begin implementing a strategic defense as soon as possible, and you need to be making informed decisions based on the advice of experienced counsel.

Contact Us for a Confidential Consultation with a Federal Securities Defense Lawyer

Oberheiden P.C. provides experienced legal representation for criminal federal securities law matters. If you need defense counsel (or if your company or firm needs defense counsel), we encourage you to call 866-603-4540 or contact us online now to arrange a complimentary initial consultation.

Dallas 214-817-2053
Houston 713-454-7814
Detroit 313-634-0925
Baton Rouge 225-269-8749
New York 332-239-7345
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Portland 207-222-7742
Nationwide 866-603-4540