SEC Fraud Defense: Palo Alto

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Brian Kuester
Attorney Brian Kuester
Palo Alto Securities Fraud Team Lead
Former US Attorney
Former District Attorney
Ellen Comley
Attorney Ellen Comley
Defense Team Lead
Senior Counsel
Roger Bach
Roger Bach
Team Consultant
Former Special Agent (OIG)

Securities professionals and executives in Palo Alto who find themselves under the scrutiny of the Securities and Exchange Commission (SEC) should strongly consider getting legal representation. While the SEC cannot file criminal charges for securities fraud, it can pass on evidence from its investigations to federal law enforcement agencies that can. Even without the authority to pursue you or your firm criminally, the civil and administrative sanctions that the agency can impose are substantial. They can lead to millions of dollars in fines and can end your career or business.

The SEC fraud defense lawyers at The Criminal Defense Firm have helped numerous securities firms and brokers across the country defend themselves against allegations of fraud and other securities violations. A national law firm, The Criminal Defense Firm also has a strong presence in Palo Alto, a hotbed of innovation and startup companies where securities transactions are especially common and frequently novel.

The SEC in Palo Alto

The SEC is well set up to monitor securities transactions in Palo Alto and enforce federal securities laws to protect investors and consumers. The agency’s Regional Office in San Francisco is located at 44 Montgomery Street, right up the road from Palo Alto. This gives SEC agents and investigators quick and easy access to the local securities markets.

Laws Enforced by the SEC

Agents at the San Francisco Regional Office and the main headquarters in Washington, D.C. are tasked with implementing and enforcing several wide-reaching laws that govern nearly every aspect of securities trading. The two most prominent of these laws are the Securities Act of 1933 and the Securities Exchange Act of 1934, both of which have spawned a host of regulations and legally binding rules that affect the entire securities industry.

In addition to these federal laws, though, the SEC also has to enforce the:

Each of these laws applies to specific areas of securities law, requires strict compliance, and carries substantial penalties for each violation.

Types of Securities Fraud and White Collar Crimes

Violations of these laws come in a wide variety of forms, with new types of fraudulent activity being created every year. However, some of the most common examples of the types of securities fraud that the SEC prosecutes include:

  • Churning – Securities professionals who are paid by commission have long known that they can maximize their income by conducting as many trades as possible. When those trades are designed to increase their commissions rather than help their client, it is called “churning,” a form of securities fraud that can draw the SEC’s scrutiny.
  • Embezzlement – A specific method of committing a theft offense is embezzlement. In the securities context, it happens when a securities professional takes money from an investor or client with the promise to buy securities with it, but then pockets the money instead. This is also a white collar crime.
  • False statements – The SEC also takes action against companies and securities professionals who make false or misleading statements or omissions in their public filings or in their solicitations for investment.
  • Fraud – A general, catch-all term for deceptive conduct that is designed to take someone else’s assets is fraud. The definition of what is deceptive enough to be fraudulent is murky, at best, and deliberately so: If it were precise and set in stone, bad actors would work around it without risking legal jeopardy. However, for innocent securities traders and professionals, the fuzzy boundaries of what constitutes fraud can lead to surprising allegations of misconduct.
  • Insider trading – Using nonpublic, material information to buy or sell securities is insider trading. The SEC takes this offense very seriously, as it puts the trader at an unfair advantage over other investors. The agency will frequently take action against both the person making the trade as well as the person who gave them the tip.
  • Not reporting suspicious activity – Many securities firms are considered a “financial institution” under the Bank Secrecy Act. Not filing an SAR (Suspicious Activity Report) with the appropriate authorities to notify them of signs of money laundering can lead to legal liability for the firm.
  • Unauthorized securities trading – Securities professionals are not allowed to trade securities on behalf of their clients without their clients’ authorization. Doing so can lead to allegations of securities fraud.

These are just a few of the most common types of securities fraud that can lead to an SEC enforcement action.

Stiff Penalties for Violations

If the SEC pursues an enforcement action against you or your securities firm for fraud, the penalties can be quite substantial.

First and foremost, there always exists the possibility for a securities fraud case to escalate to the point where criminal charges are filed. While the SEC cannot file those charges, the fruits of their investigation can be forwarded to the criminal division at the Department of Justice (DOJ), where prosecutors can pursue the case in criminal court.

Even if things do not escalate so much, the risks are still significant. The SEC can pursue allegations of securities fraud in civil court, where the amount defrauded can be recovered and civil penalties assessed. These can quickly run into the millions of dollars. Additionally, the SEC can take administrative action against securities firms and professionals for misconduct, depriving them of their right to trade securities with a suspension or even a permanent ban from the industry.

Throughout, the mere allegation of securities fraud also comes with the hidden threat of a severe blow to your reputation.

Frequently Asked Questions About The Criminal Defense Firm and SEC Fraud Defense in Palo Alto

Q: When Should I Hire a Lawyer for an SEC Enforcement Action?

The best time to hire an attorney in an SEC fraud case was yesterday. If you learn that you are under the scrutiny of the SEC or that a case is about to be filed against you, then there were likely things that you could have done in the past to reduce the likelihood that the allegations would ever have been raised.

Not all is lost, though. By getting effective legal representation on your side as soon as you can, a defense strategy can be created that stands a good chance of reaching an outcome that protects your interests. Getting a lawyer immediately, though, is paramount: The earliest stages of an SEC case are the most important, as they lay the groundwork for what is to come.

Q: What Can Trigger an SEC Case?

SEC enforcement actions can get triggered by complaints filed by disgruntled investors, whistleblowers, or by suspicious information disclosed in a public filing.

Recently, public filings have been leading to a larger share of SEC enforcement actions than before. This is likely due to the SEC’s adoption of algorithms and data mining to trawl through the massive amounts of information in those filings. Unfortunately, those methods also lead to a lot of false positives and baseless allegations against securities professionals.

Q: What Sets The Criminal Defense Firm Apart from Other SEC Defense Firms in Palo Alto?

The main thing that sets The Criminal Defense Firm apart from other law firms is our decision to only employ senior-level attorneys at our firm. This means that your defense strategy is formulated and executed solely by a team of attorneys who have decades of experience in SEC fraud defense – and often by lawyers who also have years of experience prosecuting these same types of cases for the SEC or other law enforcement agencies. None of your legal work is performed by junior associates or paralegals.

Not only does this increase the quality of the legal work that you can count on; it also helps to ensure that you have a clear path of communication with the firm. At other law firms, when you call to voice your concerns about your case, what you say has to wind its way through legal secretaries, paralegals, and junior associates before being heard by the lawyer who is calling the shots on your behalf. The chances that an important detail falls through or gets misreported are very real. That does not happen at The Criminal Defense Firm, where you talk directly with the senior attorney on your case.

Q: Why Doesn't The Criminal Defense Firm Call Itself the Leading Defense Firm?

Because we think that is something that is better to hear from our clients, rather than from us. However, our team of lawyers have put together a list of success stories that have led numerous prior clients to leave glowing testimonials about The Criminal Defense Firm’s work.

How The Criminal Defense Firm Can Protect You and Your Firm in Palo Alto

The SEC fraud defense lawyers at The Criminal Defense Firm have represented numerous clients, both individuals and corporate entities, in the past who have been accused of securities fraud or other forms of financial misconduct. With the help of our lawyers, these parties have raised aggressive, innovative, and savvy defenses that mitigated their liability or overwhelmed the SEC’s case against them entirely. Contact us online or call our office at (888) 680-1745 for legal representation in Palo Alto, California.

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