The Securities and Exchange Commission (SEC) is the federal law enforcement agency that is responsible for investigating and prosecuting allegations of fraud related to securities and other similar financial instruments. Because so much securities activity goes on in Silicon Valley, with its technology companies and hordes of new startups, the SEC has targeted the area for heightened scrutiny and enforcement.
If you or your company finds itself in the SEC’s crosshairs, you need to get effective and experienced legal representation, and fast.
The SEC fraud defense lawyers at the national law firm The Criminal Defense Firm have represented countless clients, including regulated securities professionals as well as the securities firms that they work for, through these difficult and trying times. Many of those clients have been in Silicon Valley.
Put our highly experienced team on your side
Brian J. Kuester
Former U.S. Attorney
Former DA
Amanda Marshall
Former U.S. Attorney
Local Counsel
Joe Brown
Former U.S. Attorney
& Former District Attorney
Local Counsel
John W. Sellers
Former Senior Trial Attorney
U.S. Department of Justice
Local Counsel
Linda Julin McNamara
Former Chief, DOJ Appeals
Local Counsel
Joanne Fine DeLena
Former Assistant U.S. Attorney
Local Counsel
Aaron L. Wiley
Former Federal Prosecutor
Local Counsel
Roger Bach
Former Special Agent (OIG)
Chris Quick
Former Special Agent (FBI & IRS-CI)
Kevin M. Sheridan
Former Special Agent (FBI)
Ray Yuen
Former Supervisory Special Agent (FBI)
Dennis A. Wichern
Former Special Agent-in-Charge (DEA)
Securities Laws Enforced by the SEC
The SEC has been tasked with enforcing a few extremely broad securities laws in the United States. The most important of these are the:
- Securities Act of 1933
- Securities Exchange Act of 1934
- Foreign Corrupt Practices Act (FCPA)
- Sarbanes-Oxley Act
- Dodd-Frank Act
In addition to these statutes, the SEC also has the authority to enforce other securities laws and regulations that touch on nearly every single aspect of buying and selling stocks, bonds, futures, and other securities.
Some Common Examples of Securities Fraud
People can commit securities fraud in a wide variety of ways. In fact, new ways of fraudulently using securities to deprive someone else of their money are being created every year. However, some of the most commonly used securities fraud schemes include:
- Stock manipulation – According to the SEC, stock manipulation is intentional conduct that is designed to deceive investors by artificially affecting the price or market of a security. This includes buying and selling techniques like pumping and dumping, wash sales, or painting the tape.
- Insider trading – Insider trading is using material and nonpublic information to buy or sell securities. Because using such information would give the trader an unfair advantage over the rest of the public, the SEC can prosecute both the trader as well as whoever tipped him or her off.
- Failing to report suspicious activity – Securities firms and their broker-dealers are “financial institutions” under the Bank Secrecy Act (BSA). This means that they have the legal obligation to know the true identities of their customers and to look for suspicious financial activity that could be a sign of money laundering. Failing to report that activity on an SAR (Suspicious Activity Report) can lead to legal liability and scrutiny by the SEC.
- Making false or misleading statements – Lying or making misleading statements about a company’s financial status or business prospects can amount to fraud.
- Embezzlement – Accepting money or assets from an investor with the intention of keeping it for yourself is embezzlement, a specific form of a theft offense that frequently occurs in the securities industry.
- Churning – When securities professionals are paid on a commission basis, they can maximize their profits by making an excessive number of trades. When these trades are designed to inflate a securities professional’s commissions, and not to advance the interests of their clients, it can draw the attention of the SEC.
- Unauthorized trading – Securities professionals are generally required to act within the authorization of their clients. If they trade securities outside of the scope of that authorization and do not get prior approval for the variance, it can lead to allegations of securities fraud.
Types of Penalties for Securities Fraud
Any of these illegal or fraudulent practices can lead to significant penalties and sanctions. Two of the most common repercussions of securities fraud are civil penalties and administrative actions against the securities individual or his or her firm.
Civil penalties are generally assessed to collect restitution for victims of fraudulent behavior. This includes interest on any ill-gotten gains and often a fine for every instance of fraud.
The SEC can also take administrative action against a person or company that it regulates, restricting what they can do in the securities industry. This includes a temporary suspension, administrative fine, or even a permanent ban from buying or selling securities on behalf of others, effectively ending your career or shutting down your business.
Additionally, the SEC can work with the Department of Justice (DOJ) to pursue criminal charges against a firm or individual for fraudulent behavior. While the SEC does not have authority to pursue these charges on their own, the evidence that they have gathered during their investigation is usually the centerpiece of the DOJ’s case. These charges can lead to substantial criminal fines as well as prison time for regulated securities professionals or executives.
The SEC’s Presence in Silicon Valley
The SEC’s San Francisco Regional Office has jurisdiction over financial activity in Silicon Valley. Located at 44 Montgomery Street, this Regional Office also covers securities trading in:
- Washington
- Oregon
- Alaska
- Montana
- Idaho
- Northern California
However, given the amount of activity that occurs in Silicon Valley, much of this Office’s attention is focused on its own backyard down Routes 82 and 101.
Frequently Asked Questions
Q: How Do SEC Fraud Cases Usually Begin?
Securities fraud cases often begin in one of three ways: With a complaint by an aggrieved investor, with a whistleblower, or with information in a public disclosure.
Public disclosures are increasingly likely to trigger an allegation of securities fraud, as the SEC has adopted the use of algorithms and data mining to trawl through all of the information that they contain. However, these very methods are also extremely imprecise and can lead to unsubstantiated allegations of fraud based on data that only appears suspicious to the agency’s computer programs.
Q: When Should I Hire a Lawyer?
You should hire a lawyer as soon as possible. At the very least, you should get legal counsel as soon as you become aware that you are under scrutiny by the SEC.
The reason for the rush is that the earliest days of a securities fraud investigation are usually the most important. What you say and do at this stage will set the tone for the rest of the investigation. If mistakes are made, they can skyrocket the odds that an investigation that could have been quashed ends up escalating to the point where criminal charges are filed.
Q: Can the SEC File Criminal Charges?
No, the SEC does not have the authority to pursue criminal allegations against regulated securities professionals and firms. However, it can and frequently does forward evidence of criminality to the Department of Justice (DOJ) or the Federal Bureau of Investigation (FBI) for them to pursue criminal charges. Just because the SEC cannot pursue these allegations themselves does not mean that their investigation cannot become the core element of a criminal complaint against you or your firm.
Q: Why Doesn't The Criminal Defense Firm Call Itself the Best SEC Defense Firm?
Because statements like this are better when our clients say them, rather than us. However, our team of senior lawyers and elite investigators have created a long track record of success stories that has produced a list of testimonials from happy clients in the past.
All of the lawyers that we have on our staff are senior-level. This means that your securities case will get handled by attorneys with decades of experience in the field, and often with a substantial amount of that experience spent on the side of law enforcement, including within the SEC. You can rely on that experience because The Criminal Defense Firm does not employ junior associates or even any paralegals.
As these senior attorneys craft a defense strategy that is tailored to your concerns and the facts of your case, our experienced investigators – many of whom are retired from the SEC or other financial crime law enforcement agency, like the DOJ or the FBI – gather the evidence that will become important as the case moves forward. Their keen eye and attention to detail has been honed from decades of experience on the prosecutorial side of similar cases, giving them valuable insight into what information is really important.
Together, our defense team has provided legal representation that has produced numerous stellar results for our securities clients, many of whom have written glowing reviews about they help they got from The Criminal Defense Firm
How the SEC Fraud Defense Lawyers at The Criminal Defense Firm Can Help You
If you or your securities firm has been accused of fraud or is facing scrutiny from the SEC, hiring an SEC fraud defense lawyer can be the wisest investment that you can make. An experienced defense lawyer can invoke your rights and protect your interests, presenting exculpatory evidence that can overwhelm or at least mitigate the effects of an advanced investigation or that can keep a nascent investigation from getting deep enough to affect your business.
In Silicon Valley, the defense lawyers at The Criminal Defense Firm are uniquely positioned to help securities professionals in these cases. Our law firm is a national one, with a strong presence in the Silicon Valley area. Even better, our roster of senior lawyers includes many with decades of experience defending clients in securities litigation and allegations of outright securities fraud. Many also have years of experience working within the SEC, prosecuting cases similar to the one that you are facing. This gives them valuable insights into how your case will proceed, allowing them to stay ahead of the action and predict the SEC’s next moves.
You can contact the lawyers at The Criminal Defense Firm online or by calling them at (888) 680-1745.