The Securities and Exchange Commission (SEC) sets the rules and regulations for financial professionals who buy and sell stocks and other securities. Regulated individuals and firms who are suspected of financial wrongdoing can be investigated by the SEC’s Enforcement Division for potential violations of federal securities law. Some of these investigations involve other law enforcement agencies, as well. The consequences of a violation of one these securities laws can include huge financial penalties, professional sanctions, and potentially even jail time.
Enforcement actions in New England are handled by the SEC’s office in Boston. If you or your financial firm have been contacted by SEC agents at this office or have learned that you are under investigation for potential securities violations, getting an SEC fraud defense lawyer is critical. The lawyers at The Criminal Defense Firm can help.
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)
SEC’s Enforcement Division Covers a Wide Variety of Wrongdoing
The SEC’s Enforcement Division is tasked with enforcing the following federal financial laws:
- Dodd-Frank Act
- Foreign Corrupt Practices Act (FCPA)
- Securities Exchange Act of 1934
- Securities Act of 1933
- Sarbanes-Oxley Act
These federal laws cover the entire United States and punish a wide variety of wrongful conduct that amounts to securities fraud.
Biomedical Investment Scams
Boston is a hub of pharmaceutical and other healthcare companies and startups. Unfortunately, this has made the area a target for heightened SEC enforcement. When these companies try to woo investors with an innovative product or a new way of providing potentially life-saving care, the SEC is bound to take a close look at how the company solicits investments.
Insider Trading
Insider trading is a practice that spans across all types of securities and investments. However, what may appear to be insider trading to law enforcement often has an innocuous explanation. Nevertheless, the SEC Enforcement Division readily investigates and relentlessly pursues allegations of insider trading, even when the claims are clearly on shaky ground.
Misrepresentation or Omission of Important Information
Another type of conduct that underlies all sorts of securities violations is the misrepresentation or omission of material information. Companies that seek investment are supposed to be open about their goals, their abilities to accomplish them, and their assets. How much needs to be disclosed in order to avoid being construed as misrepresentation, though, is very imprecise.
Cannabis Investment Fraud
Another industry that is full of startup businesses and calls for investment is the legal marijuana industry. As more and more states legalize medicinal and recreational marijuana, more people are trying to get into the business of growing, harvesting, packaging, and selling cannabis and CBD oil. These businesses all need investors to build the capital necessary to start operations. With so much money changing hands, the SEC has taken a close look at the industry. Worse, even where it has been legalized, the marijuana business is still see with suspicion by law enforcement officers, including those at the SEC. Businesses disproportionately find themselves being accused of additional charges, like money laundering.
Cryptocurrency Fraud
The SEC Enforcement Division has also been closely monitoring cryptocurrency investments. The world of Bitcoin and other cryptocurrencies is novel, and the law still has not adequately regulated it. This has drawn lots of bad actors to the market, where they solicit investment for cryptocurrency projects that they have no intention of completing. A few bad actors, however, have drawn the scrutiny of law enforcement on the entire market and put innocent and well-behaving entrepreneurs in the spotlight of the SEC.
Market Manipulation
Another common SEC violation is simple market manipulation. Securities professionals who, for example, time the release of beneficial or damning information about a company in order to profit off of it, or who take part in “pump and dump” schemes can face SEC sanctions.
Embezzlement
Regulated individuals and firms can also face serious penalties if they embezzle client funds and use them as their own. While the SEC may take action, embezzlement can also lead to state law enforcement agencies filing criminal charges.
The SEC’s Boston Regional Office
The SEC has 11 regional offices in addition to its main office in Washington, D.C. The one in Boston is located at 33 Arch Street, on the 24th floor. This Boston Regional Office has jurisdiction over the whole of New England, which comprises of:
- Connecticut
- Massachusetts
- Rhode Island
- New Hampshire
- Vermont
- Maine
Potential Penalties of an SEC Violation
The SEC Enforcement Division can only file administrative and civil actions. While the professional and financial penalties of these actions are significant, criminal liability is also possible in some circumstances.
Administrative actions are confined to professional sanctions against regulated professionals. These sanctions can order securities professionals to stop conducting certain activities or can even bar them from the practice for life. However, violating a court order or injunction is contempt of court, which can carry jail time.
Civil actions by the SEC demand financial penalties, including:
- Disgorgement of ill-gotten gains
- Penalties
- Interest payments
These financial penalties can be extremely high. According to the SEC Enforcement Division’s 2020 Annual Report, 715 actions were brought for securities violations that year. They ordered $3.589 billion in disgorgement and $1.091 billion in other penalties.
When a civil or administrative action by the SEC reveals potentially criminal conduct, the agency will forward it on to the Department of Justice (DOJ) or the Federal Bureau of Investigation (FBI) for further investigation.
SEC Defense in Boston: Some Frequently Asked Questions
What is a Securities Violation?
A securities violation is anything that a regulated securities professional does that breaks a securities law. Because there are numerous federal laws that govern the sale and purchase of these financial instruments, and because the types of conduct that can violate one of these laws is vague, at best, regulated professionals can commit a securities violation without intending to do so. Worse, new types of securities violations are being developed by nefarious actors all the time. This can mean that novel approaches to the business are heavily scrutinized by the SEC and other law enforcement agencies.
What Does the SEC Consider to be Fraud?
The SEC defines fraud as a misrepresentation or an omission of fact that could impact an investor’s decision-making process. It is easy to criticize this definition for being vague, but this is deliberate and, unfortunately, necessary. If the SEC’s definition of fraud were concrete, bad actors would quickly find ways of deceiving investors and taking their money without committing a fraudulent act. However, the vagaries of the SEC’s definition mean that innocent securities professionals can find themselves under investigation and facing serious repercussions for conduct that they thought was normal and commonplace.
What Can Trigger an SEC Investigation?
The SEC may decide to initiate an investigation into potential securities fraud for several different reasons.
Many SEC investigations begin when someone at the agency reviews a company’s public filings or statements. If details are missing or do not line up with other information that the SEC knows about, it can trigger an investigation to resolve the discrepancy or to find the missing information.
Some SEC investigations start when a whistleblower reaches out to the agency with details that may indicate that fraudulent activity or another type of securities violation is ongoing. These whistleblowers are often former employees or disgruntled clients. In spite of the informant’s credibility issues, the SEC will often use the information that they provide to look into the business practices that they mention.
Occasionally, an investigation will start when another law enforcement agency, like the Department of Justice, Federal Bureau of Investigation, or the Internal Revenue Service, informs the SEC of potential wrongdoing that had been uncovered in one of their own investigations.
Why Doesn’t The Criminal Defense Firm Say That It Is the Best SEC Fraud Defense Firm?
Because we prefer to let our track record of success in defending securities professionals and firms do the talking. Many of our attorneys have extensive experience investigating and prosecuting SEC fraud and other financial crimes that they now use to help defend innocent brokers against groundless allegations levied by the SEC. In many cases, we have been able to convince the SEC to drop its investigation in its early stages by presenting evidence that shows that the alleged fraud was a common business practice and that it posed no threat to investors.
Securities Defense Lawyers at The Criminal Defense Firm
Securities professionals or firms who are under investigation or scrutiny by the SEC or who suspect that they are being watched by the agency should strongly consider hiring a lawyer. By getting an SEC defense or securities litigation lawyer involved early in the process, you can drastically improve your chances of escaping serious civil or even criminal liability. An experienced attorney can conduct an internal review to gauge your potential exposure to liability, come up with a defense strategy that is soundly based on the factual circumstances and that protects your interests, and then work on your behalf to execute that strategy.
Call the SEC defense lawyers at The Criminal Defense Firm at 888-680-1745 or contact them online.