What Are the Consequences of Failing to Cooperate with an SEC Investigation - Transcript

Failing to cooperate with an investigation by the Securities and Exchange Commission can have severe and far-reaching consequences. Whether you are a target, a witness, or a third party, your response to an SEC investigation can significantly impact your professional future. At Malecki Law, our regulatory defense lawyers serve as trusted advocates to industry professionals facing a pending SEC investigation. We are here to provide you with the guidance and advocacy you need to navigate these challenging circumstances.

If you choose not to cooperate with an SEC investigation, you may face:

• Court Orders: The SEC can seek a court order to compel compliance, which may involve the FBI. Agents could appear at your home or office to seize documents, computers, or other evidence.
• Increased Scrutiny: Non-cooperation can raise red flags, potentially escalating the investigation and leading to more aggressive actions by the SEC.
• Criminal Implications: In extreme cases, failure to cooperate can result in referrals to the Department of Justice, leading to criminal charges.

For professionals under FINRA’s jurisdiction, failing to cooperate with an investigation can result in significant penalties, including:

• License Revocation: FINRA may bar you from being licensed, effectively ending your career in the securities industry.
• Permanent Record: A FINRA bar is a public record that can appear prominently in online searches, affecting your ability to find employment in any field. Employers conducting background checks will likely see this, and it could require explanation on future applications.

Even if you believe you no longer want to work in the securities industry, it’s crucial to avoid a FINRA bar. Negotiating a settlement or penalty with limited language can help minimize the damage to your reputation.

While pleading the Fifth Amendment is an option, it comes with its own set of challenges. This action can:

• Raise Suspicion: Regulatory bodies may suspiciously view pleading the Fifth, leading to further investigation.
• Harm Your Case: In FINRA proceedings, invoking the Fifth may result in immediate disciplinary actions, including suspension or a bar.

It is often better to cooperate strategically, providing the necessary documentation and working to negotiate a resolution.

One often-overlooked aspect of regulatory compliance is keeping your contact information up to date. Failing to update your address with FINRA can lead to:

• Missed Notices: If a regulatory request or subpoena is sent to an outdated address, you could inadvertently fail to respond.
• Uncontested Penalties: Non-response to FINRA requests can result in default actions, such as a bar or sanctions, which could have been avoided with timely communication.

If you receive a request from the SEC or FINRA, the following steps are essential:

1. Consult an Attorney Immediately: Seek legal counsel experienced in securities law to understand your obligations and rights.
2. Respond Promptly: Ignoring a request can escalate the situation and result in penalties.
3. Negotiate the Penalty: Even if you are not interested in maintaining your license, working with an attorney to negotiate a settlement can help control the narrative and minimize long-term consequences.
4. Prepare Thoroughly: Provide accurate documentation and ensure your responses comply with regulatory requirements.

At Malecki Law, we have extensive experience assisting professionals in responding to SEC and FINRA investigations. Whether you need help producing documents, negotiating penalties, or navigating complex regulatory proceedings, we are here to protect your rights and reputation. Contact Malecki Law at (212) 943-1233 for a consultation and let us provide the strategic advocacy you need to move forward with confidence.

Transcript:

So if you don’t cooperate in an SEC investigation um you will be subject to potentially a court order the SEC works with the FBI many times they could the FBI can get a court order show up at your house and take your computer and leave so you know it’s important to to cooperate as best as you can if you plead the fifth then you know you you can do that if it’s necessary in the finra proceeding um you know if you don’t cooperate they can bar you from being licensed at finra and through finra now some people uh say you know what I don’t want to work in the Securities industry again I don’t care barmy uh and they don’t want to respond but that’s really a short-sighted way to look at it because ephemera bar is a high search engine optimization event with your name on it and so what does that mean when somebody’s gonna hire you and they Google you the first thing that’s going to pop up is that finra bar and it’s going to carry with you forever and be something you have to disclose in applications I can say I have represented numerous people who were trying to help themselves with finra and fitness bar bar we want a bar we want a bar or who said oh my prior lawyer said you know I should just take a bar and not worry about it I don’t want to be in the industry that’s the wrong thing to do you should negotiate the least penalty probable and um and try to settle with them if you’re not interested in your license or whatever so that at least you can explain it you can have some control over the language that goes into the fin resettlement so it’s really important not to ignore these things and to keep your address updated at finra at all times because you not updating your address and them sending it to the wrong address could result in a bar that you don’t even know about and I’ve helped people through that very very important once you’ve been licensed to keep your dress active and to respond to requests I mean unless you really have something you’ve done that’s criminal the best thing to do is to try to produce some documents and negotiate a penalty.