- SEC Subpoenas:
The Securities and Exchange Commission (SEC) is a Federal body that regulates and prosecutes crimes of fraud and insider trading on the stock market. If the SEC sends you a subpoena, you are typically being contacted because you are either being investigated, or you can offer information related to one of their investigations.
There are two main types of subpoenas – subpoenas requesting production of documents (called a subpoena duces tecum) or a subpoena requiring testimony (a subpoena ad testificandum). Sometimes the subpoenas require both. To comply with either, you must produce the documents by a certain date, and/or appear for the hearing or deposition as directed. Normally, state law imposes geographical limitations on who can be effectively served with a subpoena. The SEC, as a Federal body, can actually serve subpoenas on anyone nationwide.
If you do not comply, the SEC can enforce their subpoena with few limitations. The SEC only needs to show the court: 1) the inquiry in question is being conducted for a proper purpose; 2) the subpoena was issued in accordance with the required administrative procedures; and 3) the information sought is relevant to said legitimate purpose. After the SEC establishes its right to enforce the subpoena, the respondent (or subject of the subpoena) has to show the court that the SEC’s purpose was either unlawful, or the subpoena was unreasonable.
Further, you should always respond to a subpoena, but if you are worried about your exposure, seek counsel. They may advise you to assert your 5th amendment rights (freedom from self-incrimination), where you can avoid having to full produce documents or testify about certain documents. To that end, it is always a good idea to never destroy any documents, including deleting emails or text messages, until you get clarification if you will be required to produce them. An attorney will be able to help you in preparing your responses to the subpoena, as well as preparing you for testimony.
Sometimes, you may be able to object to the substance of the subpoena, depending on what it is requesting. Very often, the SEC asks for a huge amount of documents. You might be able to assert that this request is overly broad, and it is either too burdensome for you to produce everything, the request isn’t relevant, or it’s asking for so much that you aren’t even sure what you should produce. These kinds of questions and determinations should be presented to an attorney familiar with civil procedure and securities law.
If you receive a subpoena from the SEC, you should find a securities law firm in New York that can adequately inform you of your rights and obligations. Bring a copy of the subpoena, and see if you can obtain a copy of the formal order of the investigation or case number. This will give you more information about the nature or subjects of the investigation about which you have been called to testify or bring documents. Further, you should receive counsel about how to prepare for testimony and production of documents. There is a chance that your involvement could expose you to either civil or criminal liability.
If you are required to give testimony, it is done at a hearing and your words will be recorded ‘on the record.’ That is why sometimes these hearings are called OTR. After you testify or respond to the subpoena, the SEC will determine whether they should formally charge you, based on what you said, or not pursue any causes of action. Very often, before formal charges come down, subjects will be given the option to settle. Certainly, at that point, the advice and counsel of an attorney should be sought in order to determine your rights, chances at trial, and possible negotiation strategies to obtain a better settlement.