How Long Does an SEC Investigation Take?
Author: Scarinci Hollenbeck, LLC
How long do SEC investigations take? First, we need to understand them. Simply stated, an SEC investigation is an inquiry by the United States Securities and Exchange Commission (SEC) to determine whether there has been a violation of federal securities laws. The SEC can investigate any person or entity it believes may have violated securities laws. It investigates various securities law violations, including insider trading, fraud, market manipulation, and accounting irregularities.
Investigations are typically initiated based on tips, referrals, and complaints received by the SEC. However, the SEC also has the authority to initiate investigations on its initiative. Once an investigation is complete, the Enforcement Division will decide whether or not to bring enforcement actions against individuals or entities that have violated securities laws.
The SEC issues a formal order of investigation when the Commission believes that there is a reasonable basis to believe that a securities law violation has occurred. Once an order is issued, the Staff of the Division of Enforcement is authorized to subpoena documents and take testimony under oath.
The Staff will report their findings to the Commission, which will then decide whether or not to bring an enforcement action. This Commission comprises five commissioners who are the main decision-making body of the institution on matters regarding investigations.
Are you wondering, “How long do SEC or DOJ investigations take?” The average SEC investigation takes between 12 and 18 months, but some can take several years. However, it may reopen an investigation if new evidence comes to light. It can also extend the statute of limitations if it believes there has been fraud or other criminal activity.
This body is not required to notify individuals or entities that they are under investigation. Often, the first indication that a person or entity has that they are under investigation is when an SEC attorney contacts them.
What is the Statute of Limitations?
The statute at 28 USC 2462 provides a five-year limitations period for enforcing any action, suit, or proceeding unless otherwise provided in an act of Congress. This statute can be invoked in various situations, including civil actions brought by private individuals or by the government and all suits brought in federal court. Typically, an SEC investigation falls under this category. However, this rule has some exceptions, such as when the defendant is outside the United States or when the cause of action is based on fraud or misrepresentation.
After the SEC completes its investigation, the SEC may refer the case to the Department of Justice for criminal prosecution or bring a civil action in federal court.
The SEC has a wide range of enforcement tools at its disposal, and the action it takes depends on each case’s specific facts and circ*mstances. In some cases, the SEC may bring an action in federal court, while in others, it may institute an administrative proceeding against you or your business.
Wells Notice
If the SEC decides to prosecute you based on the findings of the investigation, it will send you a Wells Notice. This notice details its intention to prosecute. You do not have to respond to the notice, but are permitted to do so.
If you have received a communication from the SEC, it is good that you get experienced securities regulatory legal counsel. The legal counsel may estimate the duration of the investigation and advise you on how to cooperate with the entity. Scarinci Hollenbeck, LLC has experienced SEC regulatory and financial crime attorneys who are familiar with the SEC investigative process and can represent you if the investigation leads to civil or criminal prosecution. Contact us today for a consultative meeting.
