Who enforces and how
The SEC brings civil enforcement actions, generally in federal court when it seeks penalties in a contested case, and can seek remedies including monetary penalties and industry bars. It does not bring criminal cases; those are handled by federal prosecutors, who sometimes run a parallel investigation using information the SEC shares. FINRA regulates broker-dealers and their registered personnel through its own disciplinary process. The New York Attorney General enforces the Martin Act, a state securities law with unusually broad reach. Several of these can be active at the same time, which is why a response to one has to account for the others.
From inquiry to Wells notice
Investigations often begin informally, with a voluntary request for documents, and may become formal, with subpoenas for documents and testimony. Testimony before SEC staff is taken under oath, and knowingly giving false information can be a separate crime, so preparation matters. Before recommending charges, SEC staff commonly send a Wells notice, which gives the recipient an opportunity to submit a written response explaining why charges should not be brought. Preserve relevant documents and communications, including messages on personal devices and apps, as soon as you learn of an inquiry. Individuals should consider carefully whether the company's counsel can represent them or whether they need separate counsel, since interests can diverge.
Weighing settlement and its consequences
Most securities enforcement matters that lead to charges are resolved by settlement, and the terms reach well beyond money. A settlement can affect professional licenses, the ability to serve as an officer or director, eligibility for certain securities exemptions, and parallel private lawsuits. In 2026 the SEC dropped its long-standing policy barring settling parties from publicly denying the allegations, which changes one part of that calculation, though each settlement's terms still need close review. In a first meeting, we look at what the agency has asked for, who else may be involved, your role, and whether there are signs of a parallel criminal inquiry.
