When your interests and the company's diverge
In many investigations the company and its officers start out aligned and drift apart as facts develop. Company counsel represents the company, and what you tell them can be shared with the government if the company decides to cooperate. That is why individuals often retain their own lawyer for securities enforcement defense, sometimes shared with colleagues in similar positions and sometimes not. Check the company's bylaws, any indemnification agreement, and the D&O insurance policy, because they may require the company to advance your legal fees, often subject to repayment if certain findings are later made. Disputes over advancement are common enough that these provisions are worth reading before you need them.
Testimony and the Wells process
SEC testimony is taken under oath with a transcript, and knowingly false answers can lead to separate charges. Preparation means reviewing your own documents with counsel in advance, not reconstructing events from memory in the room. If there is any chance of a criminal investigation by the Justice Department or a U.S. Attorney's office, whether to testify at all becomes a serious question, and invoking the Fifth Amendment in a civil SEC matter can lead to an adverse inference. When the staff is considering charges it usually sends a Wells notice, and the recipient may make a written submission explaining why no action should be brought. A Wells submission can be useful, but its contents can be used later, so what it says and how it says it are decided carefully.
Thinking about the end before it arrives
Most matters that lead to charges end in settlement, and for an individual the collateral terms often matter more than the payment. Officer-and-director bars, industry bars, limits on practicing before the Commission as an accountant or lawyer, and the effect on licenses held through FINRA or state regulators all deserve attention. The SEC dropped its long-standing policy barring settling parties from publicly denying the allegations, so current settlement terms should be confirmed rather than assumed. We also look at how any outcome would interact with a private class action or derivative suit. A first meeting usually sorts out whether you need separate counsel, how your fees will be covered, and what to do with any pending request for testimony or documents.
