Several authorities, different powers
The SEC brings civil enforcement actions and can seek penalties, disgorgement, injunctions, and industry bars, but it does not file criminal charges. Criminal securities fraud cases are brought by federal prosecutors, and in New York the Attorney General can bring both civil and criminal cases under the state's securities law. FINRA oversees registered brokers and can discipline or expel them, and its requests carry weight because failing to cooperate can itself lead to a bar. Insider trading, offering fraud, accounting misstatements, and market manipulation are frequent subjects. These authorities often coordinate, so a matter that starts as civil may not stay that way.
Protecting yourself in testimony
SEC and FINRA testimony is usually taken under oath and transcribed, and those transcripts can be shared with prosecutors. You may invoke the Fifth Amendment in SEC testimony, but in a later civil case the agency may ask the court to draw an adverse inference from that choice, and in a FINRA matter refusing to answer can lead to discipline. Preserve trading records, messaging apps, and personal devices used for business communications, and do not delete chats even if they seem unrelated. Avoid talking with colleagues or counterparties about the subject of the inquiry. If you receive a Wells notice, there is usually a window to make a written submission before the staff recommends charges.
Deciding how to engage
Our first step is to learn which authority is involved, what stage the matter has reached, and whether you are seen as a witness or as someone whose conduct is in question. We then talk about whether and how to cooperate, what testimony would involve, and how any statement could affect a parallel matter. SEC settlement practice has also shifted recently, including its policy on public denials after settlement, so current terms need checking rather than assuming. For registered persons, the effect on licenses and future employment is part of the analysis. We lay out the trade-offs so that the decisions are made with clear information.
