Looking at a notice from a federal or state agency regarding a securities law violation can seem like a dramatic moment. Generally, these notices look very official and scary, and they often outline claims that sound like they could land you in prison or leave you stripped of trading rights. What should you do?
A notice does not mean you're currently facing legal action. Government entities like the SEC rarely jump straight into civil or criminal actions against people for securities law violations. Frequently, even if there is a legitimate problem, the agency will consider a settlement. There might be a fine, and some more worrisome cases may lead to temporary suspensions of licenses or trading privileges.
Sometimes the government just needs clarification. In this sort of case, you might be able to send corrective or explanatory paperwork to satisfy the government's curiosity. If the agency is happy with the outcome, they'll send you a letter stating that the case is closed.
Read the Notice and Make Copies
Foremost, you want to make sure you understand what the notice is about. Do not immediately jump to trying to solve the problem. Simply read the notice and determine which trades are involved. Make notes about the securities involved, any dates, and what the issues might be. Look closely for any dates you have to reply by.
It's also prudent to make copies of the notice. Create a new file for the case and place the original documents in a safe place.
Similarly, you'll want to dig out or print any paperwork regarding the alleged improprieties. For example, you might have a trade confirmation that corresponds to the case. Collect these items and make copies of them, too.
It's a good idea to retain counsel at this point. You might work for a firm that has a corporate lawyer available, but you may also want to consider hiring a separate securities law attorney to represent your interests outside of the corporate framework.
Take the copies of the notice to your lawyer and ask them to review everything. Discuss the situation with the attorney and make sure you understand what you're up against. Remember, this is a situation where it's better to feel a little dumb asking a question than to misunderstand what's happening.
Most of these cases are about documentation. If you have the necessary paperwork to answer the agency's questions, you'll send it and await their reply. It may take a couple of months for the government to get back to you.
Contact a securities law attorney in your area to learn more.