Correcting Errors in SEC Testimony After the Fact.

Within the first few years of the Dodd-Frank Act’s enactment (which strengthened the SEC’s investigatory powers), a thirty-day window was routinely afforded to witnesses for the submission of errata sheets. However, this was a matter of convenience rather than a formal rule or regulation. Currently, the SEC has not designated a single deadline for correcting (or amending) testimony; and, in a manner consistent with its approach to investigative testimony as a whole, it has not made available formal rules or policies regarding corrections.

How Should I Submit an Errata Sheet Correcting my SEC Investigative Testimony?

Is Submitting an Errata Sheet Considered “Correcting” or “Amending” Testimony?

The SEC’s investigative record remains what it is regardless of whether subsequent witness disclosures “correct” or “amend” it. An errata sheet, then, is a supplement to the record, and it cannot serve to “erase” or “strike” testimony.

Can an Errata Sheet Afford Immunity Against a Criminal Investigation?

Correcting (or amending) a witness’s testimony is a positive step toward ensuring an accurate record; but, as a post-facto correction does not erase or strike the testimony, it cannot serve as a safe harbor against the federal government’s ability to pursue criminal liability for federal securities fraud, false statements, or perjury under the government’s various criminal statutes.

What is the Significance of the Federal Government’s Request for Documents, Testimony, or Identification of “Relevant Documents”?

The SEC’s request for documents, testimony, or identification of “relevant documents” is either a voluntary request or it is pursuant to a formal investigation order. If the request is voluntary, the SEC lacks the authority to compel the recipient’s compliance. If the request is pursuant to a formal investigation order, then the recipient is subject to the SEC’s authority to compel compliance. However, the issuance of a formal investigation order simply authorizes the SEC’s compulsory process, it does not provide “cause” for the investigation, and it does not establish that the recipient is suspected of misconduct.

How do I obtain and correct my SEC transcript?

How is SEC Investigative Testimony Taken?

SEC investigative testimony is typically conducted, witnessed, and recorded. A court reporter is ordinarily present to prepare a verbatim transcript. Testimony is taken under oath, and witnesses are generally subject to the penalty of perjury.

Can Counsel Attend and Advise the Witness?

Within the context of an SEC investigation, witnesses may seek the advice of counsel during their testimony.

If the SEC has no knowledge of the witness’s suspected criminal liability (or if the witness has not already been targeted in a criminal investigation), the SEC generally does not question the witness’s privilege against self-incrimination at the SEC’s request; and, it may also allow the witness to consult with counsel in private before answering the prosecutor’s question.

How Do I Obtain a Copy of my SEC Testimony Transcript?

SEC investigative witnesses may obtain transcript copies in accordance with 17 C.F.R. § 203.6, as quoted below: “A person who has submitted documentary evidence or testimony in a formal investigative proceeding shall be entitled, upon written request, to procure a copy of his documentary evidence or a transcript of his testimony on payment of the appropriate fees: Provided, however, That in a nonpublic formal investigative proceeding the Commission may for good cause deny such request.”

How Do I Correct a SEC Transcript that Contains Mistake?

While the SEC’s rules relating to investigations, 17 C.F.R. Part 203, require that transcripts of formal investigative proceedings be recorded solely by the official reporter or by another person or means designated by the officer conducting the investigation, but they do not establish a formal procedure for certifying the accuracy of a transcript. This lack of formal procedure generally means that corrections must be sought from the SEC staff assigned to the investigation through counsel. Written, post-facto corrections generally take the form of a formal errata sheet containing:

• The page and line number of the testimony in question;
• The corrected or amended statement; and
• The reason for the correction or amendment.

Can I Get to See my SEC Testimony Transcript?

With respect to the right to inspect witness transcripts, 17 C.F.R. § 203.6 provides that: “In any event, any witness, upon proper identification, shall have the right to inspect the official transcript of the witness' own testimony.”

What is the Errata Procedure for SEC Investigative Testimony?

There is no formally designated errata procedure. While witnesses to SEC investigative testimony have the same rights to obtain their transcript copies as are provided in 17 C.F.R. § 203.6, Part 203, that section specifically provides that “any witness, upon proper identification, shall have the right to inspect the official transcript of the witness' own testimony.”

Can the SEC Compel Testimony in a Formal Investigation?

Formal SEC investigations have the power to compel witness testimony via administrative subpoena. This power is authorized by Section 21(b) of the Securities Exchange Act of 1934, and it is executed according to the SEC’s rulemaking authority under 17 C.F.R. Part 203.

Does Rule 30(e) give me thirty days to correct?

Does Federal Rule 30(e) Apply in an SEC Investigation?

No, Federal Rule 30(e) applies in civil litigations and does not apply in SEC investigations. The Federal Rules of Civil Procedure (FRCP) generally apply to proceedings conducted in federal court, and these rules apply to SEC enforcement litigation. However, the SEC also conducts its own administrative investigations and civil proceedings, and it adopts its own rules with respect to each.

What Rules Establish the SEC’s Investigative Deposition Procedure?

17 C.F.R. Part 201 establishes the procedures for SEC administrative depositions, and 17 C.F.R. Part 203 establishes the procedures for SEC investigations.

Does 17 C.F.R. Part 201 Establish a Thirty-Day Review Period?

No, 17 C.F.R. § 201.233(k) establishes a fourteen-day review period when a witness requests review of the official transcript:

“On request by the deponent or a party before the deposition is completed, and unless otherwise ordered by the hearing officer or the Commission, the deponent must be allowed 14 days after being notified by the deposition officer that the transcript or recording is available, unless a longer time is agreed to by the parties or permitted by the hearing officer, in which: (i) To review the transcript or recording; and (ii) If there are changes in form or substance, to sign a statement listing the changes and the reasons for making them.”

Does 17 C.F.R. § 201.233(e) Apply to SEC Investigative Testimony?

No, 17 C.F.R. § 201.233(e) does not apply to investigative testimony. 17 C.F.R. Part 201 governs deposition procedures for SEC administrative depositions, and 17 C.F.R. Part 203 governs investigative procedures. While the SEC’s investigative process and administrative deposition process both involve sworn testimony that results in an official transcript, they are governed by separate sets of rules. A formal SEC investigation requires an order allowing the issuance of administrative subpoenas, and an administrative deposition is taken after the SEC has issued a subpoena for testimony to a defendant who has already been accused of misconduct.

If Review is Granted Under Rule 233(e), When Must I Request a Review of the Official Transcript?

If review is granted under Rule 233(e), then “On request by the deponent or a party before the deposition is completed, and unless otherwise ordered by the hearing officer or the Commission, the deponent must be allowed 14 days after being notified by the deposition officer that the transcript or recording is available.”

If Review is Granted Under Rule 233(e), When Will the Official Transcript be Made Available to me?

If review is granted under Rule 233(e), then the witness may obtain a copy of the transcript or recording from the deposition officer upon payment of the reasonable charges for it, because the rule does not provide transcripts free of charge.

If Review is Granted Under Rule 233(e), What Changes Can I Make to the Official Transcript?

If review is granted under Rule 233(e), “changes may be made to either the form or the substance of the testimony, and in all cases the changes must be accompanied by the reasons, if any, given by the witness.”

Does 17 C.F.R. Section 203.8 Address the Errata Process?

No, 17 C.F.R. Section 203.8 addresses the service of subpoenas issued in formal investigative proceedings, and does not address the errata process. This is the point at which most people call a lawyer. Spodek Law Group takes federal criminal defense cases nationwide from its New York and Los Angeles offices.

What Happens After a Witness Corrects (or Amends) an Answer to Testimony with the SEC?

Following a material correction, SEC staff may require a witness to testify further, and it may pursue an enforcement proceeding (or a referral for criminal prosecution). In a matter concerning criminal liability, the decision to prosecute will be a matter of discretion afforded to a Department of Justice (DOJ) federal prosecutor. With regard to civil enforcement proceedings, whether the SEC decides to seek enforcement will depend on the findings of its investigators and the subsequent recommendations of SEC staff in light of the witness’s cooperation.

Will my Correction be Shared with Federal Prosecutors?

The SEC and the DOJ maintain separate but overlapping enforcement authorities. If, during the course of an SEC investigation, SEC staff refers the investigation to a DOJ prosecutor, the DOJ prosecutor may receive relevant investigative information gathered, including records produced during the investigation. This includes testimony records and any errata sheets submitted in correcting (or amending) testimony.

Under circumstances in which the SEC has intervened, the SEC and the DOJ will often jointly handle the investigation. In such cases, the prosecutors will also be intimately familiar with the witness’s testimony and its subsequent corrections or amendments.

As a result, witnesses cannot expect that their corrections (or amendments) to testimony will be kept confidential or that the corrections will, in and of themselves, eliminate any risk of criminal liability.

Can Correcting Mistakes Protect Against an SEC Referral or Enforcement Proceeding?

Correcting mistakes is a critical step in a successful SEC defense and can help protect against referral and enforcement. The SEC’s Staff Manual states that, when recommending enforcement outcomes, “staff should carefully consider all factors, including witness cooperation, self-report, remediation, and any other factor, as appropriate.” When advising clients in SEC investigations, Spodek Law Group advises witnesses on how to preserve as many favorable factors as possible in light of the specific and unique circumstances of their case.

Can Correcting Mistakes Create New (or Additional) Risks?

Along with the possibility of correcting (or amending) previous testimony, witnesses may need to supplement previous testimony as well. Importantly, witnesses must also be careful not to expose inconsistencies between their testimony and the underlying documents and records. If inconsistencies exist, witnesses should address these inconsistencies directly and clearly, rather than relying on general denials. Also, witnesses who provide statements during the course of an SEC investigation should not make any contradictory statements in later SEC administrative or civil proceedings. If a witness must change or contradict an answer he or she provided during the investigation or during an administrative or civil proceeding, he or she will need to make sure that the change or contradiction is necessary in light of his or her actual knowledge and memory of the facts.

How Can I Correct Testimony Without Increasing the Risk of Criminal Prosecution?

Correcting mistakes promptly can help support the argument that an inaccuracy was unintentional. Both of the federal statutes that apply in the context of correcting (and amending) testimony made to the SEC require a high level of criminal intent.

What Does 18 U.S.C. Section 1001 Entail?

- 18 U.S.C. Section 1001 applies to any person who, in a matter within the jurisdiction of the federal government, “knowingly and willfully” makes a “materially false, fictitious, or fraudulent statement or representation.”

• Under Section 1001, a material statement can be made under oath or unsworn. Thus, witnesses can find themselves exposed to criminal prosecution under Section 1001 before (or during) the process of taking SEC investigative testimony.

What Does 18 U.S.C. Section 1621 Entail?

- 18 U.S.C. Section 1621 applies to perjury. Under Section 1621, a perjury charge requires evidence that a witness willfully makes a materially false statement under oath.

Does Correcting Testimony Inevitably Establish Criminal Intent?

Correcting testimony by providing a corrected answer to an inaccurate statement does not, in and of itself, establish the intent required to be found liable under either of the federal statutes. An innocent mistake, memory lapse, or misunderstanding is, as it should be, not grounds for criminal liability. The key question in this regard will be whether the witness’s correction is consistent with other records available, such as contemporaneous documents, and whether the witness can demonstrate that the mistake was unintentional.

Can I Disclose the Advice my Attorney Gave Me?

While the attorney-client privilege protects qualifying confidential communications, the privilege does not generally protect information that are considered “historical facts.” However, the voluntary disclosure of the advice provided by counsel with respect to the substance of the testimony is subject to scrutiny, as this disclosure can result in the loss of attorney-client privilege. This loss of privilege, in turn, can open the door for the SEC to probe the witness’s relationship with his or her attorney, his or her level of control over the outcome of the investigation, and other matters.

What is the Difference Between a Material and an Immaterial Mistake?

A mistake is considered material when it is capable of influencing the decision of the agency receiving the statement. Importantly, the determination of materiality depends on the circumstances of each individual case. If a mistake is material, it will require correction. A mistake that does not relate to the subject matter of the investigation, or that is not capable of influencing the decision of the agency receiving the statement, will typically not be material.

Can I Disclose Counsel’s Role in My Mistakes?

When correcting testimony that was given under the advice of counsel, witnesses will need to consider a range of factors. Even if it will support a witness’s position to argue that the mistake was made relying on the incorrect legal advice, disclosing the advice may have downsides. However, in many cases, witnesses will need to voluntarily disclose the role played by their attorneys in correcting or amending testimony, as doing so may make it possible to rely on contemporaneous records to confirm a witness’s corrected recollection.

What Forms of Remedial Action Can Correct Inconsistencies Between Witnesses’ Testimony and Contemporaneous Documents?

Contemporaneous documents provide critical evidence of witnesses’ intentions at the time the documents were created. When correcting testimony, witnesses who must address inconsistencies can leverage such documents to support their corrected recollections. By corroborating their corrected recollections with contemporaneous evidence, witnesses can avoid the risks that would otherwise be presented if they were to attempt to supplement and change answers in their testimony.

Contact a Federal Criminal Defense Attorney

Nothing here is legal advice, and the details of your case matter. Todd Spodek and Spodek Law Group take federal criminal and white collar cases nationwide, from offices in New York, Brooklyn, Queens and Los Angeles. You can reach the firm at 212-300-5196.