Can the SEC Search My Home??

While an SEC subpoena authorizes the agency to seek records, documents, and other evidence, it does not authorize the agency to enter a residence. However, the mere fact that documents are located in a residence does not shield these documents from an SEC subpoena. If the SEC serves a valid subpoena for records you have in your possession, the fact that you store these records at home will not defeat the subpoena.

Can the SEC Obtain a Search Warrant?

As a civil enforcement agency, the SEC generally does not have the authority to execute criminal residential search warrants. This does not mean the SEC cannot search your residence, but rather that it cannot search your residence on its own authority (i.e., without your consent). If, however, the SEC has sufficient probable-cause evidence to obtain a search warrant, an authorized federal law-enforcement officer or attorney for the government will apply to a judge. Once the federal judge grants the search warrant, the SEC will then go to the U.S. Marshal’s office and have a U.S. Marshal execute the search warrant. Again, the SEC does not have the authority to execute criminal residential search warrants by itself, but, if it is granted a warrant, the SEC will have the U.S. Marshal’s Office execute it for the agency.

What Enforcement Authorities Does the SEC Have?

The SEC is the agency that enforces federal securities laws through civil actions and administrative proceedings. It has the authority to serve subpoenas and to investigate and pursue civil charges against companies and individuals in federal court. While the SEC has the power to pursue civil charges, it does not itself prosecute criminal cases. For criminal cases, it will work in conjunction with the U.S. Department of Justice or the U.S. Attorney’s Office.

Can an SEC subpoena reach records stored in my home?

What Law Gives the SEC the Authority to Issue Subpoenas?

The SEC’s subpoena authority is found in Section 21(b) of the Securities Exchange Act of 1934. Under the Exchange Act, once the SEC’s Commissioners approve a “formal order of investigation,” the order designates particular SEC staff members who are authorized to issue investigative subpoenas. As the SEC’s subpoena enforcement authority is derived from federal statute, these subpoenas are federal subpoenas.

What Can the SEC Compel Under a Subpoena?

The SEC can issue subpoenas to compel testimony, to compel the production of documents or other records, or both. When a subpoena requires the production of documents or other records, it usually includes “all relevant documents, files, records, and data,” often with a comprehensive list of examples (i.e., “including but not limited to, emails, calendar entries, notebooks, financial statements, tax returns, etc.”).

What Happens if I Don’t Respond to an SEC Subpoena?

The SEC does not have the authority to punish compliance failure directly. If you refuse to respond to an SEC subpoena or file for a protective order (or other legal challenge), the SEC must go to federal court to request enforcement. If a federal judge grants enforcement, the judge will then order you to comply. Once again, the SEC cannot punish you directly; it will rely on the federal court’s power to hold individuals in contempt when necessary.

Can I Negotiate My Compliance Obligations?

Individuals and companies can work with the SEC to negotiate all aspects of their compliance obligations. It may be possible to negotiate the subpoena’s deadline or the categories of records required. In a typical subpoena negotiation, an individual or company will try to negotiate a particular set of custodians, a set of specific search terms, a set of date ranges, and an affirmative list of documents, files, and other records it is required to produce.

Can I Assert Attorney-Client Privilege?

The attorney-client privilege may protect documents and information that constitutes confidential communication between an attorney and client in furtherance of legal services. However, the attorney-client privilege does not cover documents or information that constitutes the underlying facts of a case. The attorney-client privilege also does not apply if the client’s attorney is also the client’s accountant or other consultant.

If I Get an SEC Subpoena, Does this Trigger Obligations to Preserve Evidence?

Yes, when an individual or company receives an SEC subpoena, it triggers an obligation to preserve evidence. However, even if a subpoena is not yet issued, but the individual or company has reason to believe an SEC investigation is imminent, it will have the same obligation to preserve evidence.

Who Can Search My Home During an SEC Investigation?

If the Federal Bureau of Investigation (FBI) or the U.S. Department of Justice (DOJ) is investigating potential criminal securities-offenses, a federal criminal prosecutor or an FBI Special Agent will be the lead investigator. The SEC is a civil enforcement agency; it does not have the authority to prosecute crimes, and it cannot seek criminal penalties (i.e., a sentence of imprisonment).

Can the FBI and the SEC Both Be Investigating at the Same Time?

A DOJ or FBI investigation and an SEC investigation can proceed in parallel. If an FBI agent has the authority to search and seize documents or other records in connection with a criminal securities-fraud investigation, that FBI agent may be able to search and seize the same documents or other records on the SEC’s behalf as well.

Can the SEC Take Part in an FBI Search Warrant?

Even if they do not independently possess the authority to obtain a warrant, a federal prosecutor or FBI agent who executes a criminal residential search warrant may have SEC personnel assist in the search. However, any SEC personnel that assist in an FBI search will have to do so with the permission of the FBI agent in charge. If the SEC believes it has a need to independently obtain a search warrant (for example, if it wants a search warrant to execute on a target that the FBI does not have reason to investigate), the SEC will have to seek a search warrant based on the criminal authority of either the DOJ or the SEC’s Office of Inspector General.

Who Else Has Criminal Warrant Authority?

The SEC has an Office of Inspector General (OIG) that is separate from its Division of Enforcement. The SEC OIG investigates possible criminal offenses relating to SEC operations. Qualified SEC OIG special agents are law enforcement officers pursuant to 5 U.S.C. §406, and they may be authorized to apply for and execute criminal residential search warrants.

Does the SEC Division of Enforcement Have Criminal Search Warrant Authority?

The SEC’s Division of Enforcement investigates possible violations of federal securities laws and other civil offenses. Although it can seek information in connection with civil enforcement proceedings, the Division of Enforcement does not have the authority to execute criminal residential search warrants.

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 Can Trigger an SEC Investigation?

A number of factors can trigger an SEC inquiry (and potential SEC investigation) into an individual’s or company’s conduct. These factors include investor complaints, whistleblower tips, referrals from other regulators, media reports, and other sources. Even without a particular trigger, however, the SEC’s trading surveillance system and regular examinations can also produce referrals for the Division of Enforcement.

Does Receiving a Subpoena Mean I’m an Investigative Target?

No, but this is true for a variety of reasons. For one, the SEC can issue subpoenas to individuals and companies that are witnesses rather than targets. For another, the SEC can issue subpoenas as a tool for gathering information and not based on a specific hypothesis. And, finally, many individuals and companies that are subject to subpoenas will never be formally charged.

Can the SEC Expand Its Investigation to Other Types of Conduct?

Yes, the SEC can expand an investigation based on new evidence (i.e., by broadening its scope). If, for example, SEC staff uncover evidence of wire fraud while conducting an investigation that was triggered by a referral from the SEC’s examination office, the SEC may refer that evidence to the Department of Justice.

Can the SEC Share Information with Other Enforcement Agencies?

Yes, the SEC can share information with other federal or state agencies during an investigation. For example, in connection with a parallel investigation conducted by the Federal Bureau of Investigation (FBI) or the U.S. Department of Justice (DOJ), the SEC may share information with that agency. It may also share information with state licensing or securities-regulators if warrantied.

Is an SEC Compliance Examination Different from an SEC Enforcement Investigation?

Yes, an SEC compliance examination is different from an SEC enforcement investigation. However, a compliance examination can lead to an enforcement investigation if it uncovers any potential violation of the securities laws.

Is the SEC Investigating Me?

As a general rule, the SEC will not disclose its investigative targets to the public unless (and until) it files a public enforcement action. Similarly, the SEC will not confirm whether or not it is investigating an individual or company. However, if you have received an SEC subpoena, SEC staff member, and/or a Wells notice from the SEC, it is more likely that you are an investigative target.

A “Wells notice” is a notification from the SEC staff members who are in charge of the SEC’s investigation in your case. If the SEC staff decides to file a public enforcement action, the SEC staff members will send you a “Wells notice,” a letter informing you that the staff has made a preliminary determination to recommend that the Commission file a civil enforcement action, identifying the securities law violations the staff intends to include in that recommendation, and giving you an opportunity to respond through a Wells submission.

When Can Agents Legally Enter and Search My Home?

Agents can legally enter and search your home if: (i) you give them consent to enter and search; or, (ii) they have a valid warrant. The validity of a consent-based search or a warrant-based search is determined by a number of factors.

If you give the SEC, the FBI, or the DOJ permission to enter your home and conduct a search, the agents can conduct a search based on your consent. When consenting to a home search, you may limit the scope of the search to a particular location, person, or item, and you may also limit the duration of the search. If the consent is based on a particular item or item category (e.g., “anything of a financial nature”), the agents must limit the search to that particular item or item category. If the consent is based on a particular location (e.g., “my study”), the agents must limit the search to that particular location.

If the agents have a valid warrant, you can still withdraw your consent, but this will not end the agents’ authority to conduct a search. If the agents do not have a valid warrant, then you can withdraw your consent at any point. Once you withdraw your consent, the agents will have to stop their search immediately (though there are exceptions to this rule).

If the FBI or DOJ agents enter and search your home based on a warrant, the search must remain within the scope of the warrant. If the agents search outside of the scope of the warrant, then they may be unlawfully conducting a warrantless search.

When agents execute a criminal residential search warrant, they must provide you with a description of the property they seize and a receipt for the property taken. Under Federal Rule of Criminal Procedure 41(f)(1)(C), an officer executing a criminal residential search warrant must deliver a copy of the warrant to the person whose property is being seized, and the officer must leave a copy of the inventory of seized property at the place where the property was taken.

How Do Courts Determine If Consent Was Given Voluntarily?

In evaluating whether consent to search was given voluntarily, courts consider the totality of the circumstances under which the consent was given. If you think you may have given consent in response to the presence of armed agents or other coercive factors, you may be able to challenge the search in court.

Even if consent to a search was given voluntarily, the consent must be based on the person’s authority to grant access. In many cases, consent will be based on the owner’s consent to the home search, though the consent can also be granted by other individuals, such as a spouse, cohabitant, or business associate.

With respect to the duration of a warrantless search, the consent-holder can withdraw consent at any time. However, the consent must be revoked prospectively, and the consent holder cannot retroactively revoke consent to end the agents’ right to continue searching.

What Should I Do If the FBI or the SEC Searches My Home?

If you find yourself in the midst of an FBI or SEC home search, you should take the following steps. First, seek legal representation immediately. Second, if you have a home search warrant, you should inspect the warrant to determine the scope of the search. If you suspect the agents are searching beyond the scope of the warrant, do not hesitate to object to the agents. Third, if you have not signed any consent form, you should object to the search on the ground that you did not consent. Fourth, if you are consenting to a home search and you wish to limit the agents’ authority to conduct a search, then you should explicitly tell the agents that you only consent to the search for the particular item, person, place, or time of your consent. Fifth, if you no longer consent to the agents searching your home, then you should clearly withdraw your consent.

Keep in mind that if you have signed a consent form, it will likely state that you consented “voluntarily and knowingly.” If you suspect the FBI or SEC agents coerced you into signing a consent form, your attorney can use this as evidence to attack the validity of the search in court.

Can I Refuse Testimony or Document Production During an SEC Investigation?

The Fifth Amendment to the U.S. Constitution protects individuals against compelled self-incrimination. If you receive an SEC subpoena for testimony, you (or your attorney) can object to the subpoena based on the Fifth Amendment privilege. With respect to SEC subpoenas for the production of documents and records, individuals can also object based on the Fifth Amendment. This is a relatively complex issue, and individuals should seek counsel to determine whether they can object to the SEC’s production demands based on the Fifth Amendment.

The Fifth Amendment protects individuals and entities. As a result, corporations have no Fifth Amendment privilege against production of records. If a corporation has reason to believe that producing certain corporate documents will incriminate its shareholders or its officers or employees, the corporation may need to request that the SEC allow it to produce the documents confidentially. The privilege only covers the corporation’s own records and not records of employees and other individuals that are within its custody and possession.

While corporations have no Fifth Amendment privilege against the production of corporate records, individuals do have a Fifth Amendment privilege in some cases.

When a corporation’s counsel represents the company, that counsel represents the interests of the company alone. The corporation’s counsel does not represent the individual shareholders or executives and employees unless the individual has a separate and formal representation arrangement with the company’s counsel. When an individual is accused of wrongdoing during a corporate SEC investigation, the corporation’s counsel generally will no longer represent that individual. If necessary, individuals accused of wrongdoing should seek independent counsel to defend against the SEC’s civil enforcement actions.

Can a Corporate Records Custodian Assert the Fifth Amendment?

A corporate records custodian cannot refuse to produce corporate records based on the Fifth Amendment privilege. A records custodian’s personal Fifth Amendment privilege applies only to documents produced on the custodian’s individual capacity.

Do Documents and Other Records Carry the Fifth Amendment?

Documents and records are the product of an individual’s thoughts and intents. As such, they often carry the same Fifth Amendment protections that apply to the individual’s thoughts and intents. However, if an individual or company created documents or records voluntarily for reasons other than to store or protect their thoughts and intent from others (e.g., for the purpose of providing them to a third party), then the individual or company’s claim to a Fifth Amendment privilege may be denied by the courts.

Are SEC Interviews Voluntary?

As a general rule, SEC interviews are voluntary. However, while a person’s participation in an SEC interview may be voluntary, individuals can face a potential criminal prosecution under 18 U.S.C. §1001 for materially lying to an SEC agent or other federal agents during an SEC interview. Individuals that volunteer to participate in SEC interviews should discuss their interview with their lawyers in advance.

Do Parallel SEC and DOJ or FBI Investigations Occur Often?

Yes, DOJ prosecutors and FBI agents investigate potential criminal securities offenses, and the SEC investigates potential civil securities offenses. As a result, parallel investigations often occur. However, if an individual is facing criminal charges, they may be able to have their SEC investigation stayed in some instances, pending the results of the criminal case.

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.