Fighting SEC Allegations: Litigation Tactics and Strategies

Fighting SEC Allegations: Litigation Tactics and Strategies

Dealing with allegations from the Securities and Exchange Commission (SEC) can be scary. But there are ways to fight back. This article talks about strategies companies and individuals can use when the SEC comes knocking.

Should You Settle or Fight?

When the SEC files charges, the knee-jerk reaction is often to settle. But that may not always be the best move. Fighting the charges in court is also an option. Here are some pros and cons of each approach:

Settling

• Avoids a long, expensive court battle
• Limits bad publicity and reputational damage
• Allows you to move on quickly
• May still result in serious penalties
• Looks like an admission of wrongdoing

Fighting in Court

• Chance to clear your name if innocent
• Avoid penalties through winning
• Forces SEC to prove its case
• Long, costly court process
• Uncertain outcome

There’s no one-size-fits-all approach. But fighting the charges could make sense if you have a strong defense or want to avoid looking guilty.[4]

Building Your Defense Strategy

If you decide to fight the charges in court, you need a defense strategy. Here are some tactics to consider:

Question the SEC’s Evidence

Dig into the SEC’s evidence and look for holes or inaccuracies. File motions challenging it. Force the SEC to back up its allegations.[1]

Claim the SEC Lacks Authority

Argue the SEC is overstepping its jurisdiction or trying to enforce laws incorrectly. Claim it lacks authority over certain activities or defendants.[2]

Allege Abuse of Power

Accuse the SEC of unfairly targeting you or abusing its powers. Point to bias, conflicts of interest, or misconduct.[3]

Dispute the Charges

Fight the specific charges and allegations. Argue your conduct didn’t actually violate the law when examined closely.[6]

Blame Others

Shift responsibility to third parties, like contractors, subsidiaries, or employees. Argue they acted alone.

Claim Good Faith

Insist you acted ethically and in good faith based on your understanding at the time. Argue you tried to comply with complex laws.

Avoiding Future Allegations

The best defense is a good offense. Here are some ways to reduce SEC scrutiny:

• Have robust compliance programs
• Quickly fix any problems discovered
• Cooperate fully during investigations
• Be very careful with public statements
• Keep meticulous records

Staying off the SEC’s radar in the first place is ideal. But if you do get targeted, fighting back may get charges dismissed or reduced.

The SEC has a tough job policing complex markets and laws. But it’s also important to protect the rights of those accused. With smart legal strategies, companies and individuals can defend themselves effectively.

References

1. https://www.foley.com/en/insights/publications/2022/07/ripple-battle-defense-strategy-sec-privilege
2. https://www.lw.com/en/insights/2022/12/SEC-investigations-guide
3. https://www.weil.com/articles/three-strategies-for-combating-parallel-litigation
4. https://www.complianceweek.com/when-the-sec-charges-should-you-fight-or-settle/7001.article
5. https://www.sec.gov/news/press-release/2023-101
6. https://www.sec.gov/files/litigation/complaints/2020/comp-pr2020-338.pdf