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Massachusetts SEC Defense Lawyers

March 21, 2024 Uncategorized

Defending SEC Charges in Massachusetts

The U.S. Securities and Exchange Commission (SEC) is the federal agency responsible for enforcing securities laws and regulating the securities industry. Companies and individuals in Massachusetts who are investigated or charged by the SEC face serious consequences like fines, penalties, disgorgement of profits, and bars from working in the industry.

When the SEC comes knocking in Massachusetts, having experienced legal counsel can make all the difference. SEC defense attorneys help clients navigate investigations, negotiate settlements, and fight charges when necessary. This article will examine SEC defense strategies, Massachusetts laws, and key considerations for companies and people facing SEC action in the state.

Responding to SEC Investigations in Massachusetts

The SEC often starts inquiries through an informal investigation before elevating issues to a formal investigation. At either stage, the basic strategies for responding to an SEC investigation include:

  • Carefully evaluating the SEC’s areas of concern
  • Collecting relevant documents and data
  • Analyzing the strength of the SEC’s potential case
  • Determining whether to cooperate or assert defenses
  • Negotiating a favorable settlement or preparing for litigation

Massachusetts SEC defense attorneys recommend taking SEC investigations seriously from the very beginning. Though informal probes may not lead to enforcement action, they offer an opportunity to get ahead of issues before the SEC commits significant resources.

The SEC has broad authority to issue subpoenas for testimony and records during investigations. Fighting subpoenas from the SEC can be difficult, but experienced counsel may be able to negotiate the scope of document production and testimony. Thorough preparation and strategic cooperation is often the best approach.

Settling SEC Charges in Massachusetts

Settling is often the fastest and cleanest way out of an SEC investigation. Settlements can happen at any stage of the probe and usually involve agreeing to remedies like:

  • Cease and desist orders
  • Fines based on ill-gotten gains
  • Civil penalties
  • Disgorgement of profits
  • Compliance monitoring
  • Bars from the industry

Settlements enable targets to avoid protracted litigation. The SEC typically grants leniency for cooperation and acceptance of responsibility. However, the SEC almost always requires settling parties to admit wrongdoing. Companies also risk shareholder lawsuits after admitting securities violations.

There are strategies for mitigating collateral damage from SEC settlements. One approach is negotiating language that minimizes the severity of admitted conduct. Admissions focused on negligent oversight rather than intentional fraud may reduce exposure in follow-on civil suits.

Fighting SEC Charges in Massachusetts

Some SEC enforcement targets decide to fight allegations rather than settle. While litigation involves more risk and cost, it may be worthwhile if the SEC’s charges seem unjustified or excessive.

The SEC initiates enforcement actions by filing a complaint with the U.S. District Court for Massachusetts, issuing an administrative order, or bringing charges before an SEC administrative law judge. Common defenses in SEC trials include:

  • The SEC lacks jurisdiction
  • The allegations rely on an incorrect legal theory
  • The SEC’s claims are unsupported by evidence
  • The SEC is applying laws retroactively
  • The activities in question were not securities transactions

SEC targets sometimes succeed in getting charges dismissed on jurisdictional or evidentiary grounds. Other times, they settle mid-trial once the SEC’s proof comes up short.

Massachusetts Laws Impacting SEC Defense

While securities regulation mostly occurs at the federal level, some Massachusetts state laws impact SEC defense strategies:

Statute of Limitations

The statute of limitations under the Massachusetts Uniform Securities Act is just 4 years. The relatively short limitations period can bar state enforcement following an old securities violation. However, federal claims have a 5-year statute of limitations.

Anti-SLAPP Statute

Massachusetts has a strong anti-SLAPP law to deter frivolous lawsuits. Securities defendants sometimes use it to quickly dismiss baseless investor claims brought after SEC charges.

Data Privacy

Massachusetts has strict data privacy laws protecting personal information. SEC targets must comply with these laws when producing documents to the SEC during investigations.

Parallel SEC and Criminal Proceedings

The SEC frequently works with criminal authorities on securities cases. SEC charges sometimes lead to parallel criminal wire or mail fraud prosecutions. These related proceedings warrant separate defense strategies.

Fifth Amendment concerns generally preclude settling civil SEC charges before resolving accompanying criminal charges. Admissions in SEC settlements can damage criminal defense. So delaying or bifurcating the civil case is often advisable.

On the other hand, admitting securities violations in a criminal plea can handcuff the defense against follow-on SEC charges. The ideal coordinated defense resolves both matters simultaneously with a global settlement addressing all allegations.

SEC Investigations of Individuals

When the SEC investigates company executives, employees, or stock promoters in Massachusetts, personal liability is on the line. Individual SEC targets often benefit from separate counsel, even if the company is cooperating.

Key defenses for individuals facing SEC charges include challenging scienter allegations and distancing oneself from corporate wrongdoing. These defenses depend on the executive’s role and mindset. Establishing good faith reliance on counsel or auditors can also help individuals defeat SEC allegations.

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