How to Negotiate With the SEC

How to Negotiate With the SEC

Welcome to Spodek Law Group. Our goal is to give you the truth about SEC negotiations – not the polished version you find on law firm websites designed to make you feel better. Because the word “negotiate” implies two parties with comparable leverage. And that assumption might be the most dangerous thing you bring into the room.

Heres the reality most lawyers wont tell you. When one side can subpoena your documents, freeze your assets, destroy your career, refer you to criminal prosecutors, and outspend you for years – what you’re doing isn’t negotiating. Its calculating how much to surrender. And if you walk in thinking otherwise, you’ve already lost.

Todd Spodek has handled SEC matters for years. And the pattern is always the same. Smart, successful people who thought they could negotiate their way out. Who believed their cooperation would be rewarded. Who trusted that reasonable people on both sides would reach a reasonable outcome. The SEC doesn’t work that way. And by the time you understand the actual power dynamics, the leverage you thought you had is gone.

Why “Negotiation” Is the Wrong Word

Lets be direct about something. Commissioner Luis Aguilar stated that the SEC settles 98% of its enforcement actions. Ninety-eight percent.

Think about what that means. Almost everyone settles. Not because the SEC is reasonable. Not because negotiations produce fair outcomes. Because litigating against a federal agency with unlimited resources is financial suicide for most people.

Justice Neil Gorsuch put it bluntly. He wrote that “few can outlast or outspend the federal government” and that “agencies sometimes use this as leverage to extract settlement terms they could not lawfully obtain any other way.”

Read that again. A Supreme Court Justice is saying agencies extract terms they couldnt lawfully obtain otherwise. Thats not negotiation. Thats coercion with paperwork.

So when you sit down to “negotiate” with the SEC, understand what your actualy doing. Your not two equals finding common ground. Your a person with limited resources facing an institution that can wait you out indefinitly.

The 98% Reality Nobody Explains

Heres the uncomfortable math. If 98% of cases settle, and the SEC knows 98% of cases settle, then the SEC has almost no incentive to offer reasonable terms. Why would they?

Commissioner Hester Peirce noted in her dissent that “the time and expense of litigating against a large administrative agency often leaves settlement as the only viable option for defendants.” The only viable option. Not the best option. The only one.

This changes everything about how you should approach SEC “negotiations.”

Your not negotiating based on the merits of your case. Your negotiating based on how long you can survive the process. Can you afford the legal fees for a two-year fight? Can your career survive being in limbo that long? Can your family handle the stress?

The SEC knows the answers to these questions better then you do. They’ve seen thousands of people in your exact position. They know exactly when most people break.

At Spodek Law Group, we see this constantly. Clients who came to us after there first lawyer told them to “just negotiate in good faith.” Who produced documents, answered questions, made good faith offers – and watched the SEC demand more and more because they knew the client couldn’t afford to fight.

What You Give Up vs What They Give Up

Chairman Gary Gensler said something revealing about settlements. He said: “We give up something in a settlement when we don’t go into court, and, of course, a defendant gives up something as well.”

Sounds balanced, right? Both sides compromise. Thats negotiation.

But look at what each side actualy gives up.

The SEC gives up the cost of trial. The time. The resources. The risk of losing.

What do you give up? The right to ever tell your side of the story.

The SEC’s “gag rule” – 17 C.F.R. § 202.5(e) – prevents you from denying there allegations after settlement. This policy dates to the 1970s. Under this rule, the SEC only settles if you agree never to dispute there version of events.

So you end up with “neither admit nor deny” language. Sounds neutral. Its not.

“Neither admit nor deny” means your permanantly silenced. The SEC’s narrative becomes the official truth. And you cant dispute it – not in interviews, not in future lawsuits, not anywhere.

Heres the kicker. If you refuse to admit the allegations, the SEC considers that “tantamount to denial” – and they wont settle. So your only options are admit, or stay silent forever.

Thats not what both sides giving something up looks like. Thats surrender with conditions.

The Wells Submission Trap

OK so lets talk about Wells notices. When the SEC sends you a Wells notice, your being told enforcement is likely coming. You get an opportunity to respond before they decide.

Your lawyer will tell you this is your chance to negotiate. To present your side. To change there mind.

Heres what they might not tell you.

Only 23% of Wells notices result in no enforcement action. Thats based on data from 2020-2023. Which means 77% of the time, enforcement is coming regardless of what you say.

But thats not the dangerous part.

The dangerous part is that your Wells submission – the document you craft to argue your innocence – can be used against you in criminal court.

In 2006, Rule 408 of the Federal Rules of Evidence was amended. The amendment created an exception that makes Wells submissions potentialy devastating in criminal proceedings. The rule now says that statements made during SEC negotiations can be introduced in criminal cases.

Think about what that means. Your carefully crafted defense strategy. Your explanations. Your admissions of what you knew and when. All of it becomes ammunition for federal prosecutors.

The SEC treats Wells submissions as potential party admissions under Federal Rule of Evidence 801(d)(2). They can use your own words against you.

So the “negotiation” document you thought was helping you might be building the criminal case against you. And nobody has to tell you this is happening.

At Spodek Law Group, we evaluate every Wells submission decision through this lens. Because the question isnt just “what do we tell the SEC.” Its “what are we handing to potential prosecutors.”

How Your Employer Becomes the Witness Against You

Theres another aspect of SEC negotiations that nobody discusses. The divide and conquer strategy.

The SEC uses what they call a “multi-action” approach. They flip one defendant against the others. Usually, this means the corporation settles first and implicates the individuals.

Think about what this means for you.

If your employer is under SEC investigation too, there incentives are completly different from yours. The company wants to survive. The company has shareholders, employees, ongoing business relationships. The company will do almost anything to resolve this and move on.

Including cooperating against you.

When your employer settles – and they almost always settle – part of that settlement involves “cooperation.” Producing documents. Identifying wrongdoers. Explaining who knew what.

Your employer’s cooperation becomes the governments evidence against you personally. The emails you thought were internal communications? Produced to the SEC. The conversations your supervisor had about your decisions? Summarized in the companys settlement documents.

So while your “negotiating” with the SEC, your employer might be negotiating too – and there negotiation involves giving you up.

This is why individual defendants often find themselves negotiating against there own companys admissions. The company has already told the SEC what happened. Now your trying to explain why that story is wrong. But the SEC already has what they need.

Ive watched Todd navigate these situations for years. And the first thing he tells every individual defendant is this: your employer is not your ally. No matter what they tell you. No matter how supportive they seem. When there survival is on the line, you become expendable.

The Timing Trap Most People Fall Into

Theres a timing element to SEC negotiations that ruins people who dont understand it.

Most defendants wait to long to engage strategicaly. They spend the early phases cooperating, producing documents, answering questions – thinking there building goodwill. By the time they realize negotiation isnt going well, theyve already given the SEC everything they need.

Heres how the timeline actualy works. The SEC opens an investigation. You recieve document requests. Your cooperative. Months pass. More requests. More cooperation. Then comes the Wells notice. Now your told enforcement is likely.

At this point, most people finaly start thinking strategicaly. But the SEC already has your documents. They already have your testimony. They already know your defense. The leverage you could have had – the uncertainty about what you knew, what documents exist, how strong there case is – is gone.

The window for real negotiation leverage is before you give them everything. Not after. And most people miss that window completly because they believe cooperation equals protection.

This is why timing matters so much. Every document you produce, every question you answer, every piece of cooperation you offer – its all information asymmetry flowing in there direction. Once its gone, its gone.

At Spodek Law Group, we tell clients that negotiation strategy starts before the first document production. Not at the Wells notice stage. By then, your negotiating from a position the SEC has already mapped.

The Only Leverage That Actually Works

So if the deck is this stacked, what leverage do you actualy have?

Heres the uncomfortable truth. The only real leverage in SEC negotiations is genuine willingness to litigate. And most people cant afford it.

Think about it from the SECs perspective. They know 98% of people settle. They know most defendants run out of money or patience. They know the process itself is the punishment.

But what happens when someone actualy fights?

The SEC has limited resources. Every case they litigate is a case they’re not investigating. Every trial is staff time and preparation and risk. The SEC doesnt actually want to litigate most cases. They want quick settlements that generate headlines and statistics.

So if your genuinly prepared to fight – and I mean genuinly, with resources and strategy and willingness to wait years – your leverage changes dramaticaly.

The problem is that this leverage is only available to people who can afford multi-year litigation against a federal agency. For everyone else, the SECs structural advantages remain overwhelming.

This is the calculation you have to make honestly. Not “can I win at trial.” But “can I survive the process long enough that the SEC prefers settling on better terms.”

Nobody should enter SEC negotiations without understanding this math. The stakes are to high. The power imbalance is to extreme.

What the 2025 Reforms Actually Changed

Theres been alot of attention on SEC reforms in 2025. Chairman Atkins announced changes to the Wells process and settlement procedures. Lets be clear about what actualy changed.

First, the SEC now provides at least four weeks for Wells submissions, particularly in complex cases. Previously, two-week deadlines were standard. This is an improvement. Four weeks instead of two gives you more time to prepare your response.

Second, senior Enforcement leadership announced they’re “now open to meetings” to discuss Wells submissions. This wasnt always the case under the prior administration.

Read that again. The SEC agreeing to meet with you to discuss your response is now considered noteworthy. The fact that this is news tells you everything about how adversarial the process really is.

Third, the SEC will now consider waiver requests simultaneously with settlement offers. Previously, defendants negotiated settlements without knowing wheather they’d receive certain waivers – creating enormous uncertainty.

These reforms are real. There meaningful. But dont mistake them for fundamental change.

The SEC can still refuse to negotiate if discussions would “delay timely Commission action.” The gag rule remains intact. The 98% settlement dynamic hasnt changed. The power imbalance is structural, not procedural.

At Spodek Law Group, we watch these reforms carefully. We adjust strategy when procedures change. But we never forget that procedural changes dont change the underlying reality: your negotiating with an institution that has every structural advantage.

The Decision Nobody Wants to Make

So what do you actually do? How do you approach SEC negotiations?

Heres the framework that actualy works. Not the one designed to make you feel better. The one based on the real power dynamics.

First question: Can you afford to litigate? Not “can you afford a lawyer.” Can you afford multi-year litigation against a federal agency? Legal fees, lost income, reputational damage during the pendancy of the case?

If the answer is no, your negotiating position is fundamentaly limited. You can still fight for better terms. But you need to understand that the SEC knows you cant sustain a prolonged battle.

Second question: Is there parallel criminal exposure? Remember Rule 408. Your Wells submission can become criminal evidence. Before you craft any response, you need to assess wheather what you say to the SEC might be used by the DOJ.

If criminal exposure exists, everything changes. Your negotiation strategy must account for building a defense across multiple proceedings simultaneously.

Third question: What is your employer doing? If the company is also under investigation, you need to assume they will prioritize there survival over yours. Plan accordingly.

Fourth question: What would the SEC accept that you can live with? Not what you want. Not what’s fair. What the SEC might actualy accept given there goals, there resources, and there incentives.

This requires understanding how the SEC actualy operates. What matters to Enforcement staff. What kind of settlements look good in press releases. What theyre willing to trade for cooperation.

Get help before you make these decisions. The consequences of miscalculating last a lifetime.

What We Tell Clients at Spodek Law Group

Every client who comes to us about SEC negotiations asks the same question. How do I get the best possible outcome?

And every time, we give the same honest answer. It depends on facts you probably dont fully understand yet.

It depends on wheather you can afford to fight. It depends on wheather criminal exposure exists. It depends on what your employer is doing. It depends on what the SEC actually wants from this investigation.

The one thing we never tell clients is that negotiation will produce a fair outcome. Because the system isnt designed for fairness. Its designed to resolve cases efficiently. And efficiency favors the party with unlimited time and resources.

What you need is someone who understands the actual dynamics. Someone who has been through this before. Someone who can help you calculate the real math – not the optimistic math, the real one.

Thats what Spodek Law Group offers. We dont promise outcomes we cant deliver. We dont pretend the system is fair. We tell you whats actually happening and help you make the best decisions possible given the reality you face.

Call us at 212-300-5196. The consultation is free. The mistake of negotiating without understanding the power dynamics isnt.

The Bottom Line

How do you negotiate with the SEC?

Carefully. Strategicaly. With complete awareness that the word “negotiate” is doing alot of work to obscure a fundamental power imbalance.

The reality is that most people who enter SEC negotiations dont truely understand the game their playing. They think its a conversation between reasonable parties seeking fair outcomes. Its not. Its a process designed to extract settlements from people who cant afford the alternative. The SEC has every structural advantage – time, resources, information, experience. You have whatever leverage you can manufacture from a fundementaly weak position.

What you should definately not do is assume both sides have equal leverage. Dont believe that good faith cooperation will be rewarded proportionately. Dont think your Wells submission is confidential negotiation strategy. Dont forget that your employer might be cooperating against you right now.

The SEC negotiation is one of the most consequential decisions you’ll make. Its also one of the most misunderstood. People walk in thinking its a business negotiation between reasonable parties. It isnt. Its a calculation about surrender terms.

We’ve handled these matters for years. We’ve seen what works and what dosent. We’ve watched clients negotiate themselves into worse outcomes and we’ve watched clients fight for terms that protected there futures. The difference is almost always the same thing: understanding the actual game before you play it.

Thats what we offer. Not false hope. Not unrealistic promises. Just honest assessment and strategic guidance based on how this actualy works.

The system is what it is. Your job is to navigate it as effectivly as possible. And that starts with seeing it clearly. Most people never get that clarity until its to late. Dont be one of them.