How to Stop an SEC Investigation.

Last Updated on: 4th August 2026, 01:33 am

Unlike civil or criminal litigation, there is no initial “motion to dismiss” that can automatically terminate an SEC investigation prior to the issuance of enforcement charges. While SEC staff may close investigations independently, or the SEC Commissioners may decide that charges are not warranted (following a staff recommendation), no motion initiated by the subject automatically compels the SEC to dismiss an investigation if it determines that the investigation was reasonably initiated. As a result, to make the SEC end an investigation, subjects must work through the agency’s existing procedures. These procedures vary depending on whether the SEC staff are the ones who have closing authority, or if the SEC Commissioners are the ones who must approve the staff’s recommendation to close the case. To shut down the process without charges, we approach the appropriate SEC personnel with compelling information and legal arguments, in the hope that this prompts the SEC to terminate the probe. Here, too, early advocacy is critical. The chances for initiating efforts to shut down the investigation will be greatest if these efforts begin before the SEC staff has spent a substantial amount of time and resources on the matter, because the more work the SEC puts into its case, the more likely that staff’s position will be to see the investigation through. Finally, there is no statute that requires the SEC staff to decide whether to close an investigation upon a subject’s request, and there is no statute that compels the SEC to stop an investigation after a certain amount of time. Formal SEC investigations under the Act have no fixed expiration date. While 15 U.S.C. § 78d-1(c) permits the Commission to delegate certain matters to its staff, these delegations remain subject to the Commission’s review and impose no specific expiration date for an investigation.

What Stage of the SEC Process Are You Facing?

An Informal Inquiry

At an early stage in an investigation, the SEC staff may issue informal requests for information or records, or simply reach out via telephone and email to schedule interviews. Some informal inquiries may lead to formal investigations; and, while others do not, an informal inquiry is often the first step in the process.

A Formal Investigation

A formal SEC investigation is initiated upon issuance of a formal order of investigation by the SEC Commissioners; since March 2025, the Commission has revoked the Enforcement Director's delegated authority to issue formal orders, so only the Commission itself can authorize one. This is a mark of escalation from any previous informal inquiries, and it also provides the SEC with the power to issue subpoenas, among other other investigative tools.

A Wells Notice or Termination Letter

A Wells notice is sent by the SEC staff to a party who is suspected of having violated federal securities laws and against whom enforcement charges are contemplated. While receiving a Wells notice means that the SEC has not yet decided to initiate an administrative or judicial proceeding, it means the SEC staff has made a preliminary determination to recommend that the Commission file an action or institute a proceeding. A termination letter, on the other hand, is sent when the SEC staff will not be recommending charges.

An SEC Administrative Proceeding

An SEC administrative proceeding may be initiated in various ways. When the SEC staff recommend charges and the SEC Commissioners agree, the Commission may seek an administrative action. A formal administrative complaint may, for example, seek to bar you from serving as an officer or director of a public company (pursuant to Section 21C(f) of the Exchange Act, 15 U.S.C. § 78u-3(f)).

An SEC Federal Civil Action

An SEC federal civil action begins with a filed complaint, from which enforcement charges will proceed under federal rules of civil procedure. Administrative closure of an investigation, termination of a subject’s involvement in an ongoing investigation, and dismissal of a filed SEC federal enforcement action are separate outcomes.

The Division of Examinations

Similar to the SEC’s Enforcement and Office of Chief Accountant, the Division of Examinations has a distinct role within the SEC. The Division of Examinations conducts compliance examinations; it may refer potential misconduct to the SEC’s Division of Enforcement, which litigates enforcement actions.

What Should You Do When the SEC First Contacts You?

Conduct an Internal Investigation

When we represent companies in connection with SEC investigations, our clients often engage in an internal investigation. These internal investigations help companies identify misconduct prior to responding to regulators, and they also help identify employees who may need to enter into a defense relationship with separate counsel. Along with conducting these internal investigations, we also help companies conduct thorough efforts to implement document preservation measures; and, as discussed above, because business records can be found on mobile devices (and because the U.S. Supreme Court recently explained that “electronic communications such as emails, text messages, call logs and other data” are discoverable), these efforts must also preserve business-related communications on employees’ personal devices.

Preserving Relevant Documents

Preserving relevant documents is extremely important, both from an evidentiary and a criminal perspective. Indeed, while 18 U.S.C. § 1519 contains a prohibition on the destruction of records to impede or obstruct a federal investigation, it is also pertinent for corporate employees to preserve business-related communications on all electronic devices, including the use of mobile phone messaging applications such as WhatsApp, Signal, and Telegram.

When conducting an internal investigation, we also provide Upjohn warnings to all relevant employees. These warnings help employees understand the nature of the internal investigation, and they also clarify that company counsel will maintain control over the privilege and decide whether information disclosed by employees will be shared with regulators and other third parties.

Establishing Company Confidentiality Protections

When assisting companies with internal investigations, we also carefully navigate the unique restriction posed by Exchange Act Rule 21F-17. This rule prohibits companies from discouraging their employees from sharing information with the SEC, and the SEC has recently focused its enforcement resources on ensuring that companies’ internal confidentiality instructions do not impede employee-whistleblowers’ ability to contact the agency.

Engaging Defense Counsel

If you are targeted in an SEC investigation, do you have to find defense counsel immediately? No, it is never too late to engage defense counsel.

Can You Challenge or Narrow an SEC Subpoena?

Are SEC Subpoenas Self-Enforcing?

No, SEC subpoenas are not self-enforcing. The subpoena received will specify a deadline for compliance, and if you are unwilling or unable to comply, you must seek guidance from defense counsel promptly. The SEC staff are often willing to negotiate the scope of a subpoena, the selection of custodians, the search terms to be used, and the timing of production of documents and records, and this can provide a way of narrowing the burden of compliance. However, failure to preserve relevant documents and records, or failure to fulfill your obligations to comply with the SEC’s subpoena, can quickly lead to unnecessary and potentially harmful consequences.

How does the SEC Enforce a Subpoena?

Under 15 U.S.C. § 78u(c) and related statutes and regulations, federal district courts have the authority to enforce subpoenas issued by the SEC. If you do not comply with an SEC subpoena by the deadline, you will likely be served with a subpoena enforcement complaint and your obligation to appear will then be governed by the court’s decision. If you seek to defend against an SEC subpoena enforcement proceeding, you will need to raise objections based on privilege, burden, relevance, or other grounds. When relevant, you will also need to produce a privilege log that identifies all documents and records withheld from the SEC’s production.

Are SEC Subpoenas Valid?

SEC subpoenas are issued pursuant to a formal investigative order. The SEC Commissioners issue the order and authorize the SEC staff to proceed with an investigation, an authority that has rested exclusively with the Commission since March 2025; and, if the investigation appears warranted, the SEC staff are then authorized to issue subpoenas. SEC subpoena disputes are not without potential consequences for both sides; and, when the SEC brings subpoena enforcement proceedings, these cases are also subject to judicial review.

How Long Does it Take for the SEC to Settle or Dismiss?

What is the SEC’s Discretionary Role in Closing Investigations?

Under 17 C.F.R. § 202.5(d), SEC staff have discretion to advise a party that a formal investigation has been terminated. When we help target individuals or entities with inquiries and investigations, we focus our efforts on securing cooperation and negotiated settlement, but we also seek to establish a strong defense if necessary. When defending against investigations, we make strategic decisions with the SEC’s investigative process in mind and we take proactive steps to minimize the need for enforcement charges in advance. If any of this describes your situation, it is worth talking it through with counsel. Spodek Law Group can be reached at 212-300-5196.

Should You Agree to an SEC Interview or Testimony?

If the SEC Interviews Me, Does This Mean That I Am Also the Subject of a Criminal Investigation?

The SEC is not required to disclose information about parallel criminal investigations when interviewing witnesses. As a result, even if you agree to speak with the SEC, you may not know whether federal prosecutors are also pursuing an investigation, and statements that you make to the SEC could be used by federal prosecutors to pursue criminal charges. If you are targeted in an SEC investigation, then, as we discussed above, you should take immediate steps to engage an experienced SEC defense attorney to protect your interests and begin working toward the termination of your investigation.

What Can I Do to Defend Myself from an SEC Investigation?

If you are asked to provide oral testimony during an SEC investigation and there is a risk that you will be compelled to give incriminating testimony, then you may be able to invoke your Fifth Amendment right against self-incrimination. However, it is important to note that corporations cannot invoke the Fifth Amendment to withhold corporate records; and, even for individuals, while invoking the Fifth Amendment provides protection against giving compelled, self-incriminating testimony, then in civil proceedings, doing so may also allow the SEC to seek adverse inferences against you. Of course, while individuals have the right not to be compelled to provide testimony, statements that individuals provide voluntarily will be subject to use in SEC enforcement proceedings.

Who Represents Which Clients in an SEC Investigation?

As discussed, we provide a comprehensive approach to representing clients in SEC investigations, including representing individuals and corporate clients in various investigations. Model Rule 1.13(a) states: “A lawyer employed or retained by an organization represents the organization acting through its duly authorized constituents.” This means that organizational counsel in an SEC investigation represents the organization, and this differs from individual counsel’s representation of individuals. Model Rule 1.7 also places restrictions on when a lawyer can represent two or more clients if the representation involves direct adversity or creates a material limitation on the lawyer’s ability to represent the client effectively. If you have concerns regarding your legal representation, be sure to contact an attorney.

When Should You Cooperate, Remediate, or Push Back?

What Is Cooperation Credit?

What Is the Seaboard Report?

The SEC’s Seaboard Report is a 2001 document that details the agency’s approach to corporate cooperation during an SEC investigation. According to the Seaboard Report, cooperation is “not merely complying with compulsory demands,” and while the SEC’s internal investigation may be expedited by prompt and proactive voluntary self-reporting, “relevance of the information, the ability to discover the information independently, and the scope of the conduct implicated” are all factors that the SEC staff use to determine the appropriate use of a cooperating company’s efforts to obtain cooperation credit.

Along with prompt self-reporting and cooperation, companies that are subject to SEC investigations can engage in remediation efforts that can have positive consequences for SEC charging and penalty assessments.

Cooperating and remediating may, in many cases, be in a target’s best interests; however, this does not guarantee that the SEC will decline to seek charges or will offer a reduced fine. Cooperation and remediation efforts can be viewed by the SEC staff as evidence of the company’s cooperation, but the decision to move forward with enforcement charges remains within the SEC’s sole discretion.

Does Cooperation Require Waiving Privilege?

While engaging in cooperation efforts with the SEC can be extremely helpful, it should not necessarily result in a waiver of privilege. Even if the SEC is granting cooperation credit, it should not, and does not, require a waiver of the attorney-client privilege.

While presenting factual information to the SEC can result in an SEC decision to terminate its investigation, presenting factual information can also potentially result in a waiver of the attorney-client privilege if a target presents information that reveals protected legal communications. If you need to present factual information to the SEC, make sure to contact a defense attorney first to ensure a proper preservation strategy is in place.

What Is a Wells Submission?

A Wells submission is a document that is presented to the SEC staff when you receive a Wells notice, and it details your defenses to the SEC’s charges. While we recommend that you only use a Wells submission if your lawyer determines that doing so will be in your best interests, doing so allows you to present your defenses to the SEC before litigation begins and can provide insight into any weaknesses in the SEC’s case. However, you should also be aware that revealing any information, including the identities of any witnesses, may provide the SEC with the ability to seek charges against individuals or organizations that were previously not targeted.

How Can Counsel Press the SEC for Closure?

How Long Do You Have to Respond to a Wells Notice?

The time to respond to a Wells notice depends on the specific notice; however, in many cases, recipients get about 30 days to respond. When you receive a Wells notice, we strongly recommend contacting a defense attorney right away, as you will need to prepare your response quickly.

Am I Required to File a Wells Submission?

No, you are not required to file a Wells submission if you receive a Wells notice from the SEC. This is one of the reasons that it is very important to work with an experienced defense counsel to determine whether or not filing a Wells submission is in your best interest.

What Can I Say in My Wells Submission?

When necessary, a Wells submission can be used to challenge the SEC’s legal theories, evidence, enforcement policy, and proposed remedies. However, it is also critical to maintain a good relationship with the SEC staff, so that they are open to listening to your defenses. This takes experience and a good working relationship with the SEC, and, while we are able to reach out to the SEC on your behalf, we do not rely on a single strategy to pursue an SEC investigation’s termination. Instead, we focus our efforts on seeking closure at all possible stages of the process, and we never assume that our efforts will be wasted.

If the SEC staff’s efforts to move forward with enforcement charges lead the SEC Commissioners to find that your actions did not warrant enforcement charges, the SEC may issue a termination letter stating that it will not seek enforcement action at this time. An SEC termination letter may be the positive result of a hard-won case for the defense, but an SEC termination letter does not constitute an exoneration; and, while it generally helps, the SEC cannot categorically bar later SEC enforcement actions if new information is discovered. An SEC investigation can close even after the SEC staff has issued a Wells notice or a letter of recommendation to initiate an enforcement action.

What percentage of SEC investigations are dismissed without any enforcement action?

The SEC does not publish a comprehensive rate of investigations that end without enforcement action, so it is difficult to say. Many of the SEC’s investigations lead to enforcement charges, and some individuals and entities may end up facing substantial fines and other punishments.

What Deadlines and Business Risks Continue During the Investigation?

Does the Statute of Limitations Apply to SEC Enforcement Action?

The U.S. SEC has statute of limitations defenses to many civil enforcement actions. Generally, under 28 U.S.C. § 2462, the U.S. government has five years to impose civil penalties for violation of certain federal statutes and regulations. However, the U.S. Congress has granted the SEC the ability to obtain disgorgement from companies and entities in many cases involving scienter (i.e., the willful or reckless) violations for ten years (i.e., with disgorgement orders of up to ten years from the start of the conduct). To toll a statute of limitations defense against an SEC enforcement action, the U.S. SEC can obtain a tolling agreement or initiate civil proceedings in federal court. For individuals and entities who need to defend against an SEC investigation, defense counsel can help determine which deadlines apply in light of the circumstances.

Are SEC Investigations Reportable or Disclosable?

SEC investigations are not reportable in every case. When you file an 8-K under Section 13 or 15(d) of the Exchange Act, this form does not categorically require disclosure of every SEC investigation. With this said, however, a failure to disclose an SEC investigation may also result in liability under Exchange Act Rule 10b-5 if the omission is material to investors and/or if the omission causes your disclosures to be materially misleading. If you are targeted in an SEC investigation, make sure to contact an experienced defense attorney to determine your disclosure and reporting obligations.

How are the Defense Costs Covered for an SEC Investigation?

Claims-made insurance policies condition coverage on the insured’s compliance with the policy’s notice provisions. With this in mind, if you need coverage for an SEC investigation, you should contact your insurance carrier as soon as possible. When it comes to D&O insurance coverage, insurance carriers often allocate costs between covered matters and those deemed uncovered. When facing an SEC investigation, we work with our clients’ insurance carriers to pursue reimbursement for all available coverage.

Does the SEC Issue Criminal Charges?

The SEC does not issue criminal charges; rather, it issues civil enforcement charges. However, SEC investigations frequently run parallel to criminal investigations conducted by the DOJ and federal prosecutors, and information obtained in an SEC investigation can lead to federal criminal investigations as well. If the SEC asks you to disclose any information that would, if disclosed, could help federal prosecutors bring criminal charges against you, it may be in your best interest not to cooperate.

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.