Managing Board Communications During SEC Scrutiny.

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

Boards of publicly traded and privately held companies that are under SEC scrutiny can (and should) seek the advice of outside legal counsel regarding the establishment of, and the adherence to, a disciplined response protocol. At Spodek Law Group, we work closely with boards to develop comprehensive SEC-response protocols that seek to preserve relevant evidence, maintain the attorney-client privilege, and promote efficient information gathering. A comprehensive SEC-response protocol should, in part, name one individual (or individuals) as the coordinator(s) for communications to and from the board. A comprehensive SEC-response protocol should also specify approved (and unapproved) communication channels, the appropriate escalation paths, and any other restrictions regarding the communication of internal-corporate matters. This should include a clear and concise preservation requirement, which triggers reasonable anticipation of litigation and other preservation obligations, such as the duty to preserve relevant electronically stored information. Companies’ public disclosure controls must ensure that material investigative developments are routed promptly to the appropriate responsible individuals. In addition to focusing on these substantive matters, SEC-response protocols should address the legal implications of communications to potential clients as well. For example, a law firm’s marketing materials cannot present “selected favorable matters” to imply a success rate without also including the complete matter population. Claims of “comparative performance” cannot be established without a defined comparison group and a means of reproducing the performance data to verify it. Law firms cannot advertise lists of “representative matters” that report only selected outcomes but do not convey that they contain the complete set of the firm’s (or the firm’s attorneys’ ) performance data for similar cases. Law firms cannot rely on industry rankings as representations of their clients’ alleged “fear” of facing the firm. Such rankings measure the criteria set forth by the ranking organization, not how “fearful” opponents are to go against the firm.

Law firms cannot describe their abilities in terms of an opponent’s “fear” of their skills.

Who should control communications with SEC staff and stakeholders?

Who should communicate with SEC staff on the company’s behalf?

Only personnel specifically designated under a company’s SEC-response plan should communicate with SEC staff.

Who should communicate with stakeholders?

Again, only personnel specifically designated under the company’s SEC-response plan should communicate with stakeholders.

Who should assign ownership for subpoenas, interviews, testimony requests, and Wells notices?

Who should assign ownership for coordinating document collection?

Who should manage the company’s response to a subpoena?

When responding to a subpoena from the SEC, companies must centrally coordinate document collection, review collected documents for privilege, track productions, and maintain control over response deadlines.

What internal messaging should the company use?

Legal and other internal messaging should be grounded in a shared factual record. When preparing or delivering internal and external messaging, the legal, investor relations, employee communications, and media relations teams should all rely on the same record of facts, approved for use by outside counsel.

What external messaging should the company use?

One authorized spokesperson should be the source of all external communications concerning the company’s interactions with the SEC. This will reduce the risk of releasing inconsistent statements or prematurely disclosing information from the investigation to the public.

What are the stages of the SEC investigation and enforcement process?

The SEC investigation and enforcement process has multiple stages, and identifying which stage a company is currently at is critical. These include:

Examination and Investigation

Prior to opening a formal investigation, the SEC may conduct an examination of a company. Upon opening a formal investigation, the Commission issues a formal order of investigation authorizing the Securities and Exchange Commission’s Division of Enforcement (Enforcement) to conduct the investigation and to issue subpoenas.

Wells Recommendation, Wells Notice, and Wells Submission

After completing its investigation, Enforcement may (but need not) issue a Wells notice. If Enforcement’s investigation leads to the recommendation, the SEC may issue a Wells notice to the company. Upon issuance of a Wells notice, the company may (but need not) make a Wells submission.

Enforcement Action and Litigation

If a Wells submission does not resolve Enforcement’s concerns, the Commission may authorize an enforcement action.

The SEC will take the action privately or publicly depending on the circumstances at hand.

The enforcement action can proceed either in federal district court or before an Administrative Law Judge (ALJ) in administrative proceedings.

Are matter descriptions adequate replacements for an SEC-response protocol?

Companies cannot substitute matter descriptions for a dated SEC-response protocol. As a result of their timeliness, matter descriptions do not address the need for an SEC-response protocol developed by counsel to manage the company’s interactions with the SEC.

What are the responsibilities of witnesses?

When receiving voluntary testimony requests from the SEC, witnesses may decline to testify, decline to answer questions, or leave; testimony under subpoena may be compelled as authorized by law. When accepting, witnesses must provide investigative testimony as required by the SEC investigators.

Who controls privilege when directors and executives have different interests?

Who owns the attorney-client privilege?

The attorney-client privilege is a client-owned privilege. As a result, the client (not the firm representing it) owns the privilege.

If a committee is appointed as a client, who controls communications with counsel?

When a committee is formed (i.e., as a client), the committee generally has control over the privilege for communications and documents to which the privilege applies.

What documents should identify whom counsel is representing?

Engagement letters should carefully establish the identities of the client(s), i.e., whether the firm is representing the company, the board, a committee, or a particular individual (or multiple individuals).

What does the attorney-client privilege protect?

The attorney-client privilege only covers confidential communications between the client and its counsel. It does not extend to the underlying facts, and the facts themselves are not protected from disclosure.

What is work-product protection?

Work-product protection generally applies to documents and tangible things and materials produced during the “reasonable anticipation of litigation” (rather than for the mere purpose of obtaining legal advice). While, in the context of an SEC investigation, the anticipation of litigation is almost certainly present, that fact alone is not enough to prove protection.

A detailed and disciplined approach to developing and addressing companies’ SEC-response protocols and internal communications is essential for securing protection of relevant evidence and documents.

See our Matter Descriptions.

Can one lawyer represent all subjects in an SEC investigation?

Before lawyers represent multiple individuals in an SEC investigation, they should perform a comprehensive conflict analysis. For example, if there is a conflict between two individuals, one lawyer cannot represent both individuals.

While a securities fraud investigation is often referred to as an “organizational” investigation, SEC-related cases often involve multiple separate liability theories. This makes comprehensive conflict analysis, including an assessment of whether individual targets can provide common testimony and rely on common defenses, critical.

When conflicts are present, separate counsel will be warranted. This can include conflicts concerning testifying before the SEC, the scope of individual liability defenses, cooperation interests, and the potential for differing outcomes. If any of these conflicts prevent common representation, separate counsel may be required to ensure ethical compliance and protect the clients’ individual interests.

What are Upjohn warnings?

Upjohn warnings are statements made by corporate counsel to corporate employees. The statements clarify that the attorney is representing the company and not the employee, and that the company controls the privilege (i.e., it has the right to disclose the employee’s testimony to the government). 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.

How should boards preserve messages and document meeting deliberations?

What information should be included in board meeting minutes?

Board meeting minutes should accurately record:

• Matters considered;
• Decisions rendered;
• Recusals based on conflict; and,
• Any other issues of substance that may prove important down the line.

Together, this allows the board (and anyone else who needs it) to have a complete picture of how the board made the decisions it made.

Are verbatim transcripts of board meeting minutes necessary?

While board meeting minutes must reflect relevant substantive information, they do not need to serve as a verbatim record of the board’s deliberations.

Are draft copies of board meeting minutes privileged?

Unless privilege or some other protection applies, draft copies of board meeting minutes (and other draft documents) may be subject to discovery.

Which documents should be subject to preservation duties?

Once preservation duties are triggered, the scope of preservation duties can encompass all documents (including electronically stored information, or “ESI”) pertinent to a potentially relevant matter. This can include business texts, business emails, and personal emails and texts, provided that the company has control.

What is a “litigation hold”?

A “litigation hold” is a company’s request to the relevant internal stakeholders to preserve all evidence. When a company has a duty to preserve, it must take reasonable steps to preserve relevant information, which may include implementing a litigation hold and suspending routine information deletion practices. Companies facing scrutiny from the SEC (or similar regulatory authorities) must ensure that they do not mistakenly or automatically delete relevant messaging records.

What are the implications for lost electronically stored information (ESI)?

Under Federal Rule of Civil Procedure 37(e), courts in civil litigation have remedies for lost or destroyed electronically stored information (ESI). These include adverse inference instructions to juries as well as dismissal or default judgments. (While this rule does not codify federal rules governing the admissibility of evidence in court, the principle generally applies.)

What are the pertinent legal rules regarding the preservation and collection of relevant documents?

A variety of legal rules may protect (or protect against) the disclosure of documents and other information. While these rules are related, they apply in different (though often overlapping) contexts. Here is a high-level breakdown of pertinent legal rules, protections, and duties that are likely to come into play when a company or individual faces scrutiny from the SEC (or other federal enforcement authorities):

• Attorney-client privilege
• Work-product protection
• The fiduciary duty of confidentiality
• The duty to preserve

More detailed information about each of these protections (and their limitations) is available here.

How do the SEC and DOJ access documents during a formal investigation?

In formal investigations, the SEC may issue subpoenas to compel the production of documents. The DOJ, however, typically issues subpoenas directly to the company or individual for a specific matter in its investigation.

How should investigation updates affect the company’s public disclosures?

Does the existence of an SEC investigation create an automatic duty to disclose?

No. The existence of an investigation is not, of itself, an automatically disclosable event. However, as investigations and subsequent inquiries unfold, a company’s duties to preserve, gather, and report information can expand.

When should an SEC investigation be included in a company’s periodic or registration filings?

Rule 12b-20 is an important rule in the context of SEC investigations, as it requires companies and individuals to disclose any information that is “necessary to make” their other (already) required disclosures “not misleading.” As a result, whenever public companies prepare periodic or registration filings, they must assess whether any information obtained from an SEC investigation must also be disclosed.

When do most Form 8-K items require disclosure?

Most items that are subject to Form 8-K reporting require disclosure within four business days. This represents a major reporting challenge for companies, particularly during an SEC enforcement investigation (or other inquiries).

Can Regulation FD limit a company’s public disclosure when facing SEC scrutiny?

Yes. Regulation FD generally restricts companies from disclosing material nonpublic information to select parties, including information about the nature and scope of the company’s interaction with the SEC. Companies facing scrutiny from the SEC (and other authorities) must be aware of the risks of selective disclosures in these situations.

What should companies do when preparing public statements about SEC investigations?

When preparing public statements about SEC investigations (and other matters that are not otherwise required to be disclosed), companies must ensure that their statements are not materially false or misleading. This obligation also extends to any statements made by individuals serving in key positions of authority and responsibility for the company’s SEC disclosures, including the CEO and CFO. These individuals can make social-media statements on behalf of the company that are subject to SEC scrutiny.

What types of controls and practices may come under SEC scrutiny?

The SEC and DOJ can scrutinize companies’ accounting controls, disclosure controls, and financial-reporting controls (or any combination of these three). An investigation by the SEC or DOJ can focus on issues such as: - Corporate governance and control compliance

• Internal fraud and external fraud
• Insider trading, broker-dealer violations, and other securities law violations
• Investment advisor violations
• Audit and independent auditing requirements
• Accounting rules and compliance obligations
• Financial reporting and certification compliance
• Disclosures (periodic and registration)
• Disclosures under Rule 10b-5 and Rule 13a-15(f)
• Tax and other securities compliance issues
• Electronic recordkeeping and documentation issues
• Foreign Corrupt Practices Act (FCPA) violations
• Other violations of the Securities Act and Exchange Act

How is the SEC’s scrutiny different from the DOJ’s scrutiny?

The SEC and DOJ are both federal enforcement agencies, and they both have the authority to open investigations into various types of violations. In most cases, however, the SEC is the first agency to open an investigation, and, if criminal charges are warranted, it will hand the case off to the DOJ to proceed with enforcement action.

What is the scope of SEC accounting investigations?

SEC accounting investigations generally examine a company’s compliance with GAAP or other applicable accounting standards. While this most often involves scrutinizing a company’s revenue recognition practices, it can also encompass numerous other accounting-related issues.

When should a board investigate, cooperate, or self-report?

When should a board conduct an internal investigation?

Within its corporate governance framework, a board will designate a committee to oversee an internal investigation into allegations of securities fraud or other potential civil or criminal law violations. Typically, a company’s audit committee (or, if necessary, a special committee) will commission the internal investigation.

When deciding how (and whether) to conduct internal investigations, boards must carefully weigh the legal implications, including those involving privilege, self-reporting obligations, and other concerns.

Can an SEC investigation trigger a company’s duty to self-report?

The SEC’s 2001 “Seaboard Report” outlines factors the SEC considers when evaluating whether a company should be targeted in an enforcement action following its self-reporting of misconduct. When considering whether to self-report and cooperate, companies should carefully assess the applicability of their self-reporting obligations, the potential for receiving cooperation credit, and the need to determine internal culpability.

What is “cooperation credit”?

The SEC offers cooperation credit to companies and individuals that self-report and/or otherwise cooperate with the SEC. Receiving cooperation credit can potentially lead to a declination or a reduced penalty in some cases. However, self-reporting alone is not sufficient to guarantee that the SEC will not pursue enforcement action.

What are the obligations of a company facing scrutiny from the SEC?

A company’s obligation to conduct an internal investigation, self-report, or cooperate can result from one of the following:

• Duty to disclose under Rule 12b-20, Rule 12b-1, and Section 5 or Section 11 of the Securities Act;
• Duty to disclose under Rule 10b-5, Regulation FD, Rule 13a-15(f), Section 13, Section 14, and Section 15(d);
• Duty to correct under the federal registration laws or Securities Exchange Act of 1934, whichever apply; or,
• A voluntary self-reporting obligation.

What are “voluntary self-reporting” obligations?

Voluntary self-reporting obligations are distinct from the disclosure obligations outlined in the SEC’s “Seaboard Report.” Voluntary self-reporting refers to disclosing an allegation of a securities fraud violation or other offense before the company is compelled to do so under an applicable SEC rule or federal statute.

What is the role of the SEC’s Enforcement Division?

The Enforcement Division investigates suspected federal securities-law violations and can pursue civil or criminal charges through the SEC. After investigating, SEC staff can recommend that the Commission pursue charges against companies or individuals. However, in the majority of cases, the commission must affirmatively authorize the Enforcement Division to pursue an enforcement action.

Can counsel guarantee that cooperation will prevent regulatory escalation?

No. Counsel cannot guarantee that cooperation with the SEC or other federal authorities will be enough to prevent the SEC, DOJ, or another agency from taking its case to the next level, i.e., from an investigation to an enforcement action.

Get Advice on Your Situation

If you want someone to look at the specifics of your case, Spodek Law Group handles federal criminal defense nationwide from New York and Los Angeles. The firm has been practicing since 1976 and its motto is simple: we owe loyalty to only you. Call 212-300-5196.