Managing Parallel SEC and DOJ Investigations.

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

While not necessarily “parallel,” the SEC and DOJ can both conduct investigations simultaneously. The SEC has procedures for sharing investigative information with the DOJ; and, as a result, testimony provided to the SEC can serve as evidence in DOJ criminal proceedings. The SEC Division of Enforcement investigates potential civil securities-law violations. If Enforcement determines that enforcement action is warranted, it can pursue civil charges in federal court. U.S. Department of Justice (DOJ) prosecutors in the Criminal Division’s Fraud Section or U.S. Attorney’s Offices can also investigate potential criminal securities offenses. The SEC Division of Examinations conducts routine and targeted examinations of securities firms and other regulated entities, during which it identifies potential civil securities-law violations. Serious examination findings are referred to the SEC Enforcement Division for further investigation, though some examinations conclude without enforcement referrals. Allegations of violations of the Foreign Corrupt Practices Act (FCPA) can also trigger coordinated investigations from the SEC and DOJ. Companies facing parallel (or potentially parallel) investigations should quickly implement unified response strategies tailored to their specific circumstances. These strategies should focus on preserving evidence and attorney-client privilege while avoiding unnecessary consequences. At the same time, companies need to coordinate their approach to statements, disclosures, and cooperation with federal authorities. They will also need to make strategic decisions regarding self-disclosure, self-reporting, and cooperation with the SEC and/or DOJ. Ultimately, this process requires negotiating resolutions with the SEC and/or DOJ, which requires experience interacting with both agencies in the context of securities-fraud-related criminal and civil enforcement actions. At Spodek Law Group, our attorneys and investigators handle matters managing SEC and DOJ investigations for our clients. We can develop and execute targeted response strategies and work toward the best possible resolution in all circumstances.

What Should the Company Do in the First 72 Hours?

SEC enforcement matters can begin as informal inquiries or formal investigations. When conducting an informal inquiry, the SEC may request voluntary cooperation. In a formal investigation, the SEC will require documents and sworn testimony under subpoena.

A company’s preservation obligation is triggered when litigation, enforcement action, or an investigation becomes reasonably foreseeable. As a result, companies targeted in parallel investigations should immediately take steps to ensure that all potentially relevant information is preserved. This begins with issuing a legal hold that expressly prohibits the destruction or alteration of all responsive information.

Importantly, companies should not rely on automatic deletion protocols. Legal holds must explicitly suspend routine deletions for all relevant custodians and systems, including all electronically stored information (ESI) such as email, instant messages, Slack, text messages, phone data, and cloud storage.

This step is critical, as loss of electronically stored information (ESI) can have serious consequences. Federal Rule of Civil Procedure 37(e) provides for sanctions in cases where electronically stored information is lost due to a party’s failure to take reasonable steps to preserve the information. Importantly, 18 U.S.C. § 1519 prohibits the destruction of evidence with the intent to impede, obstruct, or influence federal proceedings, and a criminal investigation falls squarely within this scope.

SEC Rule 21F-17 prohibits companies from taking action that attempts to “impede, inhibit, or prevent” employees from contacting the SEC. Rule 21F-17 extends from prohibiting employees from acting as whistleblowers to preventing them from cooperating with the SEC.

The SEC’s Division of Examinations is responsible for conducting both routine and targeted examinations of securities firms and other regulated entities. During these examinations, the Division can identify potential civil securities-law violations, which are then referred to the SEC’s Division of Enforcement for further investigation. The SEC Enforcement Division or the SEC’s Division of Examinations may also refer cases to the Department of Justice (DOJ) for criminal investigation.

A formal SEC investigation involves the issuance of a “Formal Order of Investigation.” This order delegates authority to specific SEC staff members to issue subpoenas and demand testimony and records. The SEC may also ask companies to voluntarily cooperate, and companies may find that this is the best course of action to avoid more aggressive enforcement.

While DOJ investigations may stem from referrals from the SEC, they can also begin on their own. Criminal securities offenses investigated by the DOJ are handled either by the U.S. Attorney’s Office in the local district or the DOJ’s Headquarters in Washington, D.C. Along with the ability to use federal grand juries to issue subpoenas and demand documents and testimony, the DOJ also has the ability to initiate criminal investigations on its own.

Many DOJ criminal investigations also involve the FBI. Given its extensive experience, resources, and capabilities, the FBI often plays a key role in the DOJ’s criminal enforcement investigations.

Companies facing civil and/or criminal enforcement need to start dealing with federal authorities immediately. With every hour of delay, these companies face increasing (and potentially ruinous) consequences.

How Can an Internal Investigation Preserve Privilege and Work Product?

While federal securities fraud investigations are frequently initiated by the SEC and/or DOJ, companies should not wait until regulators contact them to begin the internal investigation process. While regulators have the capacity to identify employee misconduct on their own, there are numerous benefits to initiating the internal investigation process before federal authorities identify any potential misconduct. With every hour that passes, federal authorities continue to develop their understanding of the scope and focus of their investigation, and that may leave little time for a company to launch a proactive investigation and response.

Do Companies’ Internal Investigations Need to Preserve Attorney-Client Privilege and Work-Product Protection?

Yes. Like all forms of internal corporate communications, internal investigation communications may be subject to the attorney-client privilege and/or work-product protection. For this reason, companies that are conducting (or contemplating conducting) an internal investigation should take a few key steps to protect information and privilege:

How Can Companies Use Upjohn Warnings to Help Preserve Attorney-Client Privilege in Internal Investigations?

Upjohn warnings are a critical aspect of conducting an effective internal investigation. An Upjohn warning makes it clear that investigating counsel represents the company, and not the individual employee. While employee communications with company counsel are typically privileged, the company (which is counsel’s client) usually has the sole authority to assert or waive that privilege.

Can Privilege Protection Cover the Underlying Facts Disclosed to Counsel?

No. As with all forms of privileged communications, a key distinction must be drawn between privileged communications themselves and the underlying facts that the communications reveal. While employees’ statements to investigating counsel may be privileged, the underlying facts they disclose to counsel remain discoverable by federal authorities.

How Can Companies Protect Information by Establishing Attorney Work-Product Protection in Internal Investigations?

Unlike the attorney-client privilege, which protects communications between counsel and clients, attorney work-product protection protects information generated by counsel. However, in order to protect an internal investigation under the work-product doctrine, a company must generally be able to establish that the information in question was generated in preparation for the anticipation of litigation.

How Can Companies Protect the Attorney-Client Privilege and Work-Product Protection When Making Voluntary Disclosures to the Government?

Making voluntary disclosures to the government can raise questions regarding a company’s ability to maintain the attorney-client privilege and/or work-product protection. In federal civil litigation, however, voluntary disclosure of information to a government agency typically does not waive attorney-client privilege. This is often referred to as “selective waiver,” and nearly every federal court of appeals to consider it has rejected it.

However, while selective waiver remains available for disclosing information to the government in civil proceedings, federal courts generally reject the notion that selective waiver is available in criminal proceedings. In the context of parallel civil and criminal proceedings, this means that a company’s voluntary disclosures of privileged information to the government for civil purposes may be found to waive the privilege for criminal purposes as well.

Confidentiality agreements between target companies and DOJ prosecutors can also raise questions about a company’s ability to protect its attorney-client privilege and work-product protection. As a general rule, the existence of a confidentiality agreement does not prevent a target company from being found to have waived its privilege and/or work-product protection.

Does the Justice Manual Address Privilege Waivers in Federal Criminal Investigations?

Yes, Justice Manual § 9-28.710 provides guidance on privilege waivers in criminal investigations. The manual explicitly prohibits DOJ prosecutors from demanding privilege waivers as a condition for receiving cooperation credit: “Prosecutors may not demand privilege waivers in exchange for cooperation credit or a presumption of innocence.” However, the Justice Manual also provides guidance for prosecutors on requesting access to information without requiring a mandatory waiver:

“Prosecutors should always be mindful of the importance of the attorney-client privilege and of the DOJ’s obligation to protect the confidentiality of privileged communications and work product. In light of these considerations, prosecutors should generally request that the parties who assert the privilege voluntarily provide the requested information.”

How Should Employees Handle Interviews and Compelled SEC Testimony?

Federal prosecutors and other government agents have numerous tools at their disposal when it comes to gathering evidence. They can (and often do) use interviews and proffers, witness testimony, grand jury testimony, subpoenas, search warrants, and other means to obtain both physical and electronic evidence. If an individual is compelled to testify in SEC proceedings, the individual may invoke the Fifth Amendment privilege against self-incrimination. Unlike individuals, however, corporations and other entities that are not natural persons cannot invoke the privilege.

Can Factfinders Draw Adverse Inferences from a Fifth Amendment Invocation?

If an individual or corporation invokes the Fifth Amendment privilege against self-incrimination during a federal criminal investigation, prosecutors and juries are generally prohibited from drawing adverse inferences from the invocation. In federal civil litigation, however, factfinders can (and often do) draw adverse inferences from the invocation of this privilege. As a result, individuals and corporations that provide testimony to the SEC must be extremely mindful of how their answers may increase their criminal exposure.

How Should Companies Handle Joint Company-Employee Representation?

Model Rule 1.7 of the American Bar Association’s (ABA) Model Rules of Professional Conduct outlines considerations for joint representation by company and employee counsel. In most cases, companies and employees can use joint representation as long as there is no known conflict. This is most frequently the case when a company and employee’s defenses are similar and are not materially divergent. When a conflict is waivable, joint representation requires informed consent; but, when a conflict is non-waivable, separate legal representation will be necessary.

When Will Separate Legal Representation Be Necessary?

Separate legal representation is required when a company and employee’s defenses materially diverge. However, just because employees are at risk of facing federal charges, this does not mean separate legal representation is necessary in all cases. This is the case even if a company is facing SEC Rule 102(e) proceedings.

What is SEC Rule 102(e)?

SEC Rule 102(e) provides the SEC with authority to pursue disciplinary proceedings against “accountants, auditors, attorneys, and other professionals” who facilitate a violation of the federal securities laws. Companies that are facing parallel SEC and DOJ investigations should prepare to address the possibility of Rule 102(e) proceedings as well.

While the government continues to use these tools to gather information and evidence, companies and individuals will need to focus their efforts on effective information preservation, response strategies, and informed cooperation. At Spodek Law Group, we represent companies and individuals in parallel SEC and DOJ investigations nationwide. We understand the implications of joint representation, the consequences of asserting the privilege against self-incrimination, and the requirements for Rule 102(e) proceedings, and we understand how these considerations need to be accounted for in targeted response strategies and negotiations with the SEC and DOJ.

Can the Company Pause the SEC Case During Criminal Proceedings?

Targets can request a stay of civil enforcement proceedings while criminal proceedings remain pending. In both civil and criminal matters, U.S. District Court judges have broad discretion to issue stays, and they typically apply judicial standards to decide motions to stay civil proceedings. However, parallel criminal investigations do not automatically result in the stay of SEC proceedings. When deciding whether to stay a proceeding, federal courts typically consider:

• The degree of overlap between the criminal and civil cases
• The procedural posture of both cases
• The potential prejudice to the government if the civil proceedings are stayed
• The government’s likelihood of proving criminal charges
• Whether the defendant will be able to preserve the attorney-client privilege during the criminal case
• Whether the defendant’s Fifth Amendment rights are at risk
• The public’s interest in both cases The Fifth Amendment does not grant defendants an automatic right to a civil stay. As a general rule, statutory authority and judicial precedent allow for parallel SEC and DOJ proceedings. Instead, these cases are often resolved either concurrently or sequentially. In a concurrent proceeding, the SEC and DOJ cases proceed at the same time. In a sequential proceeding, the civil case proceeds after the criminal case has ended.

These findings can lead to criminal charges and civil fines or injunctions. SEC enforcement proceedings can be either administrative or in federal court. Criminal prosecutions brought by the DOJ can culminate in a federal criminal trial, and they may involve additional charges like wire fraud, conspiracy, and tax offenses.

Regardless of which government agency has the authority to take action, companies facing parallel investigations should promptly retain experienced securities fraud defense counsel. At Spodek Law Group, we represent companies and individuals in cases involving parallel SEC and DOJ investigations. We can work with you to proactively prepare for interviews and testimony, negotiate with federal prosecutors and investigators, and execute tailored response strategies that minimize your liability in these complex matters.

What Must a Public Company Disclose About Ongoing Investigations?

Public companies must meet a wide range of disclosure requirements under the federal securities laws. This includes Regulation S-K Item 103, which requires companies to disclose “any material pending legal proceeding,” including specified proceedings “that have been threatened by a government authority.” However, the federal securities laws do not impose a blanket duty to announce every government investigation, and Rule 10b-5 may require additional disclosures if a company’s prior statements have been made misleading as a result of the investigation.

Can an Ongoing Criminal Investigation Excuse Required Disclosure?

Generally, an ongoing criminal investigation does not excuse a public company’s obligation to meet its securities disclosure requirements. Disclosure violations can result in substantial civil and criminal liability, while failure to meet the company’s other corporate governance obligations can have significant consequences as well.

Does the Criminal Investigation Silence Company Disclosure or Company Participation in SEC Investigations?

Generally, no. While Federal Rule of Criminal Procedure 6(e) protects the confidentiality of grand-jury proceedings, the federal criminal rules generally do not require the silencing of grand-jury witnesses or the non-disclosure of pertinent information.

What is the SEC Enforcement Process?

The SEC’s Division of Examinations investigates potential civil securities-law violations. It refers serious findings to the SEC’s Division of Enforcement, which can then conduct formal or informal investigations and pursue civil charges in federal court if necessary.

What is an SEC Disclosure Investigation?

SEC disclosure investigations investigate alleged financial reporting violations, internal control disclosure violations, and material omissions (and other fraud) in a company’s SEC filings. Cybersecurity incidents can also trigger SEC disclosure, reporting, and recordkeeping issues.

What is Parallel Private Securities Litigation?

Government investigations can also coincide with parallel private securities class action litigation. Companies facing securities class actions can find that the litigation both creates issues related to privilege and work-product protection and influences government investigations as well.

How Should SEC and DOJ Resolutions Be Coordinated?

Companies often report the findings of their internal investigations to government authorities during the cooperation process. When seeking cooperation credit, it is important to understand how these findings may be used by government authorities in any subsequent enforcement efforts.

Non-Prosecution Agreements (NPAs) and Criminal Enforcement

A Non-Prosecution Agreement (NPA) is a contract through which a corporate target agrees to fulfill certain obligations in exchange for non-prosecution for a corporate criminal investigation. While NPAs offer substantial benefits, they do not entirely avoid the threat of prosecution if the company fails to meet the terms stipulated in the agreement.

Criminal Guilty Pleas and Civil Settlements

Criminal settlements frequently take the form of a guilty plea to some charge, whereas civil settlements typically permit defendants to neither admit nor deny allegations. With this said, federal courts generally require a factual basis for entering a guilty plea. Pursuant to Federal Rule of Criminal Procedure 11(b)(3), “Before entering judgment on a guilty plea, the court must determine that there is a factual basis for the plea.”

Cooperation Analysis at the SEC and DOJ

The SEC takes several factors into account when assessing a company’s cooperation efforts during an enforcement matter. These factors include:

• Self-policing
• Self-reporting
• Remediation efforts
• Cooperation efforts with government agents As for DOJ criminal investigations, prosecutors and investigators are tasked with coordinating efforts with other government agencies when criminal proceedings overlap with a company’s civil obligations. Justice Manual § 1-12.100 provides guidance on how DOJ prosecutors and agents may coordinate overlapping corporate penalties in these cases:

“In order to avoid the imposition of excessive penalties on a corporate target, and, where appropriate, to avoid imposing penalties on a corporate target for whom an individual’s failure to address the underlying wrongdoing is the more significant issue, the U.S. Attorney’s Office and the Criminal Division will:

(a) Work closely with the Department’s civil counterparts to ensure that the corporation receives credit for remediation and other measures that are taken during the course of the criminal investigation;

(b) Work with all relevant other federal agencies to identify, when possible, opportunities for civil settlements that do not result in a duplication of penalties imposed in a parallel criminal matter.

In all cases, the relevant federal authorities should seek to work with the corporation in order to develop and execute coordinated resolutions to all pending matters.”

Issue Preclusion, Criminal Convictions, and Penalties

In cases where the government is the plaintiff, a corporate criminal conviction can create issue-preclusion consequences in subsequent civil litigation. Criminal convictions can lead to monetary judgments, with federal judges applying relevant federal civil or criminal penalties based on the nature of the underlying offenses. Criminal convictions can also involve imprisonment, criminal fines, restitution, and asset forfeiture.

Speak With a Federal Defense Lawyer

If you are dealing with any part of what this article describes, the next step is a conversation with a lawyer who handles these cases. Spodek Law Group is a second generation criminal defense firm practicing since 1976, representing clients nationwide from offices in New York, Brooklyn, Queens and Los Angeles. Call 212-300-5196 to speak with our team.