SEC Investigations of Attorneys: When Lawyers Face Scrutiny.

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

Yes. Attorneys can face personal exposure to SEC enforcement when their conduct, whether on its own or in conjunction with others’ conduct, satisfies the requisite elements for imposing liability under the applicable provision(s) of the federal securities laws. While providing legal advice (either internally or externally, and either for or without compensation) generally does not independently satisfy the relevant elements for establishing liability for antifraud or aiding-and-abetting violations, the SEC and DOJ can also conduct parallel investigations that target the same individual for liability under civil and criminal law. The SEC is charged with enforcing the federal securities laws through civil enforcement proceedings, which it can initiate through formal administrative proceedings or in federal district court. Because the SEC is a civil enforcement agency, it lacks the authority to seek imprisonment or other forms of criminal punishment for violations of the federal securities laws. SEC scrutiny can be triggered by a variety of events, including:

• Whistleblower tips
• Examinations
• Surveillance
• Referrals
• Public disclosures
• News reports
• Referrals from FINRA or other organizations These examples are not mutually exclusive, and any (or multiple) of these can lead to scrutiny from the SEC.

When can securities lawyers be personally liable to the SEC?

The SEC may initiate civil enforcement proceedings against lawyers under various provisions of the federal securities laws and related rules and regulations. These include, but are not limited to: - Section 17(a) of the Securities Act. Section 17(a) makes it unlawful to commit fraud or misrepresentations “in the offer or sale of any securities.”

• Section 10(b) of the Exchange Act and Rule 10b-5. Section 10(b) makes it unlawful to use any means of interstate commerce for the purpose of defrauding or committing fraud in connection with the purchase or sale of a security. Rule 10b-5 broadly implements Section 10(b) and provides for civil penalties in fraud cases.
• Section 20(e) of the Exchange Act. Under Section 20(e), the SEC can pursue attorneys and other individuals for substantial assistance with fraudulent or illegal conduct, even if the attorney or individual did not make misrepresentations or engage in a securities transaction. Importantly, under Section 20(e), the SEC can also seek relief based on “reckless” conduct, even in the absence of proof of the defendant’s intent to defraud.
• Janus and Lorenzo. While the Supreme Court’s decision in Janus (2011) limited Rule 10b-5(b) liability to those with ultimate authority over the subject statement, the Court’s more recent decision in Lorenzo (2019) allows for primary liability under Rule 10b-5 for knowingly disseminating false statements, even if the disseminated statement was not “made” by the individual facing scrutiny.
• Relief Defendants. The SEC may also seek relief from so-called “relief defendants.” A relief defendant is an individual or company accused of holding proceeds from a securities violation that it has no legitimate right or title to. The SEC does not need to prove any wrongdoing on the part of a relief defendant in order to seek funds. The following are some recent developments in securities enforcement that lawyers can see as key in their SEC investigations (and defense):
• FinCEN’s postponed AML rule. FinCEN recently postponed the effective date of its final rule under the Bank Secrecy Act (BSA), “Anti-Money Laundering/Countering the Financing of Terrorism Program and Suspicious Activity Report Filing Requirements for Registered Investment Advisers and Exempt Reporting Advisers,” from January 1, 2026, to January 1, 2028.
• The SEC’s application of the “Howey Test.” The SEC continues to use the “Howey Test” to evaluate whether transactions involving cryptoassets and NFTs amount to securities transactions. While a cryptoasset or NFT transaction might not necessarily fall under this definition, calling these types of transactions “securities” does not automatically render them as such in the legal sense.

Can an SEC Subpoena Force Disclosure of Privileged Client Files?

An SEC subpoena does not extinguish attorney-client privilege or the work-product protection. While the SEC can seek compelling disclosure of both, and attorneys must raise objections and make privilege claims under appropriate circumstances, these protections (when they apply) will require additional action by the SEC to overcome.

Attorney-Client Privilege

Attorney-client privilege protects “confidential communications between a client and his or her attorney made for the purpose of facilitating the attorney’s giving of legal advice.” Matters that generally fall under the privilege’s scope include:

• Advice provided by the attorney
• Client disclosures pertinent to the advice given
• Documents conveying legal advice to the client While privilege covers those communications (and related documents) and work products, it generally does not cover the underlying historical facts. To qualify for protection under attorney-client privilege, the legal advice must be provided in connection with a qualifying relationship between the attorney and the client. Communications between attorneys and their clients are not protected by the attorney-client privilege where the crime-fraud exception applies, i.e., where the communication is in furtherance of ongoing or future wrongdoing.

Work-Product Protection

Another protection is the work-product protection, which generally covers materials that attorneys prepare while representing their clients. To qualify for work-product protection, the material must (1) be material or information that is attorney-work product, (2) the material or information must have been prepared in anticipation of litigation, and (3) the material or information must be confidential. If an attorney, or an attorney’s work product, is pertinent to the SEC’s investigation, this protection can also apply. The attorney-client privilege is more limited in scope and generally only protects communications, while work-product protection generally applies to qualifying material created by or for a party or its representative. However, the crime-fraud exception applies to the work-product protection as well.

What Is the Scope of “Privilege” in SEC Investigations?

A key question in SEC investigations is what the scope of the “privilege” is. For attorneys (and others facing SEC scrutiny), there are generally three main aspects to consider in this regard.

1. What does the attorney-client privilege or the work-product protection cover?

2. When can these privileges be waived?

3. When can the privilege or protection be defeated? While the answers to these questions can vary from case to case, and the answers may depend on various factors (both the nature of the privilege and the nature of the facts at hand), these three overarching questions all can have practical implications when deciding whether to assert privilege or seek to avoid the SEC’s requests for documents and information.

What Should I Do Next?

You should consult with your lawyer immediately. By choosing Spodek Law Group, you will be consulting with an experienced and strategic securities enforcement defense attorney. We can help you determine how to proceed.

How Can Attorneys Avoid Waiving Privilege During an Investigation?

There are three main Federal Rules of Evidence (FRE) that are relevant when determining how to preserve the attorney-client privilege in the event of an inadvertent or intentional disclosure. Those rules are: - FRE 502(b). Under FRE 502(b), the disclosure of privileged information does not operate as a waiver of the privilege in the event the disclosure was inadvertent or produced in a manner that was not intentional. However, the FRE requires that the party which disclosed the information acted reasonably to prevent disclosure, and that the party which disclosed the information promptly took steps to prevent further disclosure once the disclosure became apparent.

• FRE 502(d). In some cases, a court can enter an order under FRE 502(d) stating that the production of a privileged communication or work product in a federal proceeding does not waive the privilege in any other federal or state proceeding.
• FRE 502(e). In some cases, the parties involved in an investigation can sign a “clawback” agreement pursuant to FRE 502(e). These agreements generally state that the production of privileged information does not waive the privilege and that the recipient must promptly notify the sender if it finds the information is privileged. A Rule 502(e) agreement binds only its parties unless a court enters an order, thus the agreement can have limited practical effect.

Waiver Issues of Interest in SEC Investigations

In addition to the general issues related to privilege waiver, attorneys (and others) who are facing SEC scrutiny can also face the following additional issues:

• Waiver by sharing internal findings with independent auditors.
• Waiver in the event of sharing “nonpublic” information obtained from the SEC with other parties (such as independent auditors) pursuant to a confidentiality agreement.
• Waiver in the event of information that is “nonpublic” being shared by the SEC with the DOJ. While these issues are not present in most cases, they can have significant consequences in those cases where they present a risk for inadvertent or intentional disclosure.

What Ethics Duties Change Once the SEC Investigates?

When a law firm (or company) is facing an SEC investigation, several additional ethics issues are likely to come into play. These include:

• Representing the entity vs. Representing its officers, directors, employees, or other constituents. Model Rule 1.13(a) identifies “the organization” as the client, and, while the individual is an attorney’s representative, the individual is not the client. Model Rule 1.13(f) requires that the attorney clarify who the attorney represents in the event that the attorney’s representation of the organization is not limited to the organization, particularly if the attorney’s interests diverge from those of the organization. If the attorney continues representing both, the attorney will need to conduct a conflict analysis to determine if the conflict is waivable, and if it is waivable, the attorney will need to obtain informed consent.
• Issues related to the corporate attorney’s “Upjohn Warning.” In an Upjohn interview, a company attorney informs employees and agents that the attorney represents the company, and, as such, the company (not the employee or agent) controls any and all interview privilege. The company attorney must also explain that the company can waive that interview privilege in the company’s discretion.
• Preserving documentation and evidence. While the Federal Rules of Civil Procedure impose preservation requirements, ABA Model Rule 3.4(a) imposes similar obligations on attorneys. Under Model Rule 3.4(a), attorneys cannot “unlawfully obstruct another party’s access to evidence or unlawfully alter, destroy or conceal a document or other material, having potential evidentiary value.”
• Confidentiality and other obligations under Model Rule 1.6. ABA Model Rule 1.6 generally prohibits the disclosure of “information relating to the representation of a client” without the client’s consent, and there are seven exceptions, most of which are not applicable in the context of an SEC investigation.
• Duty of candor to the SEC. ABA Model Rule 4.1 imposes a duty of candor toward third persons (including federal regulators). Specifically, Model Rule 4.1 prohibits an attorney from knowingly making a false statement of material fact or law, or failing to disclose a material fact when disclosure is necessary to avoid assisting a client’s criminal or fraudulent act.
• The possibility of withdrawal of representation. ABA Model Rule 1.16 imposes an attorney’s duty of withdrawal from representation in the event that the continued representation of a client would result in a violation of this attorney’s duty of candor to the SEC under Model Rule 4.1, or any other provision of the law or rules of professional responsibility.
• Other duties under the rules of professional responsibility. Attorneys’ duties of candor (toward the SEC) and confidentiality (toward their clients) can create conflicts that need to be carefully managed during the course of an SEC investigation.
• Potential for conflict between the law firm and its client. If a company’s law firm is involved in the conduct that triggers the SEC’s scrutiny, then the law firm must assess the possibility of a conflict between the law firm and the client. This analysis is critical in the early stages of the SEC investigation; and, if a conflict exists, the law firm must make all necessary steps to remedy that conflict promptly.

How Can SEC Cooperation Create Criminal Risk for Attorneys?

The SEC’s authority is exclusively limited to civil enforcement. If an investigation reveals conduct that could warrant criminal enforcement as well, the SEC will refer the investigation to the DOJ, and the DOJ may independently resolve to conduct its own criminal enforcement investigation as well. As a result, SEC cooperation can create criminal risk in several different ways:

• A lawyer (or any other individual) who is under scrutiny for conducting securities fraud (and other offenses) during an SEC investigation, can expose himself or herself to both criminal enforcement through the DOJ and civil enforcement through the SEC.
• Investigative statements. During the course of an SEC investigation, a lawyer (or other individuals) may be asked to make investigative statements. These statements can then serve as evidence in civil proceedings initiated by the SEC, or criminal proceedings initiated by the DOJ.
• The lawyer (or other individuals) may be called to testify under subpoena in front of the SEC. In that case, the lawyer (or individual) may invoke the Fifth Amendment to the U.S. Constitution against self-incrimination during the SEC proceeding. While the Fifth Amendment generally prevents the court from inferring guilt from silence in criminal proceedings, civil cases can be a different story. The judge presiding over the civil case can permit the jury to draw adverse inferences from the individual’s Fifth Amendment silence during the proceedings, meaning that silence may be admissible evidence of the individual’s liability in that case.
• Obstruction of justice. A lawyer (or individual) under SEC investigation can also face criminal exposure for obstruction of justice under 18 U.S.C. § 1519. Section 1519 makes it a crime to intentionally delete or destroy any “record, document, or tangible object” that can be used for “obstructing the administration of any matter within the jurisdiction of any department or agency of the United States.” If a lawyer (or other individual) receives an SEC subpoena but still decides to delete communications or other information covered by the subpoena, then the lawyer (or individual) can face criminal liability under Section 1519 independently of any liability that may arise from the underlying suspected securities violation.
• Parallel Investigations. If a lawyer (or individual) is the subject of parallel civil and criminal investigations, then they must determine how to make informed decisions in each of the investigations. This will involve a conflict between the civil-cooperation goal of the SEC investigation and the criminal-defense goal of the DOJ investigation. Decisions made in the context of an SEC investigation could adversely affect a lawyer’s or individual’s criminal defense and, in some cases, could adversely affect their ability to exercise Fifth Amendment protection.
• Client-Advocate Role. Lastly, when a lawyer is the subject of an SEC investigation, the lawyer’s interests are separate and distinct from the lawyer’s client’s interests. As discussed, the Fifth Amendment protects the lawyer’s personal rights. The Fifth Amendment does not act as a privilege that allows the attorney to avoid testifying on behalf of the client.

Can SEC Findings Cost a Lawyer the Right to Practice?

If a lawyer is suspected of a violation in the course of an SEC investigation, this could have implications regarding the lawyer’s right to practice. Specifically, the SEC can seek to discipline the lawyer in two ways:

• SEC Rule 102(e). Rule 102(e) makes it clear that an attorney’s and accountant’s “practice” (which includes making representations in connections with SEC filings or other SEC-related matters) is subject to Commission oversight. Under Rule 102(e), the SEC can censure lawyers, and in certain cases, it can censure an attorney and bar the attorney from practicing before the Commission for a period of time. This type of disciplinary action is more likely to occur when the attorney’s conduct is “willful,” and willfulness can be found when the attorney’s conduct satisfies the element for liability for a material misstatement or misleading statement under Section 10(b) of the Exchange Act or Rule 10b-5.
• C.F.R. Part 205. Part 205 addresses the ethical conduct of “attorneys practicing before the Commission on behalf of issuers.” Under Part 205, attorneys practicing before the SEC on behalf of issuers are bound to maintain standards of professional conduct that are consistent with the ABA Model Rules of Professional Conduct. As a result, any suspected violation of these rules can serve as the basis for SEC enforcement. Specifically, attorneys must take appropriate steps to report any evidence of material violations (including securities fraud) to senior leadership at the issuer they represent. If the senior leadership at the issuer fails to take appropriate action to address the material violation, the attorney must further escalate the matter to the issuer’s audit committee, and, if that is still unsuccessful, the attorney must then report the matter directly to the SEC (or the appropriate board of directors).

Can SEC Discipline lead to State Discipline?

There are two main ways in which SEC discipline can lead to state-law discipline for attorneys (i.e., professional disciplinary proceedings conducted by an attorney’s state bar or attorney disciplinary authority).

• Relationship Between SEC Rule 102(e) and State Discipline. In the first instance, SEC Rule 102(e) discipline and state-level disciplinary proceedings (conducted by the relevant attorney disciplinary authority) are separate proceedings. The SEC’s authority is limited to practice before the SEC. As a result, if an attorney is disciplined under Rule 102(e) (e.g., the attorney is censured or the attorney is barred from practicing before the SEC for a period of time), this disciplinary action, on its own, does not deprive the attorney of their state license.
• Attorney Discipline Under State Rules of Professional Conduct. However, in the second instance, the attorneys’ conduct that leads to SEC discipline can also lead to state-level disciplinary proceedings as well. When the state bar or attorney disciplinary authority receives evidence of an attorney’s violation of the state’s version of the Model Rules of Professional Conduct, it may independently initiate disciplinary proceedings against the attorney.

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.