What Happens If I Ignore an SEC Subpoena??

No, not if the subpoena is served to a witness and no formal order is issued. However, there are some exceptions to the rule.

In SEC cases, this includes:

• The subpoena is served on the person or entity that may face liability under federal securities laws; or,
• The SEC has a formal order of investigation, which can be used to compel records, testimony, or both. A formal order of investigation does not establish the recipient’s individual liability.

What is the Difference Between an SEC Administrative Subpoena and a Federal Court Subpoena?

The main difference is that SEC investigative subpoenas are administrative subpoenas that do not have to be issued by a federal court. As a result, missing a deadline to respond to an SEC administrative subpoena is not a “contempt of court,” although federal district courts can order compliance. When the SEC files a formal complaint in federal district court to compel compliance with an administrative subpoena, the subpoena becomes a federal court order. Then, if a person or entity continues to defy the subpoena, it is a form of contempt of court.

What Should I Do with an SEC Investigative Subpoena?

The first priority is to preserve all responsive information. The second priority is to challenge all non-responsive information to the extent possible. Because SEC subpoenas can be very broad, it is critical to engage experienced counsel to respond quickly and accurately while defending against the SEC’s overreach.

What Should I do If an SEC Investigative Subpoena Has Already Been Issued?

If you are faced with an SEC investigative subpoena, the first thing you need to do is call Spodek Law Group Our team can assess the risks at hand and help you make an informed decision about how to best move forward.

When can ignoring an SEC subpoena become contempt?

If the SEC obtains a federal court enforcement order, a recipient faces two separate obligations: the obligation to comply with the SEC’s subpoena, and the obligation to comply with the district court’s enforcement order. While the SEC cannot itself impose fines for a recipient’s defiance of the subpoena itself, a recipient who defies the court order is subject to civil or criminal contempt.

Civil Contempt

Criminal Contempt

If criminal contempt is pursued, it is prosecuted by an attorney for the government under Federal Rule of Criminal Procedure 42, and the prosecution must prove that the court entered a clear enforcement order and that the recipient knowingly and willfully disobeyed it. If criminal contempt is found, the penalty can include fines and imprisonment.

Is the Subpoena-Enforcement Filing Public?

With very limited exceptions, federal subpoena-enforcement filings are ordinarily accessible to the public. The SEC’s filing may reveal the nature of the investigation, and it can reveal the recipient’s alleged conduct as well. The filing may be read in full or reported on in local news.

What if I Get a Civil Contempt Fine?

If the district court issues a civil contempt fine order, there are two consequences, and the recipient can purge the first one if he or she decides to comply. The first consequence is that the recipient will be ordered to pay the accrued civil contempt fine. When the recipient complies with the subpoena, this “coercive” civil contempt is purged, the fine ceases to accrue, and no prospective civil contempt sanctions will be imposed.

Is a Civil Contempt Fine the Same as a Criminal Contempt Fine?

No, a criminal contempt fine can punish past disobedience after criminal contempt is found. A criminal contempt fine is not “purged” by later compliance.

What should I do if the deadline already passed?

Can I Get an Extension for My SEC Subpoena Deadline?

Recipients of SEC subpoenas can often negotiate extensions with the SEC, but extensions are not automatic. The SEC staff will typically grant extensions if a recipient is unable to comply with a subpoena’s deadline for reasonable reasons, including the recipient’s inability to promptly find an adequate SEC defense lawyer. However, the SEC will either grant, deny, or propose a compromise for an extension request.

Can I Limit the Scope of the Documents the SEC Is Demanding?

The SEC may agree to narrow its document demands if its document requests are burdensome. Again, however, this will depend on the SEC staff’s willingness to grant a request for a limited scope.

Can I Handle Burdensome Document Demands with Silence?

No, you can object to requests that are burdensome, but silence is not an appropriate response.

Can I Get an Extension to My SEC Subpoena Deadline if the Deadline Has Already Passed?

Yes, the SEC staff may agree to a revised schedule even if you missed your deadline. The best strategy under these circumstances is to offer some limited production before your requested extension expires. Again, however, the SEC staff’s response will determine whether it is best to negotiate further or to respond with a written response or to negotiate for an extension.

If I Miss the SEC Subpoena Deadline, Does This Resolve My Compliance Deficiencies and Prevent SEC Enforcement?

No, as discussed in Detail 2, the SEC can still pursue federal enforcement or SEC civil penalties for a recipient’s compliance deficiencies after a recipient complies with an SEC subpoena.

If your compliance deficiency is the failure to comply with an SEC subpoena on its date of production or testimony, then a late production or late testimony does not resolve the compliance deficiency and does not prevent the SEC from enforcing compliance by seeking an enforcement order from a federal district court or imposing SEC penalties.

What is a Written Extension Confirmation?

A written extension confirmation is a record that documents the revised deadline for compliance with an SEC subpoena. The SEC will respond to a subpoena’s recipient with either a confirmation of a revised deadline, a request for a limited production, or a request for the recipient’s compliance by the date stated in the subpoena.

What is a Written Scope Confirmation?

A written scope confirmation records the scope of an SEC subpoena’s demands after an SEC staff member agrees to limit the subpoena’s demands based on a recipient’s objections. This documentation ensures that any future discussions with the SEC are centered on the actual terms of the SEC’s demands.

How Do I Find My SEC Subpoena Deadline?

Each SEC subpoena states its date of production or testimony. This date can be found in the “ deadline for compliance” or “deadline for production or testimony” section of the SEC’s subpoena.

What Should I Preserve After Receiving an SEC Subpoena?

A recipient should preserve potentially responsive documents after receiving an SEC subpoena. A recipient should also preserve any communication from an SEC staff member to the recipient that discusses the subpoena’s compliance requirements.

If the recipient is a company, then the company may need to suspend its routine electronic-data deletion. The company may also need to send instructions to relevant employees to preserve responsive electronic documents.

What if I Delete Some Subpoenaed Information?

Deleting potentially responsive information after receiving an SEC subpoena is dangerous. The SEC may seek enforcement or civil penalties, and it may refer the matter to the Department of Justice, which can bring charges for obstruction of justice or other criminal conduct related to the SEC’s investigative subpoena.

What if the Requested Information is Not on My Computer?

As discussed above, responsive information may be in the recipient’s possession, custody, or control even if the information is not stored on the recipient’s computer. For example, a recipient’s mobile phone may contain responsive information that is still within his or her control. In similar fashion, if a recipient’s mobile phone accesses a cloud service that stores a backup of responsive information, this information may still be in the recipient’s possession, custody, or control.

Can I Have Responsive Information that I No Longer Possess?

Yes, in many cases, this is a true statement. If you previously had responsive information but no longer possess the information, you may still possess, have, or control the information if the information is being stored electronically in a cloud service. This type of information is commonly subject to an SEC subpoena.

Does the SEC Subpoena Explain What I Need to Preserve?

Yes, SEC subpoenas commonly include instructions for the preservation of electronically stored information. The instructions state which types of information are subject to preservation obligations, in what cases these information are subject to preservation, and what is generally understood as being “under a person’s possession, custody, or control.”

Spodek Law Group, led by managing partner Todd Spodek, defends clients in federal criminal and white collar matters.

How Do I Challenge an SEC Subpoena?

A recipient can challenge an SEC subpoena by arguing that the subpoena (i) does not serve a legitimate investigative purpose; (ii) demands information that is not relevant to the investigative purpose; (iii) imposes an unreasonable or abusive compliance burden; (iv) is issued by an unauthorized party; (v) violates a Fifth Amendment privilege; (vi) demands privileged information; and/or (vii) or is otherwise invalid for some other reason.

How Do Courts Examine SEC Subpoenas?

Courts assess whether an SEC subpoena (i) serves a legitimate investigative purpose; and, (ii) demands information that is relevant to the investigative purpose in question.

Will Courts Assume the SEC’s Subpoena is Unreasonable or in Bad Faith?

No. In fact, the opposite is true. In RNR Enterprises, Inc. v. SEC, 122 F.3d 93 (2d Cir. 1997), the D.C. Circuit states: “When it comes to the SEC’s use of an administrative subpoena, this court has said that the SEC has wide discretion to determine what is relevant for an investigative purpose . .. Recipients rarely overcome the SEC’s evidentiary presumption that its subpoena serves a legitimate purpose. The burden of establishing the SEC’s bad faith is steep.” In RNR Enterprises, however, the court required “substantial evidence” before granting an improper-purpose hearing.

What Can a Recipient Say in Response to the SEC’s Subpoena Enforcement Action?

In addition to making any subpoena challenges that are viable, the recipient can also defend against an SEC subpoena enforcement action by (i) proving that the SEC’s subpoena was not served on the recipient; or (ii) proving that the recipient is outside of the SEC’s jurisdiction.

In SEC v. Howatt, 525 F.2d 226 (1st Cir. 1975), the federal district court noted that “The SEC’s subpoenas must pursue a legitimate investigative purpose. That purpose must not involve a forbidden attempt to intrude upon protected privacy interests, and the information requested must be reasonably related to the SEC’s legitimate investigative purpose.”

What is an Administrative Subpoena?

An administrative subpoena is a subpoena that is issued by an administrative agency under its administrative authority to conduct an investigation. An SEC administrative subpoena can seek production of documents, oral testimony, or both, and it cannot be excessively indefinite or unduly burdensome.

What is a Formal Order?

A formal order is an order that authorizes designated SEC staff to conduct an investigation and use compulsory process to enforce compliance with SEC subpoenas.

Can privilege or the Fifth Amendment justify withholding information?

Does the Fifth Amendment Protect Against an SEC Subpoena?

The Fifth Amendment protects individuals from being compelled to be witnesses against themselves in criminal prosecutions, but it does not grant a complete privilege against SEC subpoenas. This is one of the most important SEC subpoena issues that recipients and their lawyers will need to address in their response to the subpoena.

When Can the Fifth Amendment Excuse Non-Compliance?

The Fifth Amendment can only excuse non-compliance when the SEC compels testimony that would tend to incriminate a person in a federal criminal prosecution.

Recipients of SEC subpoenas often make the mistake of thinking that an SEC subpoena’s Fifth Amendment implications allow them to ignore the subpoena entirely. This is not the case.

Does the Fifth Amendment Excuse Withholding Documents?

The Fifth Amendment generally does not excuse withholding documents under an SEC subpoena. A recipient created documents voluntarily, and the act of creation does not incriminate the recipient unless the document itself is contraband (e.g., drug records).

When can Producing Documents Be “Testimonial”?

While the Fifth Amendment normally does not apply to records and communications, it can apply to document production if producing the documents is deemed to be “testimonial”, a recipient may be compelled to concede, by producing a document, that the document exists, that the document is in the recipient’s possession, or that the document is authentic. However, the SEC can defeat this argument when the SEC can prove the document exists, is in the recipient’s possession, or is authentic.

Do Corporations Have a Fifth Amendment Privilege?

Corporations do not have a Fifth Amendment privilege against SEC subpoenas. In Braswell v. United States, 487 U.S. 99 (1988), the U.S. Supreme Court explains: “A corporate custodian whose business records are demanded cannot refuse to testify to their existence or control on the ground that testifying to either is a testimonial act and would provide the basis for a criminal prosecution of the corporation.” This decision prevents a corporate custodian from using his or her individual Fifth Amendment privilege to defend against an SEC subpoena to produce corporate records.

Does the SEC Need to Justify Its Documents Request to Get Privilege Protection?

No. Recipients must raise privilege claims, and these claims ordinarily require documentation that supports their validity. In many cases, the SEC will require a document-by-document assessment and a privilege log to determine the validity of a privilege claim.

Can I Claim Attorney-Client Privilege or Work Product Protection?

Possibly, but not at the SEC’s discretion. Voluntary disclosure of privileged communications is one of the quickest ways to waive attorney-client privilege. Nonprivileged responsive materials are still producible. The SEC will usually require documentation to be provided and a privilege log.

How long can an SEC investigation continue?

Does the SEC Stop Its Investigation if it Fails to Obtain an SEC Subpoena Enforcement Order?

No. The SEC’s failure to obtain an SEC subpoena enforcement order only stops the agency’s ability to compel a subpoena’s recipient to produce information or testify.

While SEC investigators must close a recipient’s individual investigation if it has been dormant for a long time, the SEC can continue the underlying investigative effort against others.

The SEC conducts thousands of administrative investigations every year, and the duration of an SEC investigation can vary depending on the specific circumstances involved.

How Long Does an SEC Investigation Last?

The length of an SEC investigation varies depending on the facts and circumstances involved. As a result, there is no set amount of time for the SEC to complete an investigation.

The SEC, however, may refer its investigation to the U.S. Department of Justice (DOJ) if the SEC discovers evidence of federal criminal violations. If the SEC discovers federal securities law violations that are also criminal violations of federal statutes, the information that the SEC obtains under an administrative subpoena can be shared with federal prosecutors with the DOJ.

The SEC can file an enforcement action up until the expiration of the relevant limitations period. A recipient’s failure to comply with an SEC subpoena by producing a deficient response does not trigger any limitations period, and the SEC can continue its investigation for an unlimited period of time before bringing any enforcement action.

Will the SEC Share my Personally Identifiable Information with Other Agencies or Private Entities?

The SEC’s Form 1662 is a public record that describes the agency’s routine use of personally identifiable information obtained during an investigation. In Form 1662, the SEC clarifies that it collects personally identifiable information for the purpose of “pursuing civil enforcement and SEC administrative action.” The SEC identifies the Department of Justice (DOJ) and other government authorities as potential recipients of personally identifiable information. It explicitly states that it does not typically share this information with private entities.

Is the SEC Investigation Nonpublic?

Generally, yes, SEC investigations are nonpublic. The SEC’s filing of an enforcement action with the SEC’s Office of the Chief Accountant, a state securities commission, or a federal district court is the first time an investigation will be public.

Can I Ignore a Subpoena from Congress?

No. While a congressional subpoena does not allow for enforcement via the SEC’s Section 21(c) process, it is not a request for voluntary information. Congressional subpoenas must further valid legislative purpose and must not impose “unreasonable or unduly burdensome” conditions. As discussed above, this is a very high bar to overcome.

If you received a subpoena from Congress and it sought testimony and documents that you have a Fifth Amendment right to withhold or that would provide the SEC with evidence sufficient to support an SEC subpoena enforcement action, you should speak with an experienced federal securities lawyer promptly.

Will a Congressional Committee refer a Subpoena Recipient to the Department of Justice for a Criminal Prosecution if a Subpoena Recipient Willfully Defaults?

Potentially. A willful default of a subpoena issued by a congressional committee can expose the recipient to criminal prosecution under 2 U.S.C. § 192.

A congressional committee’s referral of its subpoena recipient for a contempt of Congress prosecution can be accompanied by a certification under 2 U.S.C. § 194. 2 U.S.C. § 194 provides a statutory presumption that the certification is accurate. This statutory presumption is only rebuttable with “clear and convincing” evidence.

Can I Ignore a Civil Subpoena from a Congressional Committee?

If the subpoena is civil in nature, the SEC may be able to seek enforcement against the recipient in federal district court under 28 U.S.C. § 1365. But, the recipient must be able to avoid civil liability before he or she should consider ignoring a congressional committee’s civil subpoena.

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.