SEC Defense Attorney in Fort Lauderdale, Florida When can an SEC investigation turn into a criminal investigation?
When can an SEC investigation turn into a criminal investigation?
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Not all SEC cases go criminal. That’s important to understand. However, some
do. And the reasons why an SEC case can be referred to the criminal authorities,
typically to the Department of Justice, is for a few reasons. There’s a few
factors that the SEC will consider in making that decision. The first
typically is the nature and quality of the evidence. How compelling and
convincing is that evidence? The reason the criminal authorities have to prove
their case beyond a reasonable doubt which is a much higher standard than the
SEC civil proof which is by a prepoundonderance of the evidence meaning 51 to 49% just a little bit more
than not. The quality of the evidence is a critical factor. The second, how much
money is involved? How large of a fraud, for example, is it? If it’s a few
hundred,000 versus a few hundred million, that makes a difference.
Obviously, the larger the potential losses, the more significant criminal
interest likely exists. Another key factor is the individual investors who
have been harmed. Who are they? If they are elderly, retirees,
or particularly vulnerable victims, that is a critical factor that the SEC will
1:541 minute, 54 secondstake into account when determining whether to refer it criminally. Finally,
if the individual who is being investigated by the SEC has a prior
history of securities violations, is a recidivist as it is known, that increases dramatically the chances of a
referral to the criminal authorities under the reasoning that if that individual did not get the message in
the first case, they perhaps don’t take serious seriously enough the SEC’s
enforcement powers and thus it should be referred for criminal prosecution.
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Fort Lauderdale, FL SEC defense attorney David R. Chase talks about when an SEC investigation can turn into a criminal investigation. He points out that not all SEC investigations result in criminal proceedings, although some matters may be referred to criminal authorities, typically the Department of Justice. He notes that the SEC considers several factors when determining whether a case should be referred for criminal prosecution, beginning with the nature and quality of the evidence and how compelling and convincing it is. He emphasizes that this factor is particularly important because criminal authorities must prove their case beyond a reasonable doubt, which is a significantly higher standard than the SEC’s civil burden of proof, which is based on a preponderance of the evidence, or slightly more than 50 percent.
He identifies the amount of money involved as another important consideration, noting that the size of the alleged fraud can influence the likelihood of criminal interest. A matter involving a few hundred thousand dollars may be viewed differently from one involving hundreds of millions of dollars, as larger potential losses generally create greater concern for criminal authorities. He also notes that the identities and circumstances of the investors who were harmed can be significant, particularly when the alleged victims include elderly individuals, retirees, or other especially vulnerable people.
He further emphasizes that the target’s prior history of securities violations is another important factor. He explains that an individual who has previously violated securities laws and is considered a recidivist may face a substantially increased likelihood of referral to criminal authorities. He notes that the reasoning behind this approach is that if prior enforcement action did not deter the individual from engaging in similar conduct, the SEC may determine that stronger measures, including criminal prosecution, are warranted.
