The U.S. Securities and Exchange Commission (SEC) has increased its enforcement efforts against fund managers and other financial professionals

The U. S. Securities and Exchange Commission (SEC) has increased its enforcement efforts against fund managers and other financial professionals.

When the stock market crashed in October 1929, so did public confidence in the U.S. markets. Congress held hearings to identify the problems and search for solutions. Based on its findings, Congress – in the peak year of the Depression – passed the Securities Act of 1933. The following year, it passed the Securities Exchange Act of 1934, which created the U. S. Securities and Exchange Commission (SEC).  From its inception, the SEC was charged with a three-part mission:

  1. Protect investors;
  2. Maintain fair, orderly, and efficient markets; and
  3. Facilitate capital formation.

In basic terms this means companies offering securities for sale to the public must tell the truth about their business and what they are selling, and the risks involved in investing.  Companies, brokers, dealers, and exchanges must treat investors fairly and honestly.

In recent years, the SEC has increased its enforcement efforts against fund managers and other financial professionals accused of violating securities laws.  If you are a fund manager facing a lawsuit by the SEC, it is important to understand your legal options and to work with experienced securities litigation attorneys to defend yourself, your business, and your case.

The SEC may start and investigation or bring a lawsuit against a fund manager or financial professional for a variety of reasons, including allegations of fraud, misrepresentation, manipulation, marking, insider trading, or other violations of securities laws.

Typically, the SEC will reach out to you as the “good cop” trying to get as much information as possible.  The SEC has excellent attorneys and investigators, and they are not the “good cop”.  The SEC will attempt to get as much information from you as nicely as possible to build their case.  It could start with telephone calls or letters requesting written responses to questions or allegations.  Then it may progress to requests for recorded statements or depositions.  These are all calibrated to extract information from you to help their investigation.

It is important that as soon as you receive notice from the SEC regarding a request for information or notice of an investigation, the first step is to hire an experienced securities litigation attorney. Your attorney will work with you to review the allegations against you, gather evidence, and develop a legal strategy to defend your case.  You should not communicate with the SEC on your own.

One of the most important defenses in a lawsuit brought by the SEC is to challenge the evidence presented. The SEC must prove its case by a preponderance of the evidence, which means that it must show that it is more likely than not that you violated securities laws. Your attorney can challenge the evidence presented by the SEC, including witness testimony, documents, and other evidence, to show that the SEC has not met its burden of proof.

Another defense in a lawsuit brought by the SEC is to argue that you did not have the intent to violate securities laws. Many securities laws require that the defendant acted with a certain level of intent, such as knowingly or recklessly. If your attorney can show that you did not have the intent to violate securities laws, this can be a strong defense in your case.

Finally, your attorney may argue that the SEC’s allegations are based on a misinterpretation of securities laws or that the SEC is applying the law in an unfair or inconsistent manner. This type of defense can be particularly effective if the SEC is attempting to apply a new or untested legal theory to your case.

Defending an investigation or lawsuit by the SEC can be a complex and time-consuming process, but with the help of experienced securities litigation attorneys, you can protect your rights and defend your case. If you are facing a lawsuit by the SEC, contact an attorney today to discuss your legal options.

Mr. Kibort practices in business litigation and financial-services litigation, including defending financial advisors, financial planners and investment advisors, financial planning firms, investment firms, fund managers, funds, hedge funds, and brokerage firms, including in SEC and FINRA investigations and lawsuits, FINRA arbitrations and mediations.  This blog entry is not legal advice and does not create an attorney-client relationship; it is merely an example to provide some legal education.  It is simply intended to provide general information.  Each case is fact specific and requires its own unique solution.  It is strongly recommended that you seek the advice of a qualified attorney to help you with any questions you have.  We can handle your matters in Minnesota, Wisconsin, Iowa, North Dakota, California, and Washington D.C.

Parker Daniels Kibort is a full-service litigation law firm located in Minneapolis, Minnesota.  We have a proven record of success at the highest levels for our clients.  We are organized to attack cases with efficient, responsive representation.

Our Founding Principles:

  • RESPONSIVENESS – We live with an attitude of accessibility. We are available and ready to respond to your questions or concerns 24/7, all week, every week.
  • RESULTS – We win with an aggressive unrelenting approach to trial, and track record is, put simply, unmatched.
  • RELATIONSHIPS – We work closely with our clients and routinely develop long-lasting relationships harkening back to the days of lawyer as counselor, confidant, and close advisor.

We live our banner motto – WISE COUNSEL, WINNING RESULTS.

Are you facing investigation or a lawsuit by the SEC? Contact Attorney Jesse Kibort at Parker Daniels Kibort at 612.355.4100.