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The SEC’s Division of Enforcement upholds the integrity of the markets by investigating possible violations of the federal securities laws and litigating enforcement actions in federal court and administrative proceedings.
In terms of the process, thousands of tips, complaints and referrals come into the SEC each year. When a matter passes the first hurdle from preliminary inquiry to investigation, facts are developed to the fullest extent possible through informal inquiry, interviewing witnesses, examining brokerage records, reviewing trading data, and other methods. With a formal order of investigation, the Division of Enforcement’s staff may compel witnesses by subpoena to testify and/or produce books, records, and other relevant documents. Following an investigation, the staff presents findings to the Commission for its review. The Commission can authorize the staff to file a case in federal court or bring an administrative action. In many cases, the Commission and the party charged decide to settle a matter without a trial.
The life of an SEC investigation generally spans 2-4 years, depending on the complexity of the case. The process is not quick, but it is disciplined and thorough.
The Division’s mission is to level the playing field for investors; in FY 2018, the SEC’s enforcement activity resulted in sanctions approaching $4 billion.
For the nuts and bolts of the enforcement process, check out our Insider’s Guide here.