What the rules actually say
Two provisions do most of the procedural work, and both are worth reading rather than paraphrasing.
15 U.S.C. § 78u is the Commission’s investigative authority. It empowers the SEC to conduct investigations, to administer oaths, to subpoena witnesses and documents, and to seek judicial enforcement of its subpoenas.
17 C.F.R. § 202.5 governs enforcement activities:
- Formal investigations are discretionary. “The Commission may, in its discretion, make such formal investigations and authorize the use of process as it deems necessary to determine whether any person has violated, is violating, or is about to violate any provision of the federal securities laws or the rules of a self-regulatory organization of which the person is a member or participant.”
- They are non-public. “Unless otherwise ordered by the Commission, the investigation or examination is non-public and the reports thereon are for staff and Commission use only.” That confidentiality protects the process, not the subject: it means you may not know what the staff has been told about you.
- You may submit a statement on your own initiative. “Persons who become involved in preliminary or formal investigations may, on their own initiative, submit a written statement to the Commission setting forth their interests and position in regard to the subject matter of the investigation.”
- The staff may — but need not — tell you what it is looking at. “Upon request, the staff, in its discretion, may advise such persons of the general nature of the investigation, including the indicated violations as they pertain to them, and the amount of time that may be available for preparing and submitting a statement prior to the presentation of a staff recommendation to the Commission.” That sentence is the regulatory basis of the Wells process, and note both the discretion and the request requirement: asking is a step counsel takes, not something that happens automatically.
- Submissions go to the Commission. “In the event a recommendation for the commencement of an enforcement proceeding is presented by the staff, any submissions by interested persons will be forwarded to the Commission in conjunction with the staff memorandum.”
- Settling with the SEC does not settle a criminal case. This is stated in the rule itself: “It is the policy of the Commission … that the disposition of any such matter may not, expressly or impliedly, extend to any criminal charges that have been, or may be, brought against any such person or any recommendation with respect thereto.” Anyone who consents to a judgment “does so solely for the purpose of resolving the claims against him in that investigative, civil, or administrative matter and not for the purpose of resolving any criminal charges.”
That last provision deserves emphasis because it is the assumption most often made and most often wrong. A negotiated SEC resolution buys nothing from the Department of Justice.
On this page
Investigative testimony: what it is, and what it is not
SEC investigative testimony is sworn and transcribed, taken by staff attorneys, usually in a conference room, with a court reporter. It is not a deposition and it is not a grand jury appearance, and the differences matter.
| SEC investigative testimony | Civil deposition | Grand jury | |
|---|---|---|---|
| Who asks | SEC staff attorneys | Opposing counsel | Prosecutor and grand jurors |
| Counsel’s role | May attend and advise the witness; may not cross-examine other witnesses or make speaking objections as in litigation | Full participation, objections on the record | Counsel may not be present in the room |
| Under oath | Yes | Yes | Yes |
| Transcribed | Yes | Yes | Yes |
| Other parties present | No — witnesses are examined separately and the process is non-public | Yes | No |
| Fifth Amendment | May be asserted; adverse inference permitted in a civil case | May be asserted; adverse inference permitted | May be asserted; no adverse inference in a criminal trial |
| Access to the transcript | The witness may generally inspect the transcript; obtaining a copy is subject to the staff’s procedures | Available to parties | Ordinarily secret under Fed. R. Crim. P. 6(e) |
Table: how SEC testimony differs from the two proceedings people assume it resembles.
The disclosure form
Witnesses are provided with the Commission’s form describing the routine uses of the information they supply — including that it may be provided to the Department of Justice for possible criminal prosecution, to other federal and state agencies, and to self-regulatory organizations. It is an agency disclosure document rather than a rule of law, but it does two things worth knowing.
First, it is the document a court will look at in assessing what a witness was told about criminal exposure — a question that matters directly under the Kordel reservations discussed below. Second, it puts the witness on notice, which means that testifying after reading it undercuts a later argument that the criminal use of the testimony was a surprise.
It should be read before the day of testimony, not handed over at the start of it.
The Fifth Amendment decision
This is the decision the entire case turns on, and it has no default answer.
If you testify, everything you say is sworn, transcribed, and available to criminal prosecutors. You will have locked in an account of events before you know what the government has. Any later inconsistency becomes impeachment, or worse, a false-statement or perjury exposure independent of the underlying conduct.
If you assert the privilege, you may lose the civil case. An adverse inference may be drawn from a party’s invocation of the Fifth Amendment in a civil proceeding — unlike in a criminal trial, where it may not. And losing the SEC case can mean an injunction, disgorgement, penalties, and a bar that ends a career, whatever happens on the criminal side.
What the analysis actually depends on: what the documentary record already shows; whether there is any indication of a criminal referral; whether the exposure is genuinely criminal or realistically civil-only; whether the staff will accept a written submission or an attorney proffer in place of testimony; and whether the civil matter can be stayed. None of that can be assessed from a web page, and anyone offering a general rule is not being careful.
The Wells notice: the pivot
A Wells notice is the staff’s communication that it intends to recommend that the Commission bring an enforcement action, identifying the provisions it believes were violated. It is derived from the discretionary practice in § 202.5(c), and it is the last structured opportunity to change the outcome before an action is filed.
What a Wells submission can do. Present exculpatory facts the staff does not have; attack the legal theory; distinguish the conduct from the cases the staff is relying on; address remedies and argue for a lesser charge or a lesser sanction; and, occasionally, persuade the staff not to recommend at all. Under § 202.5(c), the submission goes to the Commission with the staff memorandum — so the audience is the Commissioners, not only the staff who wrote it.
What a Wells submission costs. It is a written statement of the subject’s position, signed by counsel, committing to a version of events. It can be used later. It can be obtained by other parties in litigation. It may reveal defense theories to the staff and, through them, to prosecutors. And in a parallel-proceeding case, a submission that argues the facts can create the same problem as testimony, in permanent written form.
The decision framework. A submission is most valuable where the staff has a factual misunderstanding that documents can correct, or where the legal theory is genuinely weak. It is least advisable where the facts are bad and the real question is criminal exposure, and where a submission would do nothing but preview the defense.
There is also a middle course: a narrow submission addressed to a discrete legal or remedial point, rather than a comprehensive account of the facts. Where a criminal investigation is live, that is often the only submission worth making.
Where the case is heard: Jarkesy and the forum question
For decades the SEC could choose between filing in federal district court and bringing an administrative proceeding before its own administrative law judges. That choice mattered enormously — no jury, different evidentiary rules, and a decision-maker within the agency bringing the case.
That choice is now constrained. In SEC v. Jarkesy, 603 U.S. 109 (2024), the Supreme Court held: “When the SEC seeks civil penalties against a defendant for securities fraud, the Seventh Amendment entitles the defendant to a jury trial.”
The reasoning proceeds in two steps.
The claim is legal in nature. The Seventh Amendment reaches “statutory claims that are ‘legal in nature,'” determined by “whether the cause of action resembles common law causes of action, and whether the remedy is the sort that was traditionally obtained in a court of law. Of these factors, the remedy is the more important.” SEC civil penalties are legal because the statutes “condition the availability and size of the civil penalties available to the SEC based on considerations such as culpability, deterrence, and recidivism,” which “go beyond restoring the status quo,” and because “[t]he SEC is also not obligated to use civil penalties to compensate victims.” Such relief is therefore “a type of remedy at common law that could only be enforced in courts of law.”
The public-rights exception does not apply, “because the present action does not fall within any of the distinctive areas involving governmental prerogatives where the Court has concluded that a matter may be resolved outside of an Article III court, without a jury.” Congress cannot “conjure away the Seventh Amendment by mandating that traditional legal claims be … taken to an administrative tribunal.”
What Jarkesy does not decide matters as much as what it does, and the opinion is explicit about its limits. The Court did not address whether the Seventh Amendment requires a jury for other SEC remedies — disgorgement, or industry and officer-and-director bars. It did not decide whether the ALJs’ removal protections violate the separation of powers. And it did not address in-house adjudication by agencies whose claims do not replicate common-law fraud.
The practical consequence for someone under investigation is that a fraud-based penalty case is now headed for a district court and a jury rather than an administrative hearing room — which changes the settlement dynamics, the discovery available, and the value of a Wells submission aimed at the remedy rather than the liability. Whether follow-on remedial proceedings can still be brought administratively is an open question that is being litigated.
The parallel criminal referral
The SEC and the Department of Justice work the same cases, and the SEC may refer a matter to prosecutors at any point — including before you know it exists.
The law permits it. United States v. Kordel, 397 U.S. 1, 11 (1970), holds that it “would stultify enforcement of federal law to require a governmental agency … invariably to choose either to forgo recommendation of a criminal prosecution once it seeks civil relief, or to defer civil proceedings pending the ultimate outcome of a criminal trial.”
But Kordel is also where the limits are, and the Court set them out expressly. It reserved the case where the government:
- “has brought a civil action solely to obtain evidence for its criminal prosecution”;
- “has failed to advise the defendant in its civil proceeding that it contemplates his criminal prosecution”;
- proceeds against a defendant who “is without counsel”;
- proceeds where the defendant “reasonably fears prejudice from adverse pretrial publicity or other unfair injury”; or
- proceeds in “any other special circumstances that might suggest the unconstitutionality or even the impropriety of this criminal prosecution.”
Those reservations are the doctrinal basis for the motions that get filed in these cases, and they make the factual record of the agencies’ coordination worth developing. When did the criminal investigation open? Was the subject told? Who attended the SEC testimony — were prosecutors or agents present or observing? Did the staff continue to take testimony after a referral? These questions have answers, and the answers are discoverable.
Kordel also held something that cuts the other way and needs saying plainly: a defendant who answers without asserting the privilege, while represented and with an appreciation of the consequences, “is in no position to complain now that he was compelled to give testimony against himself.” The protection has to be claimed to exist.
For entities, Kordel imposes a further burden: a corporation served with interrogatories must “appoint an agent who could, without fear of self-incrimination, furnish such requested information as was available to the corporation,” and cannot discharge that obligation “simply by pointing to an agent about to invoke his constitutional privilege.” Where genuinely no such agent exists, the Court assumed the remedy would be a protective order postponing civil discovery — but it did not decide the point.
FINRA is a third forum
FINRA is not a government agency. It is a self-regulatory organization, and that changes the analysis in ways that surprise people.
FINRA Rule 8210 requests are not subpoenas. FINRA has no subpoena power and cannot go to court to compel compliance. What it has instead is membership. Rule 8210 authorizes FINRA to require members and associated persons to provide information, documents and testimony, and failure to comply is itself a violation — one that routinely results in a bar from association with any member firm.
The practical effect is that the Fifth Amendment analysis is different in kind. A person may assert the privilege in response to a Rule 8210 request; FINRA cannot compel an answer. But the refusal is treated as a failure to comply, and the standard sanction is a bar. The choice is therefore between answering — with the answers available to the SEC and potentially to prosecutors — and accepting the loss of a license.
Because FINRA proceedings, SEC enforcement and a criminal investigation can all be live at once, a registered person can face three forums with three different rules about silence. Sequencing them is a strategic problem, not a procedural one, and it is one of the reasons registered representatives need counsel who has thought about all three.
Responding to the document subpoena
Most of the record the staff will eventually rely on comes from documents, and most of it comes from the subject’s own production. How that production is handled shapes the case more than any single later decision.
Scope is negotiable, and the negotiation is substantive. Custodians, date ranges, search terms, data sources and de-duplication protocols are all subjects on which the staff will engage. An unqualified “yes” to a broad subpoena produces a case the staff had not assembled.
Privilege has to be asserted properly and logged. Attorney-client privilege and work product survive an SEC subpoena, but they must be claimed with a log adequate to permit assessment. Where an internal investigation was conducted by outside counsel, the privilege belongs to the company, and the company may waive it — including selectively, in the course of seeking cooperation credit.
Personal devices are in scope. Business communications conducted on personal phones and personal messaging applications are producible, and the failure of regulated firms to preserve them has itself been a substantial enforcement theme. Assuming a message is beyond reach because of where it was sent is a mistake.
The instruction not to disclose. Subpoenas to third parties frequently carry a request that the recipient not notify the subject. It is a request rather than an order in most circumstances, but its practical effect is that banks, brokers and telephone carriers produce records about a person before that person knows a matter exists.
The obligation to preserve begins on notice. Once an investigation is known — or reasonably anticipated — deletion, “cleaning up” a device, or allowing an auto-delete setting to run is the fastest route from an enforcement problem to a criminal one. This is the single most avoidable disaster in the field, and it happens constantly.
The other thing that runs in parallel: the firm
Where the subject is employed by a regulated firm or a public company, the employer is usually conducting its own investigation, and its interests are not the employee’s.
- Company counsel does not represent the employee. The interview is not privileged as to the individual, and the memorandum belongs to the company.
- The firm has its own incentives to cooperate, including credit for voluntary disclosure — and cooperation credit is generally conditioned on identifying the individuals involved.
- Books-and-records obligations mean the communications already exist. Regulated firms retain email, chat and recorded lines, and produce them on request without asking the individual.
- Indemnification and advancement of legal fees are governed by the company’s charter, bylaws and any agreement — and they can be terminated, often at the point the interests diverge most sharply.
Independent counsel should be retained when the internal investigation begins, not when the SEC subpoena arrives.
Applied Insight — Elizabeth Franklin-Best, Esq., Principal Attorney: The most valuable work in an SEC matter usually happens before any decision about testimony is made. Reconstructing the documentary record the staff is working from — the trading data, the communications, the firm’s own files — is what makes every subsequent decision an informed one rather than a guess. A client who testifies without knowing what the staff already has is making the single riskiest choice available to them.
What to do when the subpoena arrives
- Preserve everything, immediately. A litigation hold across all devices and accounts, including personal ones used for business. Deletion after notice converts a defensible enforcement matter into an obstruction case.
- Do not call the other people involved. Contacting witnesses after learning of an investigation is how a civil matter becomes a criminal one.
- Do not respond directly to the staff. Retain counsel and have counsel make contact. Voluntary conversations with staff attorneys are not off the record.
- Establish the scope. Under § 202.5(c) the staff may, in its discretion and on request, describe the general nature of the investigation and the indicated violations. Asking is free and the answer shapes everything.
- Assess criminal exposure first. Whether this is a civil matter or a criminal one in an early phase determines every subsequent decision — testimony, submissions, and whether to seek a stay.
- Negotiate the production. Scope, custodians, date ranges, search terms and privilege protocols are all negotiable, and the negotiation matters: an over-broad production hands the staff a case it had not built.
- Map the collateral consequences. Bars, license consequences, employment, insurance and indemnification are part of the outcome, not an afterthought.
Where this fits
The substantive law the SEC is investigating — Rule 10b-5, scienter, materiality, § 1348, and the parallel-proceedings framework as a whole — is set out on our securities fraud attorney hub. Where the conduct is trading on inside information, the doctrine is on our insider trading lawyer page, including the Rule 10b5-1 affirmative defense. Where investors’ money was raised or used improperly, see investment fraud attorney.
Where a criminal case follows, the counts multiply quickly: wire fraud for the communications, money laundering for the transfers, tax for the unreported gains, embezzlement where the money came from the issuer, and bank fraud where a lender was given the same figures. How they group is on the white collar crime lawyer hub, and sentencing itself in our federal sentencing pages. Where a conviction has already been entered, review runs through federal appeals and, for claims outside the record, a § 2255 motion. Elizabeth Franklin-Best, P.C. is a federal criminal defense attorney practice representing individuals and firms in SEC and parallel criminal matters nationwide.
Frequently Asked Questions About SEC Investigations
What is a matter under inquiry?
A MUI is the SEC’s internal designation opening a matter for preliminary review before any formal investigation is authorized. Subjects are usually not notified, and many MUIs close without further action. It matters because staff may make voluntary requests at this stage without subpoena power — and “voluntary” production still shapes the record.
What is a formal order of investigation?
Commission authorisation designating staff members to conduct an investigation and to use compulsory process. Once it issues, the staff can subpoena documents and testimony. 17 C.F.R. § 202.5(a) makes formal investigations discretionary: “The Commission may, in its discretion, make such formal investigations and authorize the use of process as it deems necessary.”
Do I have to comply with an SEC subpoena?
An SEC subpoena issued under a formal order is compulsory, and the Commission can seek judicial enforcement. But scope, custodians, date ranges and privilege protocols are negotiable, and an individual retains the Fifth Amendment privilege as to testimony and, in some circumstances, an act-of-production privilege. Compliance is not the same as unlimited compliance, and the negotiation is where much of the value is.
Should I testify in an SEC investigation?
That decision cannot be made in the abstract. Testifying puts a sworn, transcribed account in the hands of the criminal prosecutors before you know what they have. Declining permits an adverse inference in the civil proceeding, which can cost you the SEC case and the bar that comes with it. The right answer depends on the documentary record, on whether a criminal referral has occurred, and on whether alternatives — a written submission, an attorney proffer, a stay — are available.
What is a Wells notice?
Notice from the staff that it intends to recommend that the Commission bring an enforcement action, identifying the provisions it believes were violated. It arises from the practice described in 17 C.F.R. § 202.5(c), under which the staff may advise a person of “the indicated violations as they pertain to them, and the amount of time that may be available for preparing and submitting a statement.” It is the last structured opportunity to change the outcome before an action is filed.
Should I make a Wells submission?
It depends on what it would say. Under § 202.5(c), submissions are forwarded to the Commission with the staff memorandum, so a well-founded one is read by the decision-makers. But it is a signed written statement of position that can be used later, may be obtained by other litigants, and previews the defense. Where the real question is criminal exposure, a narrow submission on a legal or remedial point is often the only one worth making.
If I settle with the SEC, am I done?
No, and the Commission’s own rule says so. Under 17 C.F.R. § 202.5(f), “the disposition of any such matter may not, expressly or impliedly, extend to any criminal charges that have been, or may be, brought against any such person,” and a person who consents to a judgment “does so solely for the purpose of resolving the claims against him in that investigative, civil, or administrative matter and not for the purpose of resolving any criminal charges.” An SEC settlement buys nothing from the Department of Justice. The point generalizes: a resolution with a civil regulator does not resolve criminal exposure, which is why the same warning appears on our Anti-Kickback and Stark and False Claims Act pages in the health care context.
Can the SEC refer my case to prosecutors?
Yes, at any stage, and it need not tell you. United States v. Kordel, 397 U.S. 1 (1970), permits parallel civil and criminal proceedings. What it reserved — and what remains litigable — are cases where the civil action was brought “solely to obtain evidence for its criminal prosecution,” where the government “failed to advise the defendant in its civil proceeding that it contemplates his criminal prosecution,” or where other “special circumstances” suggest impropriety. Establishing when the criminal investigation opened and what the subject was told is worth doing, and it is federal criminal defense work rather than regulatory work.
Will my case be heard by an SEC administrative law judge?
Not if it is a fraud case seeking civil penalties. SEC v. Jarkesy, 603 U.S. 109 (2024), holds that “[w]hen the SEC seeks civil penalties against a defendant for securities fraud, the Seventh Amendment entitles the defendant to a jury trial,” because such penalties are legal rather than equitable relief and the public-rights exception does not apply. The Court did not decide whether a jury is required for other remedies such as disgorgement or industry bars, and that question is being litigated.
Can I make the SEC tell me what it is investigating?
You can ask, and the request is worth making. 17 C.F.R. § 202.5(c) provides that “[u]pon request, the staff, in its discretion, may advise such persons of the general nature of the investigation, including the indicated violations as they pertain to them, and the amount of time that may be available for preparing and submitting a statement.” Note both qualifiers: the staff must be asked, and it may decline. Investigations are otherwise non-public, and the same rule says so expressly.
Is a FINRA Rule 8210 request a subpoena?
No. FINRA is a self-regulatory organization, not a government agency, and it has no subpoena power. Rule 8210 requires members and associated persons to provide information, documents and testimony, and failure to comply is itself a rule violation that routinely results in a bar. So the privilege can be asserted, but the price of asserting it is generally the license — which makes the sequencing of FINRA, SEC and criminal exposure a strategic problem rather than a procedural one.
Can I be told not to talk to anyone about the subpoena?
Subpoenas to third parties — banks, brokers, carriers, your employer — commonly carry a request that the recipient not notify you. That is why the first indication of an investigation is often that records about you have already been produced. Requests of that kind directed at you are a different matter and should be handled by counsel; what is never advisable is to respond by contacting other people involved, which is how a civil enforcement problem becomes an obstruction case.
Do I have to produce messages from my personal phone?
If they contain business communications, generally yes. Business communications do not become unreachable because of the device or application they were sent on, and failure to preserve them once an investigation is known or reasonably anticipated is far more damaging than their content usually is. Auto-delete settings should be turned off the moment a matter is known.
How long does an SEC investigation take?
Longer than people expect — frequently years from the opening of a matter to a resolution, and the subject is often unaware of the first part of it. The Commission’s own limitations periods under 15 U.S.C. § 78u(d)(8) give it five years for non-scienter disgorgement and ten years for scienter-based disgorgement and for equitable remedies including bars, so the passage of time is not by itself protection.
The SEC closed its investigation. Am I safe?
Not necessarily. A termination letter states that the staff does not intend to recommend an enforcement action at that time. It is not a finding that no violation occurred, it does not bind the Commission if new information emerges, and it does not bind the Department of Justice at all. It is genuinely good news; it is not immunity. The parallel problem in health care — where a civil audit closes but the matter continues under seal — is described on our healthcare fraud attorney and Medicare fraud pages.
By Elizabeth Franklin-Best, Esq. — Principal Attorney & Founder, Elizabeth Franklin-Best, P.C.
Contacted by the SEC?
A Wells notice, a subpoena, or an informal inquiry each call for a different response — and each creates a record that a later criminal case can use.
Representation begins with a paid, one-hour consultation — a working session in which we review where matters stand and tell you honestly what options remain. We do not promise outcomes.
Reviewed for legal accuracy by Elizabeth Franklin-Best, Esq., Principal Attorney·September 2026