Understanding SEC investigations
If you've seen news about an SEC investigation involving a public company or executive, you may wonder what it actually means. Here's what you should know. For broader context, read our guide on how the SEC works.
What Is an SEC Investigation?
An SEC investigation is a formal inquiry into whether a person, company, or organization may have violated federal securities laws.
Investigations can involve public companies, corporate executives, investment advisers, broker-dealers, or other market participants.
It's important to remember that an investigation does not automatically mean that any laws have been broken.
Why Does the SEC Launch Investigations?
The SEC may investigate a wide range of issues, including:
- Insider trading
- Accounting fraud
- Misleading financial disclosures
- Market manipulation
- Unregistered securities offerings
- Violations of reporting requirements
The goal is to determine whether securities laws have been violated and whether enforcement action is appropriate.
What Happens During an Investigation?
An SEC investigation may involve:
- Reviewing company documents
- Requesting financial records
- Interviewing witnesses
- Examining trading activity
- Gathering other relevant evidence
The length of an investigation varies depending on the complexity of the case.
What Happens After an Investigation?
After reviewing the evidence, the SEC may:
- Close the investigation without taking action
- Reach a settlement
- File a civil enforcement action
- Refer the matter to the U.S. Department of Justice if criminal conduct is suspected
Not every investigation results in enforcement action.
Where Can You Find SEC Enforcement Actions?
The SEC publishes enforcement actions, litigation releases, and other public announcements on its website.
These announcements provide information about completed cases and significant enforcement activity involving securities law violations.
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