As an officer or director of a public company, there are few things that will impact your professional life more profoundly than an investigation by the U.S. Securities & Exchange Commission’s Division of Enforcement. As an SEC investigation is launched, it is critical that you do not become lost among the frenzy of external and internal interests that will compete for your time and attention. At the onset, regardless of whether the SEC is examining revenue recognition, conflicts of interest, off balance sheet transactions or reserve issues, having a basic understanding of what’s at stake—and the interests of the different players that emerge—will have an immediate beneficial impact on your livelihood, career, and personal freedom.
You are not a target. But you may be. Unlike the Department of Justice, which will place you in one of three categories—target, subject, or witness—and subsequently allow you to ascertain how much risk you face, the federal securities laws only authorizes the Enforcement Division to conduct fact-finding investigations to determine whether there have been violations of the federal securities laws. The staff of the Enforcement Division can do this either formally or informally.
