The importance of complying with Securities Laws can never be emphasized enough. Securities regulators, including both the Securities and Exchange Commission (SEC) and state securities agencies, routinely conduct securities investigations into potential securities violations that can result in financial and administrative penalties. They can also refer potential criminal cases to the Department of Justice or state Attorneys General for harsher judgments, including prison time for the worst offenders. Additionally, the SEC routinely makes substantial Whistleblower Awards for witnesses with inside information (and evidence to back it up) that results in successful securities enforcement actions, giving people who know what of your wrong-doing the incentive to turn you in.
Investigations into suspected securities noncompliance may not always result in prison, but they can cost offenders plenty in fines, huge legal fees and irreparable damage to your reputation with investors.
In fact, in fiscal year 2021 the SEC filed 697 total enforcement actions and obtained judgments and orders for nearly $2.4 billion in disgorgement and more than $1.4 billion in penalties —a 33 percent decrease and 33 percent increase, respectively, over amounts ordered in the prior fiscal year in these categories.
So how does a securities investigation happen?