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Financial Regulation and Compliance: How to Manage Competing and Overlapping Regulatory Oversight, + Website by H. David Kotz

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CHAPTER 7 How to Defend SEC Enforcement Actions

In some instances, the adverse effects of a difficult examination can lead not only to deficiency letters but could also result in a referral to the division, or department of the Agency, or SRO that conducts the Enforcement functions for an investigation and, potentially, an Enforcement action. The next four chapters describe how companies can defend first, investigations and second, Enforcement actions brought by the SEC, FINRA, CFTC, and NFA.

7.1 SEC'S LAW ENFORCEMENT FUNCTION

The SEC is a law enforcement Agency and its Enforcement Division executes this law enforcement function by investigating securities law violations, and by making recommendations to the SEC Commission to first conduct these investigations, and then to bring civil actions in federal court or before an administrative law judge on behalf of the SEC Commission. The SEC's Enforcement Division also coordinates with law enforcement Agencies, such as the DOJ with respect to criminal actions brought for securities law violations. The DOJ may seek indictments for criminal violations of securities laws on their own initiative or through referrals from the SEC.

The SEC identifies the following common violations that may lead to SEC investigations as:

  • Misrepresentation or omission of information considered significant or important about securities.
  • Manipulating the market prices of securities.
  • Stealing customers' funds or securities.
  • Violating broker-dealers' responsibility ...

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