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Contents Acknowledgments Preface Chapter 1 Overview: The Multilayered Securities Enforcement System A. Introduction B. SEC Enforcement C. Self-Regulatory Organizations D. State Regulation E. Criminal Prosecution Chapter 2 SEC Inspections: A Potential Prelude to Enforcement Action A. The SEC¿s Power to Conduct Inspections B. Limitations on the SEC¿s Inspection Powers C. Organization of the Inspection Program; Goals and Types of Inspections D. How the SEC Conducts and Targets Inspections 1. Targeting of Registrants for Inspection 2. Conduct of Inspections E. Possible Outcomes of SEC Examinations F. Surviving an SEC Inspection 1. Plan Ahead 2. Control the Process 3. Advocate Your Case 4. End the Inspection Quickly 5. Do Not Lie to the SEC 6. Preserve Confidentiality G. Criticism of the SEC Inspection Program 1. Government Criticism of the SEC Inspection Program 2. Industry Criticism of the SEC Inspection Program Chapter 3 SEC Investigations: The Heart of SEC Enforcement Practices A. The Importance of SEC Investigations B. The Commission's Authority to Conduct Investigations C. The Initiation of SEC Investigations D. The Various Types of SEC Investigations 1. Inspections of Regulated Entities 2. Preliminary Inquiries 3. Informal Investigations 4. Formal Investigations E. Cooperation and Remediation in Enforcement Investigations 1. The Seaboard Report 2. What Is Cooperation? 3. Potential Benefits of Cooperation and Remediation 4. Sanctions Increased for Lack of Cooperation 5. Cooperation and Legal Representation Issues 6. Practical Considerations F. Counsel's Own Inquiry into the Facts 1. Identifying the Relevant Issues 2. Client Interviews and Documents 3. Communications with the Staff 4. Starting with the Staff Attorney 5. Presentations to the Staff during an Investigation 6. Communications with Other Counsel G. Counseling the Client on the Management of the Investigation 1. Controlling Rumors about the Investigation 2. Assuring That Counsel Is Present for Communications with the Staff 3. Helping Witnesses Maintain Credibility 4. Preparing and Supervising Internal Reports H. The Staff's Investigatory Tools 1. The Staff's Subpoena Power 2. Challenges to Staff Subpoenas 3. No Right to Notice of Subpoenas to Third Parties 4. Section 21(a)(1) Written Statements I. Legal Constraints on the Staff's Investigatory Powers 1. Applicable Privileges 2. Cooperation, Selective Waiver, and Confidentiality Agreements 3. Privacy Statutes and the FOIA 4. Judicial Review of SEC Staff Subpoenas J. The Production of Documents to the Staff 1. The Importance of Document Production in SEC Investigations 2. The Subpoena for Documents 3. Negotiating Modifications to Subpoenas for Documents 4. A Plan for the Production of Documents K. Testimony before the Commission Staff 1. The Differences between a Civil Deposition and Testimony in an SEC Investigation 2. Negotiating the Time, Place, and Duration of Testimony 3. The Order of Witnesses 4. ¿Going in Early¿ to Provide Testimony 5. The Importance of Counsel's Pre-Testimony Investigation 6. Witness Preparation¿The Key to Successful Testimony 7. The Actual Testimony 8. Transcripts and Other Recordings of Testimony L. Publicly Disclosing an Investigation 1. General Considerations 2. Disclosure of Wells Notices 3. Disclosure of Contingent Liabilities 4. Disclosure of Underlying Violations 5. Practical Considerations M. Closing an Investigation without Further Action N. Wells Submissions: The Critical Step at an Investigation's Conclusion 1. The Historical Background of Wells Submissions 2. Pre-Wells Submissions and Meetings 3. The Wells Submission Process 4. The Determination Whether to File a Wells Submission 5. The Wells Submission's Role in the Settlement Process 6. Preparation of a Wells Submission 7. Filing a Wells Submission and the Staff's Reply 8. The Post-Wells Process 9. The Use of Wells Submissions in Subsequent Actions Chapter 4 Sanctions and Collateral Consequences: The Stakes in SEC Enforcement Actions A. Overview of the SEC¿s Civil Enforcement Powers B. Injunctions C. Cease and Desist Orders¿The Alternative Route D. Monetary Penalties 1. The Remedies Act 2. Heightened Penalties and the Use of ¿Fair Funds¿ 3. The SEC¿s Policy Statement Regarding Corporate Penalties 4. Insider Trading Penalties E. Disgorgement F. Fair Funds and Disgorgement Distribution Plans G. Bar Against Serving as an Officer or Director 1. The ¿Unfitness¿ Standard 2. Time Limited and Conditional Bars 3. Equitable Officer and Director Bars H. Ancillary Relief in Injunctive Proceedings I. Undertakings J. Temporary Freezes of Extraordinary Payments to Corporate Officers and Employees K. Sanctions against Regulated Entities and Their Associated Persons 1. Revocation or Bar 2. Suspensions 3. Censure 4. Limitations on Activities L. Collateral Consequences of Injunctive and Administrative Cease and Desist Orders 1. Disclosure and Reporting Obligations 2. Safe Harbor for Forward-Looking Statements 3. Offering Exemptions 4. Additional Collateral Consequences Specific to Regulated Entities and Their Associated Persons 5. Impact in Private Litigation 6. Proceedings by Foreign Regulators M. Persons in the Commodity Futures Industry N. Professionals O. Other Issues 1. Statute of Limitations 2. Miscellaneous Consequences Chapter 5 Settlements: Minimizing the Adverse Effects of an SEC Enforcement Action A. The Decision to Settle or Litigate B. The Potential Advantages of Settling 1. Limiting Adverse Publicity 2. Eliminating Individual Defendants 3. Negotiating Lesser Charges 4. Avoiding Collateral Estoppel 5. Resolving Uncertainties in Securities Industry Status 6. Threat of Criminal Prosecution C. The Settlement Process D. The Timing of Settlement Discussions E. Negotiating the Type of Commission Action 1. The Alternatives 2. Negotiating an Administrative Cease and Desist Order in Lieu of an Injunction 3. Settling an Injunctive Action F. Negotiating the Settlement Documents G. Negotiating the Ancillary Remedies 1. Disgorgement 2. Monetary Penalties 3. Bar against Serving as an Officer or Director 4. Other Settlement Remedies Chapter 6 Litigating SEC Injunctive Actions A. Introduction B. The Commission¿s Requests for Preliminary or Emergency Relief 1. Preliminary Injunctions and Restraining Orders 2. Asset Freezes and Receivers 3. Responses to Motions for Preliminary Relief C. The Defendant¿s Response to the Commission¿s Complaint 1. Preliminary Defense Motions 2. Answers and Affirmative Defenses 3. Discovery 4. The Right to a Jury Trial 5. Burden of Proof D. The Permanent Injunction E. Post-Judgment Remedies: Strategies for Modifying or Vacating an Injunction Chapter 7 Litigating Administrative Proceedings A. Introduction B. Overview of the Role of Administrative Proceedings in SEC Enforcement 1. Types of Proceedings and the Process 2. Legislative History 3. Differences from Civil Actions 4. The Commission¿s Discretion 5. Judicial Review 6. The Challenge for Defense Counsel C. Strategic Consideration for Discovery, Motion Practice, and Trial in the ¿Rocket Docket¿ of Administrative Proceedings 1. Introduction 2. Time Deadlines 3. The Administrative Law Judge 4. Discovery 5. Selective Evidentiary and Legal Issues for Review before Trial D. Types of Administrative Proceedings and Remedies 1. Cease-and-Desist Proceedings 2. Civil Money Penalties 3. Revocation and Suspension of Securities Licenses and Bars from the Securities Industries 4. Proceedings to Suspend or Revoke Securities Registration 5. Proceedings to Correct Filings 6. Rule 102(e) Proceedings¿Disciplining Professionals Who Practice before the Commission E. Rules of Practice 1. General 2. Initiation of Proceedings and Answer¿Rules 200¿220 3. Prehearing Conferences¿Rule 221 4. Prehearing Submissions¿Rule 222 5. Discovery¿Rule 230¿240 6. Motions for Summary Disposition¿Rule 250 7. Hearings¿Rules 300¿360 8. Review of Administrative Decisions¿Rules 400¿490 9. Temporary Cease-and-Desist¿Rules 500¿514 10. Temporary Suspensions¿Rules 520¿524 11. Disgorgement¿Rules 600, 601, and 630; Rules 1100¿1106 Chapter 8 Criminal Enforcement of the Securities Law A. Federal Criminal Prosecution in Securities Cases: An Overview B. Federal Criminal Prosecution in Securities Cases: The Current Environment 1. Major Corporate Fraud Cases 2. DOJ¿s Corporate Fraud Task Force 3. The Sarbanes-Oxley Act of 2002 4. SEC/DOJ Coordination: Parallel Proceedings 5. Appraising the Potential for Criminal Prosecution C. Fundamental Criminal Principles and Their Application to Corporate Crime 1. General Criminal Principles 2. Scienter Requirements in Securities Cases 3. Criminal Liability and Rights of Corporations 4. Prosecutorial Discretion and DOJ¿s Principles of Federal Prosecution of Business Organizations D. Introduction to Criminal Prosecution 1. Overview of DOJ Investigations and the Criminal Process 2. The Criminal Process 3. Role of the Grand Jury 4. Cooperation by a Corporation: Internal Investigations and Self-Reporting 5. Preservation of Evidence E. Major Criminal Offenses and Offenses Related to the Criminal Process 1. Conspiracy 2. Aiding and Abetting 3. Mail and Wire Fraud 4. Money Laundering 5. Foreign Corrupt Practices Act 6. Racketeer Influenced and Corrupt Organizations Act (¿RICO¿) Chapter 9 Enforcement by Self-Regulatory Organizations: The Frontline Regulators of Broker-Dealers and Associated Persons A. Introduction 1. Overview 2. The NASD and the NYSE B. The Source and Scope of SRO Disciplinary Authority C. SRO Disciplinary Jurisdiction 1. Disciplinary Jurisdiction 2. Retention of Jurisdiction by the SROs D. Sources and Topics of SRO Investigations E. SRO Investigations 1. In General 2. Commencement of Investigation 3. Simultaneous Investigations of the Same Matter 4. Confidentiality 5. Representation by Counsel 6. Duty to Cooperate 7. Fifth Amendment Protections 8. Document Production 9. Witness Statements 10. Interviews and Testimony F. Conclusion of the Investigation 1. Closed Cases, Informal Disciplinary Action, and Minor Rule Violation Letters 2. Wells Calls and Well Submissions 3. SRO Settlements G. Contested Hearings 1. Statutory Requirements and Overview of Disciplinary Rules 2. Complaints, Charge Memoranda, Answers, and Hearing Panels 3. Discovery 4. Pre-Hearing Procedures and Motions 5. Hearings 6. Decisions and Sanctions 7. Internal SRO Appeals H. SEC Review of SRO Decisions 1. SEC Authority 2. The SEC Review Process 3. Strategic Considerations I. Judicial Review of SEC Decisions Chapter 10 Blue Sky Enforcement A. Introduction B. Special Challenges in State Enforcement Practice C. State Securities Regulators: Who They Are and How They Are Organized 1. Individual State Regulators 2. The Role of NASAA D. The Powers of State Securities Regulators 1. Statutory Authority 2. General Investigatory Procedures 3. Sanctions E. Defending a State Securities Investigation 1. Initiation of a State Investigation 2. The Role of Counsel 3. The Investigative Record 4. Resolving a State Securities Investigation F. Dealing with Multistate Investigations G. The Rise in Coordinated Federal, State, and SRO Investigations H. Litigating an Enforcement Action 1. Administrative Hearings 2. Civil Proceedings 3. Criminal Proceedings Collateral Consequences of State Enforcement Actions Chapter 11 A. Introduction B. Sources of Authority C. Issues Arising from Counsel¿s Prior Involvement in Matters Under Investigation 1. The Lawyer as Witness 2. The Lawyer as ¿Subject¿ or ¿Target¿ D. Joint Representation 1. Advantages of a Joint Representation 2. Conflicts in Joint Representations 3. Consequences of Joint Representation 4. Common Situations in Joint Representation That Raise Conflict Issues E. Joint Defense Agreements 1. Overview of Joint Defense Agreements 2. Common Characteristics of Joint Defense Agreements F. Dealing with False Testimony and Obstruction 1. Applicable Ethical Rules 2. Possible Remedial Steps Chapter 12 A. The FSA Regulatory Regime 1. General 2. The FSA¿s Role and Statutory Powers 3. FSA Authorization and Approval 4. FSA Enforcement¿What Can It Do to You? 5. Major Differences from the US Regimes B. Recent Developments 1. The Enforcement Process Review 2. The Shift to a Principles-Based Approach 3. Handbook Changes C. The FSA¿s Supervisory Activity 1. Supervision/ARROW Visits/Inspection of Regulated Entities D. The Initiation of FSA Investigations 1. Reference to Enforcement Division/Use of Formal Powers E. The Various Types of FSA Inquiries/Investigations 1. The Responsibility to Self Report¿Principle 11/Statement of Principle 4 2. The Responsibility to Self-Report¿Specific Rules 3. The Responsibility to Self-Report¿The Notification¿Timing and Content 4. Money Laundering Reporting Obligations and Suspicious Transaction Reports 5. Statutory Information Requests to Authorized Persons under the Section 165 Power 6. Skilled Person¿s Reports 7. Formal Investigations 8. Remedial Action F. Cooperation and Remediation in Enforcement Investigations 1. The ¿Regulatory Dividend¿ 2. Cooperation and Legal Representation Issues 3. Remediation G. Responding to Information Requirements/Investigations 1. Legal Professional Privilege and ¿Protected Items¿ 2. Privilege against Self-incrimination¿Use of Information Obtained under Compulsion 3. Challenges to FSA Information Requirements 4. Confidentiality¿Obligations Owed by the Firm 5. Confidentiality¿The FSA¿s Position 6. Document Production 7. FSA Interviews 8. Publicity for an Investigation H. The Result of the Investigation 1. Preliminary Findings Letter 2. Private Warning 3. The Formal Process 4. Settlement and Mediation 5. Mediation 6. Criminal Proceedings
Library of Congress Subject Headings for this publication:
Securities -- United States.
Actions and defenses (Administrative law) -- United States.
United States. Securities and Exchange Commission.