What Is an SEC Enforcement Action?
The Securities and Exchange Commission (SEC) utilizes a number of enforcement actions against corporations it has reason to believe are in violation of federal securities laws. Once the SEC Enforcement Division has determined that a violation has occurred, it will make a recommendation of action to the commission.
Generally, these officials will recommend that one or more of three actions be imposed on the violating company: a civil injunctive action, what’s known as “ancillary relief,” and monetary sanctions to be paid to the SEC.
Civil Injunctive Action
A civil injunctive action is likely the most frequently used form of enforceable action against a violating entity or individual. Here, the SEC brings forward a formal request that the defendant be obligated to henceforth obey all securities laws. This is heard by a judge and, if the order is imposed and subsequently breached, the defendant can face criminal charges, fines, and potential imprisonment.
When the commission seeks ancillary relief, the goal is to “make right” the harm done by the defendant. When ancillary relief is imposed, the defendant may be ordered to return any profits earned through the violation it participated in that allowed for gains.
Then, the SEC will request that a temporary restraining order be issued. This will freeze the illegally gained funds so that, once the case is closed, the profits can be returned to investors who were the victims of the fraudulent activity. In addition, under the Sarbanes-Oxley Act, the court may bar the defendant from holding the position of director or officer of a publicly traded company in the future.
Apart from civil injunctions and ancillary relief, the SEC will often impose substantial monetary sanctions on the defendant. The amount recovered can vary greatly, depending on the type of violation and how long it went undetected.
When these sanctions exceed $1,000,000, whistleblower rewards can be issued. Those who tipped off the SEC can receive compensation for their valuable information.
Speak with an SEC Whistleblower Lawyer
Becoming aware of information regarding a securities violation within your company can open the door for you to collect a reward as a whistleblower if substantial enforceable actions can be taken against the violator.
For more information about how to become an SEC whistleblower or what actions you can expect to be taken if fraud is proven, reach out to an SEC whistleblower lawyer at Meissner Associates. Fill out the contact form below or give us a call at 1-866-764-3100 to schedule a consultation.