A Board-Certified Specialist In Criminal Law By The California Board Of Legal Specialization

How to survive a securities fraud investigation 

On Behalf of | Jan 29, 2025 | White Collar Crimes

If you’re like most people, you’ve likely only heard about securities fraud investigations on the news. This can give the perception that such investigations only affect prominent people and well-known organizations. In reality, any person or entity can be investigated for this crime, whether directly or indirectly involved with the investment scheme in question. 

Suppose you or your entity is under investigation for securities fraud. This might include insider trading allegations, failure to report, or failure to register. The investigation might focus on the legitimacy of the investment itself, such as allegations of Ponzi schemes. You might fear the worst and think that there’s no coming out unscathed. You would be right to worry because these investigations can be rigorous. These investigations are often only the first step in what becomes a criminal investigation and prosecution. The government uses the broader scope of administrative investigations by the SEC in order to build a criminal case.

However, you should know that all hope is not lost because you can prepare for the process and seek legal support during this challenging time. Having an overview of what to expect during a securities fraud investigation can offer insights into how to navigate the process effectively.

Document review and data collection 

Since it’s an investigation, you can expect investigators to request access to individual or your organization’s: 

  • Transaction logs
  • Communications 
  • Account statements
  • Trading records 

Responding promptly to all inquiries and requests for information is one of the surefire ways to demonstrate your cooperation. You should also consider enlisting legal support to help ensure you maintain transparency while protecting your legal interests.

Interviews and depositions 

You should also prepare for interviews and depositions under oath. These sessions are critical as they help investigators gather information that can prove allegations of: 

  • Insider trading, where individuals use non-public information to trade stocks
  • Market manipulation to artificially inflate or deflate stock prices
  • Misrepresenting or omitting information investors need to make investment decisions
  • Employing Ponzi schemes that falsely promise high returns with little risk

Preparing thoroughly with reliable legal support is vital to help ensure accurate and consistent testimony.

Forensic analysis 

When federal regulatory bodies open an investigation, they will likely partner with forensic analysts to help prove the allegations of deceptive practices in financial markets. Federal regulatory bodies are required to initiate investigations when they suspect fraud due to:

  • Whistleblower reports
  • Suspicious trading patterns
  • Routine audits

Forensic analysis is meant to help prove, beyond reasonable doubt, that one or more of these allegations are true.

Few things are more shocking and nerve-wracking than finding out you are part of a securities fraud investigation. But you should know that you can survive this challenging time by preparing for what is to come. With dedicated legal guidance, you can ensure you cooperate during the investigation while protecting your legal interests.