9 Proven Strategies for Defending an SEC Investigation

In today’s complex regulatory environment, facing an SEC investigation can pose an existential threat for public companies. It also affects private funds, investment advisers, and broker-dealers. The key to mounting a resilient defense lies in early action, clear strategy, and rigorous discipline. I am a securities attorney specializing in regulatory investigations. I’ve outlined nine essential steps to help you defend against SEC scrutiny. These steps will protect your reputation and ensure business continuity.

By: Mark J. Astarita, Esq.

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Why SEC Investigations Demand a Strategic Response

The SEC has extensive investigatory powers. These include subpoena power, forensics of books and records, and witness testimony. The SEC often examines everything from accounting irregularities to insider trading or defective disclosures. Early decisions can shape the entire trajectory of the matter, affecting whether you face fines, remedial obligations, or reputational harm. For entities and individuals registered with FINRA, these practices also translate into parallel risks from a FINRA exam or investigation.

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1. Engage Experienced Securities Counsel Immediately

When you receive a subpoena or informal inquiry from the SEC, the single best move is to secure seasoned securities regulatory counsel. It is crucial to have an attorney experienced with defending SEC investigations. An attorney who regularly defends SEC investigations brings:

• Deep familiarity with how the SEC structures fact-gathering and negotiating resolution terms;
• Expertise in preserving privilege, coordinating internal investigations, and interfacing with regulators;
• Practical insight into how SEC settlement decisions are influenced by cooperation, remediation and prior history.

Engagement of counsel isn’t optional—it’s strategic.

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2. Conduct a Targeted Internal Investigation

Rather than waiting for the SEC to ask questions, begin an internal fact-finding initiative. This proactive step allows you to:

• Identify and isolate significant risks before the SEC uncovers them;
• Frame a remediation narrative (if needed) that positions you as cooperative and controlled;
• Equip counsel with the evidence, timelines and decision-makers necessary to design a robust response.

This internal probe should be well-documented, swift and legally coordinated from the outset.

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3. Communicate Strategically with the SEC

Maintaining cooperative communication with the SEC can deliver meaningful benefits—but must be carefully managed. Key points:

• Open dialogue signals willingness to address concerns and may reduce regulatory friction;
• Conversely, inadvertent disclosures may undermine privilege or expose new liability;
• Every interaction should be vetted through counsel, with advance planning as to how statements may be used.

A thoughtful approach to regulator-engagement frequently improves outcome leverage.

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4. Strengthen and Document Compliance Programs

The SEC examines whether your firm has an effective compliance infrastructure. To reinforce your position, you should:

• Implement comprehensive, up-to-date policies covering securities laws, anti-fraud rules and internal controls;
• Train employees periodically, with evidence of completion and manager oversight;
• Carry out periodic audits and monitor escalation processes for red-flags;
• Demonstrate remediation where prior deficiencies existed.

A robust compliance environment not only mitigates risk — it provides valuable context when the SEC assesses sanctions.

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5. Keep Accurate, Well-Organized Records

In an SEC investigation, documentation plays a central role. You must ensure:

• All relevant communications, trading logs, board minutes, disclosures and analytics are preserved;
• A defensible chain of custody for documents (including e-communications) is maintained;
• Document retention policies are rigorously followed, and inadvertent destruction is avoided.

Well-maintained records strengthen your position both in internal reviews and possible settlement discussions.

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6. Cooperate — While Protecting Privilege

Cooperation with the regulator is almost always preferable—but not at the expense of losing the attorney-client privilege. Your defense strategy should:

• Need all responses to be cleared through counsel;
• Delineate clearly between privileged work-product (investigation memoranda, counsel interviews) and other factual disclosures;
• Balance transparency with protection of sensitive communications.

This dual goal—cooperate but preserve privilege—is a hallmark of effective SEC-defense.

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7. Manage Reputational Risk with Intention

An SEC investigation often triggers secondary reputational damage: loss of investor confidence, client attrition, media scrutiny. A well-rounded defense includes:

• A communications plan addressing internal stakeholders, clients and limited public scrutiny;
• Alignment of legal and PR teams so messaging is consistent, factual and protective of business interests;
• Demonstration of remedial actions (if appropriate) to show credibility and accountability.

Legal outcome matters—but perception and reputation matter almost as much.

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8. Consider Settlement Options Early

While mounting a vigorous defense is critical, engaging in settlement discussions may be pragmatic—and potentially cost-saving. Your counsel should evaluate:

• Whether early remediation and cooperation can secure favorable terms;
• The trade-offs of defending at trial versus resolving quietly;
• How settlement might impact your obligations (e.g., undertakings, disclosure obligations, supervision requirements).

Bearing in mind the cost, risk and time-horizon of an investigation, settlement may emerge as the optimal path.

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9. Monitor Regulatory Trends — Stay One Step Ahead

Regulatory regimes evolve continually. To maintain strategic advantage:

• Stay current on SEC enforcement trends, key priorities (for example, ESG issues, retail compliance, disclosures, digital asset regulation);
• Update your compliance program suitably, documenting your proactive stance;
• Prepare internal playbooks for emerging risk areas so you’re not reacting at the eleventh hour.

Anticipation is a competitive advantage in regulatory defense.

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Final Comments

Facing an SEC investigation requires more than reactive resistance. Success largely depends on the investments you’ve already made in governance, documentation, compliance and internal discipline. From the moment you see the inquiry, the steps you take will define your risk exposure. They will determine your leverage in negotiations. These actions will ultimately shape the outcome.

If you or your firm are under regulatory inquiry or believe you may be at risk, call our office. Our partners are former SEC Senior Staff Attorneys and brokerage firm defense counsel with over 100 years of combined experience. Call us at 212-509-6544.

FAQ | Frequently Asked Questions

How long does an SEC investigation last?
The timeline varies based on complexity, industry, scope and cooperation. Some investigations conclude in a few months; others may persist for years.

Can an individual represent themselves in an SEC investigation?
Yes—but it’s strongly discouraged. Securities laws are highly technical, and the consequences of missteps (including waiver of privilege) can be severe.

What common actions trigger an SEC investigation?
Triggers can include: suspicious trading, material misstatements in financials, whistleblower complaints, violations of internal controls or disclosure failures. Early vigilance is essential.

Q4: How can I find an experienced securities attorney representing me or my company?

This one is easy. Call Sallah Astarita & Cox, LLC at 212-509-6544 or by email. We represent market participants in investigations across the country. Call today; the call is free.

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