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Under Investigation? Why You Must NOT Talk to the SEC or Government Agents Without a Lawyer
If you or your company receive a subpoena or get a call or visit from the Securities & Exchange Commission (SEC), FBI, or another governmental authority, it’s not likely because they want to help you. Even if you are convinced of your innocence, you need to be very careful in how you respond.
First and foremost: Do not speak to anybody from the government until you’ve first contacted an experienced lawyer.
The Danger of Unprotected Statements
Many potential clients are shocked when the SEC moves forward with an investigation or brings charges after the clients believed they could convince the SEC of their innocence. As the late criminal attorney James Neal famously noted in an episode of the PBS series, Ethics in America, “There are very few deaf and dumb people in the penitentiary.” Indeed, cooperation with the government might be a good strategy, but only if you get the help of an experienced defense attorney.
Your Best Friend: The Fifth Amendment Privilege
The Fifth Amendment to the U.S. Constitution provides that no person “shall be compelled in any criminal case to be a witness against himself.”
• Broad Application: The Fifth Amendment Privilege applies to any government investigation or proceeding where your testimony could potentially expose you to criminal liability like SEC investigations, DOJ inquiries, and federal and state regulatory examinations. It doesn’t matter if your statements are being sought in a routine examination by a civil authority. Your statements can be given to criminal prosecutors who can bring charges against you.
• No Formal Charges Needed: You do not need to be formally charged with a crime to invoke the Fifth Amendment Privilege. The privilege applies whenever there is a reasonable possibility that your statements could be used against you in a future criminal prosecution. You need an attorney to advise you about what kind of criminal charges you could possibly face.
• Securities Cases: Securities investigations almost always raise the possibility of criminal charges. That is because the definition of securities fraud is extremely flexible and broad and the conduct can constitute not just civil securities fraud but also federal criminal securities fraud or wire fraud.
Why Securities Cases Demand Particular Caution
Investigations by the SEC and state securities regulators present significant dangers that make Fifth Amendment Privilege especially important:
• Parallel Proceedings: Securities matters routinely involve simultaneous civil (SEC) and criminal (FBI/DOJ or state) investigations. The SEC discloses in tiny print on its forms and often orally that statements you make and documents you provide to the SEC can be provided to criminal prosecutors. The SEC often seeks to convince criminal prosecutors at the Department of Justice to bring criminal fraud charges based on the evidence they have obtained. Sometimes the SEC is investigating at the same time the DOJ has convened a grand jury to investigate. As a result, without the representation of an experienced attorney, there is no safe way to provide information without risking it being used against you by criminal prosecutors.
• Complex Regulatory Framework: Securities laws are intricate, technical, and often counterintuitive. What seems like an innocent explanation to a layperson may constitute an admission of a material element of a securities violation. People often come to us after having basically admitted to securities fraud. To avoid that, contact an attorney at the beginning of the investigation.
• The Perjury Trap: Once you begin answering questions (whether under oath or not), you create a record. Inconsistent answers create the potential of being charged with perjury (18 USC §§ 1621 and 1623) or a violation of the “false statement” federal statute (18 USC § 1001). These “process crimes” can be easier to prove than the underlying securities violation and carry severe penalties. Remember, Martha Stewart did not go to prison for insider trading, but because she was convicted of making false statements to federal agents in an interview.
• No “Talking Your Way Out”: Clients, particularly successful business people, routinely overestimate their skills of persuasion. They are convinced that if they explain their conduct, the government will just drop the case. In reality, investigators frequently have reached a preliminary conclusion about the conduct of the person they contact before they make contact. That means they are not looking for information that will help you, they are looking for information that confirms what they already think. You need a lawyer to help you get them to hear evidence that shows you did not violate the law.
Practical Guidance: Dos and Don’ts
If and when you are contacted by the SEC, DOJ, FBI, or any other government agency, follow these steps without deviation:
| Do | Don’t |
| Contact Your Attorney Immediately. If agents appear unannounced, tell them you need to contact your attorney before speaking. | Do Not Answer Questions. Politely decline to answer any substantive questions. Do not attempt to explain, clarify, or provide context. |
| Invoke Your Fifth Amendment Privilege Clearly. State: “I am invoking my Fifth Amendment Privilege and wish to speak with my attorney” before talking to you. | Do Not Consent to Searches. If agents without a search warrant request to search your property or documents, politely decline. Obviously, comply with a valid search warrant. |
| Preserve All Documents. Do not delete anything! Until you have had a chance to consult with an experienced defense attorney, make sure nothing gets deleted | Do Not Delete, Destroy, or Alter any documents. This can result in obstruction of justice charges. Turn off auto-delete on emails and text applications. |
| Stay Silent. Do not talk about the matter with colleagues, friends, or family (unless and until specifically advised by your attorney). | Do Not Agree to “Just a Few Quick Questions”. There is no such thing as an “informal chat” with the government |
Addressing Common Concerns
| Concern | The Reality |
| “Won’t asserting the Fifth Amendment make me look guilty?” | No. The law is clear that invoking the Fifth Amendment cannot be used as evidence of guilt in a criminal proceeding. Asserting the Fifth Amendment can be used against a defendant in a civil lawsuit, but this reinforces the need for you to engage an attorney that has experience beyond criminal cases. |
| “I have nothing to hide and can explain what happened.” | This is the most dangerous mindset. Conduct that seems proper to you may meet the technical elements of a securities violation. Moreover, even if innocent, inconsistencies in testimony can lead to charges of false statements, obstruction of justice, or perjury. |
| “Won’t cooperation help me get a better outcome?” | A proper early response by an attorney on your behalf is the best path to a good outcome. Statements made by people before retaining a lawyer are far more likely to be used as evidence against the person than to cause the government to go away. You need a lawyer to help you determine whether to cooperate and if so to shepherd you through the process of cooperation. |
Your Fifth Amendment Privilege is a fundamental constitutional safeguard. Asserting this right is not an admission of wrongdoing; it is a prudent exercise of the protections our legal system affords. You can invoke the Fifth Amendment Privilege and – with the help of an experienced attorney – still provide information to the government that leads to no civil or criminal charges.
The core rule is: Do not speak to anybody from the government until you’ve first contacted an experienced lawyer.
If you are contacted by any government agent or investigator, please contact us immediately. We will navigate this matter together, strategically and with your rights fully protected.
Photo by Chris Linnett on Unsplash