An envelope or email from the Securities and Exchange Commission gets everyone's attention. The first job is to figure out what it actually is, because the SEC contacts companies for very different reasons, and the right response depends entirely on which one you received.
I was an attorney in the SEC's Division of Enforcement from 1991 to 2000. Here is how I would sort it out.
Step One: Identify Which Division Is Writing
Division of Corporation Finance — a comment letter. If you file with the SEC, the staff reviews your filings. A comment letter asks you to explain, support, or revise disclosure. It is a regulatory review, not an accusation. It still deserves careful handling: your answers become public, and a careless response can create a record you have to live with.
Division of Enforcement — a voluntary request. A letter asking you to "voluntarily" produce documents or information means enforcement staff have opened an inquiry. Voluntary means there is no subpoena yet. It does not mean the request is casual.
Division of Enforcement — a subpoena. A subpoena means the Commission has issued a formal order of investigation. That is a serious step.
A Wells notice. A Wells notice means the staff intends to recommend that the Commission bring an enforcement action.
Step Two: The First 48 Hours
Whatever arrived:
- ›Preserve everything. Suspend routine deletion of email, messages, and files. Destroying documents after receiving SEC contact turns a disclosure problem into an obstruction problem.
- ›Do not call the staff attorney to "explain." Informal conversations get written down.
- ›Limit internal discussion to the people who need to know, and do not speculate in writing.
- ›Note the deadline. Comment letters typically ask for a response within ten business days. Enforcement requests have their own dates.
- ›Get the right lawyer.
Step Three: Get the Right Kind of Lawyer
This is where I want to be direct. For a comment letter, a securities lawyer who understands disclosure is exactly what you need, and that is work I do every day.
For an enforcement inquiry, subpoena, or Wells notice, you need enforcement defense counsel. I do not handle enforcement defense. My practice is prevention: helping companies make sure the SEC never has a reason to send the second kind of letter. If you are already there, hire a defense lawyer now and do not wait.
Why Companies Get Contacted
From inside the Division, the triggers I saw most often were simple:
- ›A press release that announced something that turned out not to be true
- ›Unusual trading around an announcement
- ›Investor complaints and tips
- ›Stock promotion paired with insider selling
- ›A filing that contradicted something the company said elsewhere
- ›Private offerings that drifted outside their exemption
Almost all of these are preventable with a disclosure review and a few documented habits.
Avoiding the Next Letter
The cheapest SEC problem is the one you fix before anyone outside the company notices. That is what SEC compliance counsel is for: reading your filings, decks, and press releases the way the staff will, and fixing what does not hold up. For the fraud side specifically, see Securities Fraud Risk & Compliance.
Related Reading
- ›How the SEC Builds a Securities Fraud Case
- ›The SEC Comment Letter Response Checklist
- ›The Other Side of the Table — my book on how the SEC reads issuers
Questions about how this applies to your company? Email me directly at flehrer@securitiesattorney1.com or call (561) 706-7646. No intake form, no screening call.
This post is general information, not legal advice.
Authoritative Sources
- SEC Form S-1 — Registration Statement Under the Securities Act — U.S. Securities and Exchange Commission
- 17 C.F.R. Part 229 — Regulation S-K — Electronic Code of Federal Regulations
- SEC Enforcement Manual, Division of Enforcement — U.S. Securities and Exchange Commission
- SEC Division of Enforcement — Litigation Releases — U.S. Securities and Exchange Commission
- Securities Act of 1933 (15 U.S.C. §§ 77a et seq.) — U.S. Government Publishing Office
- Securities Exchange Act of 1934 (15 U.S.C. §§ 78a et seq.) — U.S. Government Publishing Office
Primary sources are cited so readers can verify the law directly. Rules and staff guidance change; see our editorial and corrections policy to report an error or an outdated citation.
Frederick M. Lehrer served as an enforcement attorney in the SEC's Division of Enforcement at the Southeast Regional Office from 1991 through 2000, and concurrently as a Special Assistant United States Attorney in the Southern District of Florida from 1997 through 1999, prosecuting securities-related financial crimes. He has practiced securities and corporate law in private practice for more than twenty-five years, advising issuers worldwide on SEC registration, disclosure obligations, Regulation D private placements, Regulation A offerings, and going public transactions. The firm is based in Florida and serves clients internationally.
Questions about how this applies to your company are answered personally — most within the same business day. Flat-fee arrangements available for most work.