Three keys to avoiding SEC investigations

No business relishes an investigation from the Securities and Exchange Commission (SEC). Running afoul of federal regulations can result in significant fines and penalties and, in come cases, even criminal charges. A few keys to mitigating such risks include:

• Meeting disclosure requirements: Business leaders who steer clear of SEC investigations prioritize annual and quarterly reporting requirements, and strictly adhere to SEC proxy rules. Some requirements have changed during the COVID-19 crisis, so it is important to keep up-to-date on revisions, extensions and other changes.
• Maintaining documentation: An SEC inquiry can often be concluded by delivering requested information in a timely manner. When information is missing or incomplete, however, a small problem can quickly turn into a massive liability. By implementing polices for the management and preservation of important financial information, you can rest assured that you will not have to explain missing documents to SEC investigators.
• Avoiding unlawful promotions: Novel promotion methods can draw unwanted scrutiny from securities investigators. In recent years, celebrity influencers have been charged with unlawful touting and other crimes for failing to disclose required information to the SEC. These problems are especially prevalent in newer revenue-generating activities such as initial coin offerings (ICOs) and initial exchange offerings (IEOs).

When it comes to securities law, an ounce of prevention is truly worth a pound of cure. If you have concerns over exposure to lawsuits, investigations and other securities issues, speak with an attorney who can help you manage risk and efficiently resolve problems.