I received this email from Daniel Viola at Sadis & Goldberg LLP this morning
Don’t be surprised if you receive a subpoena or are contacted by the Securities and Exchange Commission (“SEC”). The SEC has significantly increased its enforcement efforts since the recent discovery of certain high profile Ponzi schemes. Effective August 11, 2009, the SEC has also made it easier for its staff attorneys to issue subpoenas. [1] Thus, the SEC staff attorneys will no longer have to obtain formal approvals to issue subpoenas; instead, they will simply need approval from their senior supervisor. If you receive an inquiry letter or subpoena from the SEC, remain calm. This is not uncommon given the current regulatory climate. Above all, do not respond without first contacting legal counsel.
The SEC appears determined to issue more subpoenas and give people more incentives to cooperate with investigations as it works to enhance its oversight of the financial markets. The SEC generally has broad powers to conduct investigations of potential violations of the federal securities laws and often works with the Department of Justice in connection with joint proceedings, often known as “parallel proceedings.” Our Regulatory Practice Group consists of former SEC personnel and litigators with experience regarding civil and criminal proceedings. Please feel free to contact Daniel G. Viola at 212.573.8038 (or dviola@sglawyers.com) or Christiaan Johnson-Green at 212.573.8169 (or cjohnsongreen@sglawyers.com) with any questions.
SECActions.com has posted more information about this new ruling
Fulbright.com also weighs in with some addional commentary
In the wake of the subprime meltdown and the Madoff scandal, one of SEC Chairwoman Mary Schapiro’s first official actions was to streamline requirements for initiating formal investigations. Formerly, the full SEC Commission had to take action at a scheduled meeting in order to approve a formal investigation (which arms SEC investigators with subpoena power). In February of 2009, Chairwoman Schapiro’s changes allowed Commissioners to sign off on formal investigations outside of scheduled meetings and allowed certain investigations to be approved by a single Commissioner.
On August 5, 2009, the Director of the SEC’s Enforcement Division, Robert Khuzami, announced that the SEC had adopted an even more aggressive approach: the Commission had approved an order delegating the Division Director authority to approve formal orders of investigation, and Director Khuzami stated that he intended to further delegate this authority to Division senior officers throughout the country. According to Director Khuzami, “This means that if defense counsel resist the voluntary production of documents or witnesses, or fail to be complete and timely in responses or engage in dilatory tactics, there will very likely to be a subpoena on your desk the next morning.”
The changes in SEC policy are indicative of the agency’s overall shift towards greater emphasis on enforcement actions. Director Khuzami pointed out that “Comparing the period from late January to the present to roughly the same period in 2008, the Division has opened 10% more investigations (approximately 525, compared to 475); has been granted 118% more formal orders (which grants us subpoena power) (275, compared to 126); has filed 147% more TROs (52, compared to 21); and has filed nearly 30% more actions (397, compared to 306).”
