Regulatory Investigations

When the SEC, FINRA, or state regulators launch an investigation into your business activities, your career, reputation, and financial future hang in the balance. A regulatory investigations attorney provides the strategic defense you need to navigate complex enforcement proceedings and protect your professional standing.

At Varnavides Law, we bring a unique perspective to regulatory defense. Our founding attorney spent 10 years at Sichenzia Ross Ference LLP defending broker-dealers against the very regulatory bodies that may now be investigating you. That insider knowledge of how regulators build cases informs every defense strategy we develop.

What Is a Regulatory Investigation?

A regulatory investigation occurs when a government agency or self-regulatory organization examines whether you or your firm has violated securities laws, regulations, or industry rules. These investigations can target individual brokers, investment advisers, broker-dealer firms, or public companies.

Regulatory investigations differ from civil lawsuits in several important ways. Regulators possess subpoena power, can compel testimony, and have broad authority to demand documents. They can pursue both civil penalties and industry sanctions, and their findings may be referred to criminal prosecutors.

The consequences of an adverse regulatory finding extend far beyond fines. You may face industry bars, license revocations, reputational damage, and difficulty finding future employment in financial services.

Regulatory Bodies That Conduct Securities Investigations

Multiple federal and state agencies may investigate securities-related conduct. Understanding which regulator is involved helps shape your defense strategy.

How SEC Investigations Unfold

SEC investigations typically progress through defined stages. Understanding this process helps you respond strategically at each phase.

Informal Inquiry Stage

Many SEC investigations begin as informal inquiries. At this stage, the SEC staff may send voluntary document requests and ask for interviews. While these requests are technically voluntary, refusing to cooperate may prompt the SEC to escalate to a formal investigation.

In March 2025, the SEC amended its rules to require Commission approval for formal orders of investigation, which had previously been delegated to the Enforcement Division Director. This change may result in more informal inquiries and provide defense counsel greater opportunity to negotiate scope and pursue early resolution.

Formal Investigation Stage

A formal investigation order grants SEC staff subpoena power to compel document production and testimony. You may receive a document subpoena requiring production of emails, trading records, communications, and other materials. The SEC may also issue testimony subpoenas requiring you to appear for sworn examination.

Wells Notice Stage

If the SEC staff believes enforcement action is warranted, they may issue a Wells notice. This letter indicates the staff intends to recommend charges and identifies the alleged violations and potential remedies.

A Wells notice provides a critical opportunity to respond before charges are filed. Your Wells submission can present legal arguments, factual defenses, and mitigating circumstances that may persuade the staff to modify or drop the recommended charges.

Typically, you have approximately two weeks to respond to a Wells notice, though extensions are often available. SEC Chairman Paul Atkins has emphasized the importance of the Wells process as an extension of due process rights, and defense counsel may request at least four weeks to prepare a thorough submission.

The FINRA Investigation Process

FINRA investigations follow their own procedural framework, with Rule 8210 serving as the foundation for the authority’s investigative power.

Rule 8210 Requests

Most FINRA investigations begin with a Rule 8210 request for documents and information. The SEC has described Rule 8210 as an essential cornerstone of FINRA’s ability to police the securities markets.

Rule 8210 requests can be extensive, demanding voluminous records that create substantial compliance burdens. However, cooperation is mandatory. According to FINRA Regulatory Notice 25-11, members and associated persons must provide information and testimony regardless of where they are located, even if local laws might otherwise restrict disclosure.

FINRA On-the-Record Interview

FINRA may require you to appear for an on-the-record interview to provide sworn testimony. These interviews are conducted by FINRA staff and recorded for the official record.

Unlike court depositions, FINRA interviews allow staff to ask wide-ranging questions without many procedural limitations. Preparation with experienced counsel is essential to avoid inadvertent admissions or statements that could be used against you.

FINRA Disciplinary Proceedings

If FINRA determines that violations occurred, it may initiate disciplinary proceedings. These administrative proceedings can result in fines, suspensions, or permanent industry bars.

FINRA disciplinary proceedings are adjudicated by FINRA hearing panels. While you have the right to appeal adverse decisions to the SEC and ultimately to federal court, the process can take months or years to conclude.

Parallel Proceedings and Criminal Exposure

One of the most significant risks in any regulatory investigation is the potential for parallel criminal proceedings. Research indicates that approximately 27% of SEC enforcement cases include a criminal component.

The Cooperation Dilemma

Parallel proceedings create a strategic dilemma. Cooperating with the SEC may help resolve the civil investigation favorably but could expose you to criminal liability if prosecutors are running a parallel investigation. The SEC is not required to inform you that a criminal investigation is underway.

Conversely, invoking Fifth Amendment protections may preserve your rights against self-incrimination but can antagonize regulators and suggest criminal exposure. There are no simple answers, and the right approach depends on the specific circumstances of your case.

Coordinated Defense Strategy

Effective representation in parallel proceedings requires a coordinated defense strategy that accounts for both civil and criminal exposure. Your regulatory investigations attorney should evaluate the likelihood of criminal referral, advise on cooperation decisions, and protect your constitutional rights throughout the process.

Common Types of Regulatory Violations

Regulatory investigations may focus on various types of alleged violations. Understanding the specific allegations helps shape your defense strategy.

How a Regulatory Investigations Attorney Helps

Experienced legal representation can significantly impact the outcome of a regulatory investigation. Here is how a regulatory investigations attorney adds value at each stage.

Early Case Assessment

When you first learn of an investigation, your attorney evaluates the scope of the inquiry, identifies potential exposure, and develops a preliminary defense strategy. This assessment considers the strength of the evidence, the applicable law, and the most likely outcomes.

Document Preservation and Production

Proper document preservation is critical. Your attorney helps implement litigation holds, identify responsive documents, and manage the production process to protect privileged communications and work product.

Negotiating with Regulators

Experienced counsel can often negotiate the scope of document requests, coordinate interview scheduling, and explore early resolution opportunities. Regulators frequently agree to reasonable accommodations when approached professionally.

Interview Preparation

Before any regulatory interview, your attorney prepares you to respond effectively to questions while avoiding common pitfalls. This preparation includes reviewing potential topics, practicing responses, and understanding your rights.

Wells Submission Preparation

If you receive a Wells notice, your attorney prepares a persuasive submission presenting your best arguments against enforcement. A well-crafted Wells submission can result in reduced charges, modified remedies, or complete dismissal.

Settlement Negotiation

Many regulatory investigations resolve through settlement. Your attorney negotiates terms that minimize sanctions, avoid industry bars where possible, and limit collateral consequences such as customer claims or employment issues.

The Insider Advantage

At Varnavides Law, we understand how regulators think because we spent a decade on their side of the table. Our founding attorney defended broker-dealers at Sichenzia Ross Ference LLP for 10 years, representing firms against SEC and FINRA enforcement actions.

This experience provides critical insight into how regulators build cases, what evidence they prioritize, and where their theories are most vulnerable. We use that knowledge to develop defense strategies that anticipate regulatory tactics and position your case for the best possible outcome.

California-Specific Considerations

If you operate in California, you may face investigations from both federal regulators and the California Department of Financial Protection and Innovation. The DFPI has authority to examine broker-dealers and investment advisers licensed in California and coordinates with other state regulators through the North American Securities Administrators Association.

Recent DFPI enforcement actions demonstrate the department’s active oversight. In December 2024, the DFPI joined a multistate settlement with Edward Jones addressing mutual fund supervision deficiencies. Earlier, the DFPI participated in a $22.5 million multistate settlement with a digital asset platform.

Our California presence allows us to represent you before both state and federal regulators, coordinating defense strategies across jurisdictions. Learn more about our securities fraud defense practice.

What to Do When You Learn of an Investigation

The actions you take when you first learn of a regulatory investigation can significantly impact the outcome. Here are the critical steps to take.

Immediate Steps

1. Preserve all documents: Immediately implement a litigation hold to preserve all potentially relevant documents, including emails, text messages, and electronic files.
2. Contact experienced counsel: Engage a regulatory investigations attorney before responding to any requests or agreeing to interviews.
3. Identify the scope: Understand which regulator is investigating, what conduct is being examined, and who else may be involved.
4. Limit discussions: Avoid discussing the investigation with colleagues, friends, or family who may later become witnesses.
5. Review insurance coverage: Determine whether you have directors and officers insurance or other coverage that may apply to defense costs.

Fee Structure

We understand that facing a regulatory investigation creates financial stress in addition to professional concerns. We offer flexible fee arrangements tailored to the needs of each case.

Regulatory defense matters are typically handled on an hourly basis, with retainers and billing arrangements discussed during your initial consultation. We provide regular billing updates so you understand your costs as the case progresses.

Schedule a free consultation to discuss your situation and receive a clear explanation of how we structure our representation.

The information on this page is for educational purposes and does not constitute legal advice. Prior results do not guarantee a similar outcome.