Blog
How to Respond to SEC Subpoena for Testimony
Contents
Your attorney can be present — but can’t actually protect you the way you think. If you’ve ever seen a deposition on television, you’ve seen attorneys objecting to questions, instructing witnesses not to answer, and fighting over what’s proper. SEC testimony doesn’t work like that. In SEC testimony, your attorney sits there in an “advisory” capacity only. They can’t object. They can’t stop questions. They can’t instruct you not to answer. They can take notes, talk to you during breaks, and ask a few clarifying questions at the end. That’s it. You sit there for six hours or more answering questions designed to extract admissions while your attorney watches, essentially helpless to intervene.
Everything you say gets transcribed by a court reporter. If there’s a parallel DOJ investigation — and you may not know if there is — your testimony can be accessed by federal prosecutors. The words you speak in that room trying to cooperate with a civil regulatory inquiry can be read aloud at your criminal trial years later. The testimony isn’t a conversation. It isn’t even really a deposition in the traditional sense. It’s an interrogation with a lawyer-shaped security blanket.
This article explains what actually happens in SEC testimony, why your attorney’s presence provides less protection than you expect, what questions the SEC uses to destroy cases, and how to prepare in a way that doesn’t make things worse.
Your Attorney Can’t Actually Protect You
Everyone tells you to bring an attourney to SEC testimony. Thats correct — you absolutly should. But almost nobody explains what your attourney actualy CAN do once there in the room. The answer is: much less then you think. According to the SEC’s own Form 1662, wich they give to every witness, your counsel may “advise you before, during and after your testimony; question you briefly at the conclusion of your testimony to clarify any of the answers you give during testimony; and make summary notes during your testimony solely for your use.”
Thats it. Three things. Advise you during breaks. Ask clarifying questions at the end. Take notes. Your attourney cannot object to questions the way they would in court. There is no judge present to rule on objections. The SEC staff control the record completly — they decide when to go on the record and when to go off. Your attourney is there in an “advisory” capacity, not an adversarial one. — look, I’ve sat through these testimoneies as defense counsel, and the feeling of helplessness is real —
In a regular civil depostion, your attourney can say “objection, that question is improper” and in many cases instruct you not to answer. They can fight about the scope. They can protect you from unfair questioning. In SEC testimony, none of that works. The normal rules of evidance dont apply. SEC staff can ask you anything they want, for as long as they want, in any manner they want. Your attourney sits there and watches. They can confer with you during breaks, but once your on the record, your on your own.
What the Testimony Room Actually Looks Like
SEC testimony typicaly takes place at the SEC’s regional office or, increasingly, via videoconferance. Theres a court reporter transcribing everthing. SEC enforcment staff are present — usually two or three of them. Your attourney sits next to you. And then the questioning begins. For six hours. Sometimes longer. The record shows that testimoney can be “grueling, and most pepole break down after several hours of questioning.”
The staff who attend the testimony have done this thousends of times. Your doing it for the first time. They know every trick. They know how to ask questions that seem simple but contain legal traps. They know how to get pepole to volunteer information they didnt intend to share. They know that fatigue produces mistakes, and they structure there questioning acordingly. — and this is were pepole get destroyd —
Deposition witnesses make a disproportionate number of errors toward the end of the deposition and toward the end of the day. SEC staff know this. They often save there most difficult questions for hour five or six, when your tired, when your guard is down, when your just trying to get through it. The imprecise answer you give at 4pm becuase your exhausted can become the basis for perjury charges or expanded investigation.
Heres somthing else nobody tells you: your demeanor during testimony affects the outcome. The staff members who attend have a role in determining wheather further action will be taken. If your evasive, combative, or appear to be hiding somthing, that impresson influences there recommendation. You need to be accurate without beeing expansive, cooperative without beeing volunteering, confident without beeing arrogant. For six hours. While there trying to get you to make mistakes.
The Questions That Destroy Cases
SEC testimony typicaly starts with questions that seem procedural. They ask about your background, your role, your responsibilitys. Then they ask about your preparation — what documants you reviewed, who you talked to, what you did to prepare for testimony. These questions seem inocuous. There not. There designed to establish baselines and identify inconsistancys later.
The “preparation questions” are a trap for the unwary. If you say you reviewed certian documants, they will ask why you chose those documants. If you say you talked to certian pepole, they will ask what those pepole told you. If you say you didnt prepare much, they will wonder what your hiding. If you say you prepared extensivley, they may argue your testimony is rehearsed and unreliable. There is no perfect answer — thats the point.
Then come the substancive questions. And here is were the lack of evidance rules becomes dangerouse. They can ask leading questions. They can ask compound questions. They can mischaracterize your previous answers and ask you to confirm the mischaracterization. They can show you documants out of context and ask you to explain them without providing the context. Your attourney cannot object. The only person protecting you is you.
If you lie to the SEC, you face criminal consequenses. 18 USC 1001 makes it a federal crime to make false statements to federal agencies. Even if the underlying investigation is civil, lying during testimony can result in criminal prosecution. Martha Stewart didnt go to prison for insider trading — she went to prison for lying about it. The false statement often becomes more serious then whatever the original investigation was about.
The Fifth Amendment Decision
You have the right to refuse to answer questions that might incriminate you. The Fifth Amendment applies to SEC testimony even though its a civil proceding. But exercizing that right has consequenses that most pepole dont understand untill its to late.
If you invoke the Fifth Amendment in SEC testimony, the SEC can draw an adverse inferance against you in there civil case. They can argue to a court that your refusal to answer suggests you have somthing to hide. More dangerouse: if your involved with FINRA, invoking the Fifth results in automatice industy bar. FINRA’s position is that participating in the securites industry means accepting there regulatory authority, including the obligation to cooperate. Invoke the Fifth in response to FINRA, and your career in securites is over. No hearing. No appeal.
So your choices are: testify and potentialy hand prosecutors the evidance they need to convict you. Or invoke the Fifth, lose the civil case by adverse inferance, get barred from the industry by FINRA, and destroy your career while protecting yourself criminaly. There is no good option. Theres only damage control. This is the decision you face, and you need to make it with experianced counsel befor you walk into that testimony room.
How to Prepare Without Over-Preparing
Preparation is essential but contains its own paradox. You need to be prepared enough to answer questions accuratley. You cannot be so prepared that your answers sound rehearsed and scripted. The SEC staff can tell the differance between someone who has reviewed the facts and someone who has memorized a script. The latter actually hurts you — it suggests your hiding somthing, that your real testimony would be problematic if given spontaniously.
The goal of preparation isnt to win the testimony. Its to not lose. You want to answer questions accuratley without volunteering additional information. You want to correct mischaracterizations without arguing. You want to maintain composure for six hours without appearing evasive or hostile. This requires practice — but practice in how to listen and respond, not practice in memorizing answers.
Work with your attourney on the following. Review all documants you produced — they will be refrenced during testimony. Review your calendar and email for the relevnt time period. Identify topics that are problematic and understand the legal implications. Practice listening carefully to questions and answering only what is asked. Understand when its appropriate to say “I dont recall” (when you genuinly dont recall) and when that answer will create problems (when documants show you should recall).
The subpoena response phase typicaly costs $50,000 to $150,000 according to industry estimates. Thats alot of money. But consider the alternative: $100,000 spent at the subpoena phase can prevent $1,000,000 spent at trial — and produce far better outcomes. The investment in proper preparation, including preparation for testimony, is usually worth it.
How do you respond to an SEC subpoena for testimony? You bring experianced counsel. You understand what counsel can and cannot do. You prepare extensivley but naturaly. You make the Fifth Amendment decision befor you enter the room. And you accept that your going to spend six hours in a chair answering questions designed to extract admisions, with your attourney watching but largley unable to intervene. Thats the reality. Understanding it is the first step toward surviving it.