Criminal Defense Lawyers

SEC Subpoena Individual vs Company

The difference between an SEC subpoena addressed to you as an individual versus you as a corporate representative is the difference between having constitutional rights and not having them. That’s not an exaggeration. If the envelope says “John Smith,” you can invoke the Fifth Amendment. If it says “John Smith as Custodian of Records of XYZ Corporation,” you cannot. Same person. Same investigation. Completely different legal position based on how someone at the SEC addressed the paperwork.

This distinction destroys people who don’t understand it. You get a subpoena, you see your name, you assume your constitutional rights apply. But they might not. Corporations don’t have Fifth Amendment rights. Corporate officers acting in their corporate capacity don’t either. The Supreme Court made this clear decades ago, and the SEC knows exactly how to use it. By choosing how to address the subpoena, they’re choosing what rights you have.

Here’s what nobody explains until it’s too late: you might receive BOTH types of subpoenas. One as an individual. One as custodian of records or corporate representative. Different rights attach to each one. And the strategy that protects you on one might destroy you on the other.

The Capacity Question That Changes Everything

When you recieve an SEC subpoena, the first thing you need to figure out isnt what documents they want or when testimony is scheduled. The first question is: in what capacity have you been subpoenaed?

Look at the face of the subpoena. Does it say your name alone? “John Smith” – thats individual capacity. Does it say your name plus a corporate role? “John Smith as Custodian of Records of XYZ Corporation” – thats corporate capacity. Does it just name the company? “XYZ Corporation” – thats corporate, and someone has to respond on behalf of the entity.

This matters becuase your Fifth Amendment rights against self-incrimination depend entirely on this distinction. Individual capacity means you CAN invoke the Fifth if truthful answers might incriminate you. Corporate capacity means you CANNOT – the constitution dosent apply to corporations, and when your acting in a corporate role, it dosent apply to you either.

Heres the trap that gets people. Your an officer of the company. CFO, maybe. The SEC sends a subpoena addressed to you as custodian of records. You have to produce documents. You cant refuse based on self-incrimination. Those documents show a problem – maybe accounting fraud, maybe something worse. Now the SEC has evidence. Evidence you were forced to produce. Evidence they can use against you personally in any subsequent individual enforcement action.

The more senior you are in the company, the more likely you’ll be subpoenaed in corporate capacity. And corporate capacity means fewer rights, not more.

WARNING: If you receive a subpoena in corporate capacity, you cannot invoke Fifth Amendment rights in that capacity. Corporations have no Fifth Amendment protection, and neither do corporate officers acting in their corporate role.

The Subpoena Dosent Tell You What You Need to Know

OK so you’ve looked at the subpoena. You know what capacity your named in. But heres something that will frustrate you: the subpoena dosent tell you the important stuff.

It dosent tell you wheather your a target, a subject, or just a witness. It dosent tell you if theres a parallel criminal investigation at DOJ. It dosent tell you the SECs legal theory – what they think happened and who they think is responsible. It might not even tell you who the main focus of the investigation is.

The subpoena tells you what documents they want and when they want them. Thats it. Everything else is hidden.

This is intentional. The SEC dosent want you to know your status becuase knowing would change your behavior. Targets invoke rights and hire lawyers. Witnesses cooperate and talk freely. The SEC prefers the second outcome, so they keep everyone in the dark as long as possible.

But you can get more information. After recieving a subpoena, you have the right to request a copy of the SECs Formal Order of Investigation. They typically provide it if your attorney agrees not to share it outside the defense team. The Order tells you who the main target is and what conduct is under scrutiny. Its not complete information, but its more then the subpoena alone provides.

Always request the Formal Order of Investigation. The additional context could completely change your strategy.

When Your Interests and the Companys Interests Diverge

Heres the uncomfortable truth that nobody at your company wants to acknowledge: the companys interests and your interests are not the same thing. In fact, they might be directly opposed.

Think about what happens in a typical SEC investigation. The company recieves notice of an investigation. They hire outside counsel – a big law firm that specializes in SEC matters. That counsel represents the company, not you. They interview employees, including you. They collect documents. They figure out what happened.

Then they make a strategic decision: how does the company minimize its exposure? Sometimes that decision involves identifying whose conduct was problematic and making sure the SEC knows it wasnt institutional – it was one person. Maybe it was you.

Ive seen cases were employees trusted company counsel, shared everything in internal interviews, said things that got documented, and then found out later those statements were handed to the SEC as part of the companys cooperation package. The company settled, paid a fine, moved on. The individual employee faced charges – using there own words from the internal investigation as evidence.

The company gets cooperation credit for turning over employee interviews. Your statements become currency. The company trades you for a reduced penalty.

This isnt paranoia. This is how the system works. The SEC Enforcement Manual has seperate frameworks for evaluating cooperation by individuals versus companies. The company can earn credit for cooperating. Part of that cooperation involves identifying and disciplining responsible individuals. You might be that individual.

The FINRA Trap for Registered Persons

If your registered with FINRA – broker, advisor, compliance officer – you have an additional problem that makes everything worse.

At the SEC, you can invoke the Fifth Amendment in individual capacity. The SEC can draw an adverse inference from your silence in civil proceedings, meaning they can assume the worst about whatever you refused to answer. But you retain the right to stay silent.

FINRA is different. FINRA is a self-regulatory organization – technicaly a private entity, not a government actor. The Fifth Amendment only applies to government action. FINRA can require you to answer questions, and if you invoke the Fifth, they will bar you from the industry.

Read that again. You excercise your constitutional right to remain silent, and FINRA ends your career. Not becuase they proved you did anything wrong. Becuase you wouldnt talk.

More then one-third of all FINRA industry bars are for Rule 8210 violations – refusing to cooperate with FINRA investigations. People assert there Fifth Amendment rights, figuring constitutional protections apply, and discover to late that FINRA dosent care about the constitution. They were punished for silence, not misconduct.

So now picture your situation. You recieve an SEC subpoena in individual capacity. Your also registered with FINRA. You might have both SEC and FINRA exposure. Taking the Fifth protects you from criminal exposure through SEC testimony. But it destroys your career at FINRA. You protected yourself from one threat by creating a worse one.

CRITICAL: If you’re registered with FINRA and receive an SEC subpoena, your Fifth Amendment strategy must account for BOTH agencies. The approach that protects you at SEC may end your career at FINRA.

The Parallel Investigation You Dont Know About

The SEC is a civil enforcement agency. They cant send you to prison directly. But heres what they can do: share everything with the Department of Justice, which definately can prosecute criminally. And they do this constantly. The SEC and DOJ have formal information-sharing agreements. Theres something called an Access Request that lets DOJ get everything the SEC collected – documents, testimony transcripts, interview notes, all of it. When the SEC builds a case against you, there often building it for DOJ at the same time.

SEC investigations frequently run parallel to DOJ criminal investigations. Sometimes DOJ opens an investigation after seeing what SEC found. Sometimes they open simultaneously without telling anyone. The SEC is not required to disclose that a parallel criminal investigation exists. You could be sitting in an SEC interview, answering questions under oath, while DOJ prosecutors are literaly watching through information sharing. The SEC staff know theres a criminal investigation. Your company’s lawyers might know. DOJ knows. Everyone knows except you – the person giving testimony that could end up at your own criminal trial.

So your sitting in SEC testimony, thinking “this is civil, not criminal.” Your more relaxed then you should be. The SEC staff are professional, asking questions, taking notes. Theres no Miranda warning becuase this isnt a criminal arrest. Your answering questions, trying to be helpful, thinking cooperation matters.

Meanwhile, DOJ prosecutors are watching. Or they will be soon. The SEC and DOJ have information-sharing agreements. Your civil testimony can become criminal evidence. Every word you say in that “civil” interview can end up in a criminal prosecutors file.

By the time you learn about the criminal investigation, youve already testified. Under oath. On the record. And now prosecutors have your words – words you gave becuase you thought this was just a regulatory matter, words you might never have said if you knew DOJ was involved.

The subpoena dosent tell you about parallel investigations. The SEC staff wont mention it. You find out when you get a target letter from DOJ, long after youve already talked.

What Company Counsel Cannot Do For You

When SEC investigation hits your company, theres usually a meeting. Outside counsel explains the situation. They tell everyone to preserve documents. They schedule interviews. It all feels very organized, very professional. The lawyers are handling it.

But those lawyers dont represent you. They represent the company. And what benefits the company may harm you personally.

Company counsel cannot give you legal advice that prioritizes your interests over the companys. They cant tell you to invoke the Fifth if doing so would hurt the companys cooperation strategy. They cant advise you to refuse an internal interview if the company needs that interview for its own defense. There attorneys for the entity, not for the humans who work there.

This creates a dangerous situation. Your sitting in a conference room with lawyers who seem to be on your side. There asking questions, taking notes, nodding sympatheticaly. It feels like there helping you. But everything you say belongs to the company. The company can waive privilege and hand your statements to the SEC whenever it wants.

The Upjohn warning is supposed to address this. Company counsel must tell you they dont represent you personally, that privilege belongs to the company, that the company can choose to share your statements. But this warning comes at the beginning of the interview, when your nervous and not processing information carefully. By the time you realize what it meant, youve already talked.

You need your own lawyer. Not a referral from the company. Not counsel “approved” by the company. Your own independent attorney who represents only you.

Individual vs Corporate: A Decision Matrix

Let me lay out the practical differences clearly.

Subpoena in Individual Capacity:

• CAN invoke Fifth Amendment for testimony
• CAN invoke Fifth Amendment to refuse document production (in limited circumstances – act of production doctrine)
• Adverse inference allowed in civil proceedings
• Your statements are YOUR statements
• Your document production is YOUR production

Subpoena in Corporate Capacity:

• CANNOT invoke Fifth Amendment – corporations have no Fifth Amendment rights
• MUST produce corporate documents responsive to subpoena
• Your production may contain evidence against you personally
• Company gets cooperation credit for what you produce
• You’re acting as the corporation’s agent, not as yourself

If You Receive Both:

• Different rights apply to each
• Strategy for one may conflict with strategy for other
• Need to coordinate response carefully with counsel
• Cannot use individual Fifth Amendment to refuse corporate document production

The Fall Guy Scenario

I need to explain what happens in worst-case scenarios becuase it happens more often then anyone admits.

Company recieves SEC subpoena. Internal investigation reveals serious problems – maybe accounting fraud, maybe trading violations, something substantial. The company faces huge fines, possible criminal referral, reputational devastation.

Company counsel advises a cooperation strategy. Part of cooperation is identifying responsible individuals and taking remedial action. Translation: find who to blame and fire them. Show the SEC that the problem wasnt institutional – it was one bad actor. The company is committed to compliance. They just had a rogue employee.

Maybe that employee is you. Maybe you were doing exactly what you were told to do by superiors who wont be blamed. Maybe the “violation” was industry practice that everyone engaged in until the SEC decided to crack down. Dosent matter. Someone has to be the fall guy, and corporate incentives point toward finding one.

The company settles. Pays a fine. Issues a press release about enhanced compliance. Moves on. You face individual enforcement action, maybe criminal referral, career destruction. The company used your internal interview statements as part of there cooperation package. Your own words, given to company counsel who you thought was helping you, are now evidence in your case.

This is why you need your own lawyer from day one. Not becuase the company is evil. Becuase the companys interests and your interests are different, and nobody is looking out for you unless you hire someone to do it.

The Timeline Reality

Heres something else that nobody tells you about SEC investigations: there long. Really long. The average SEC investigation takes about two years from opening to case filing. Some go even longer. And that statistic only counts cases that actualy result in charges – investigations that close without action can drag on for years to.

Two years of uncertainty. Two years of document preservation obligations. Two years of watching your career stall becuase you cant talk about the investigation and potential employers do background checks. Two years of legal fees if your paying your own lawyers. Two years of stress affecting your family, your health, your ability to function normaly.

And during those two years, you may not know if your a target or a witness. The SEC dosent have to tell you. You might be cooperating fully, producing documents, answering questions, thinking your just helping the investigation along, only to find out at month eighteen that youve been the target the whole time and everything youve said has been used to build the case against you.

This is why the individual versus corporate capacity question matters so much at the beginning. Your strategic decisions in the first few weeks will shape the next two years. Getting it wrong means two years of mounting exposure. Getting it right means positioning yourself as favorably as possible for whatever outcome awaits.

What To Do When The Subpoena Arrives

Whether your named individually, corporately, or both, here’s what you need to do.

Immediately:

• Preserve all documents – do not delete anything
• Figure out what capacity your named in
• Request a copy of the Formal Order of Investigation
• Get your own lawyer – not company counsel

Before Responding:

• Understand wheather your a target, subject, or witness
• Understand your FINRA exposure if registered
• Consider parallel criminal investigation possibility
• Coordinate with personal counsel on Fifth Amendment strategy

During the Investigation:

• Do not speak to SEC without your own lawyer present
• Do not assume company counsel represents your interests
• Do not discuss the investigation with coworkers
• Do not destroy any documents under any circumstances

The subpoena looks like paperwork. A formal demand for documents, maybe testimony, with a deadline and some legal language. Most people who recieve one dont realize what there actualy holding. There holding a fork in the road. One path leads to managable regulatory issues – maybe a fine, maybe nothing at all, maybe just being a cooperative witness and moving on with your life. The other path leads to career destruction, industry bars, possibly criminal prosecution, years of legal proceedings, and financial devastation.

The capacity question – individual versus corporate – is one of the biggest factors determining which path your on. Individual capacity means you have constitutional rights. Corporate capacity means you dont. Both capacities can exist at once for the same person. Understanding this distinction before you respond, before you produce documents, before you say anything to anyone, is the difference between navigating the investigation successfully and becoming another statistic in the SECs enforcement numbers.

Nobody at your company is going to explain this to you. The company’s lawyers represent the company. HR is protecting the company. Your coworkers dont understand the distinctions. The SEC certainly wont explain your rights to you – there job is to investigate, not to give you legal advice.

You need someone in your corner. Someone who understands the individual versus corporate capacity distinction. Someone who can coordinate your response across both capacities if you recieve both types of subpoenas. Someone who can advise on Fifth Amendment strategy considering both SEC and FINRA exposure. Someone whose only job is protecting you.

Get a lawyer. Today.