No, the Securities and Exchange Commission, or “SEC,” cannot initiate a criminal case. The SEC is responsible for monitoring and regulating financial markets. It works “to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation.”
To that end, the SEC investigates possible violations of federal securities laws and initiates enforcement proceedings when it concludes the securities laws have been violated. The SEC’s enforcement mechanisms are not criminal, however. The SEC can initiate administrative enforcement proceedings before an “administrative law judge” – an employee of the SEC who decides whether a violation has occurred. Or, the SEC can enforce the securities laws through a civil lawsuit in federal court.
Because SEC proceedings are not criminal, they do not risk imprisonment. Nonetheless, the penalties and consequences of an SEC enforcement action can be severe. For example, violations of the securities laws might result in civil monetary penalties of millions, or even hundreds of millions, of dollars. They may also result in an individual being barred from serving as an officer or director of a public company.
While the SEC has no authority to initiate a criminal case, many violations of the securities laws are also crimes. As a result, the SEC will often work closely with criminal investigators at the FBI and with prosecutors at the Department of Justice. It’s not uncommon for SEC investigations to proceed in parallel with a criminal investigation and for SEC lawyers and prosecutors to cooperate in an investigation. In some cases, the SEC may even make a referral to the Department of Justice, asking the Department to investigate conduct that the SEC believes is criminal.
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