The Division of Enforcement of the U.S. Securities and Exchange Commission (SEC) is responsible for investigating possible violations of securities laws and regulations.
The Division of Enforcement could be seen as the police force for the SEC. Since the chief goal of the SEC is securities law enforcement, the division is central to accomplishing its mandate.
The most common securities law violations for 2020, according to the SEC website, include preventing potential fraud related to the COVID-19 pandemic, issuer disclosure and accounting violations, foreign bribery, manipulation of market prices, investment advisory issues, insider trading, broker-dealer misconduct, and securities offerings.
In some cases, investigations by the Division of Enforcement have resulted in the reimbursement to investors whose money has been found to have been misappropriated. In a particular case, wrapped up in September 2020, a court-appointed receiver returned $1 billion to investors defrauded of their money by a now-defunct investment group.
It pursues investigations of alleged violators of SEC laws regulations.
The Division may bring civil actions against violators or recommend criminal charges.
Evidence of possible violations is collected through market surveillance, investor complaints, other divisions of the SEC, and other securities industry sources.
The SEC also maintains a whistleblower’s fund: as of August 2021, the fund has paid a total of $956 million since issuing its first award in 2012.
The SEC may ask suspected violators to voluntarily hand over relevant documents and voluntarily testify regarding alleged violations. But it also can seek a formal order of investigation that allows SEC staff to compel alleged violators and witnesses to produce documentary evidence and give testimony.
The Division of Enforcement can bring civil actions against regulatory violators in U.S. District Court or in an administrative proceeding presided over by an independent administrative law judge.
The SEC’s whistleblower’s fund has paid out a total of $956 million since 2012.
Neither the SEC nor its Division of Enforcement has the authority to bring criminal charges against alleged violators, but either can recommend that federal or state prosecutors bring criminal charges.
The SEC can seek orders, or injunctions, in civil suits that are intended to prohibit an individual from committing future regulatory violations. That individual could face imprisonment or fines for contempt of court the injunction is violated.
The SEC can also seek a court order to ban an individual from acting as a director or corporate officer.
A number of administrative proceedings are available to the SEC, including cease and desist orders; revocation or suspension of registration; suspension from employment, or bars from employment. The Commission can order civil fines or seize any ill-gotten gains obtained by violators.
Other bars are available to the SEC based on the specific conduct, industry, or associational links of the violators.