If you work in any area of the securities industry—such as advising investors, issuing publicly traded securities, or even investing yourself—you may one day face the possibility of receiving a subpoena from the U.S. Securities and Exchange Commission (SEC). The SEC has broad authority to regulate the securities markets by issuing rules and investigating potential violations of federal securities laws.

An SEC subpoena requires you to either produce documents in your possession or appear before the SEC to provide sworn testimony. While subpoenas are a powerful investigative tool used to protect the investing public and promote fair markets, receiving one can be an alarming and stressful experience.

The most important step you can take upon receiving an SEC subpoena is to immediately consult an experienced SEC defense attorney. An attorney can protect your rights, ensure compliance with complex SEC rules, and help manage the agency’s often short and inflexible deadlines.

What an SEC Subpoena Means

An SEC subpoena is a legal order indicating that the Commission has already issued a formal order of investigation. It is backed by the authority of the federal government and ignoring it can lead to contempt proceedings in federal court.

Key points to understand include:

• The subpoena confirms that a formal investigation is already underway;
• Failure to comply may result in court enforcement, daily fines, or possible incarceration;
• The subpoena will not disclose whether you are a witness or a target;
• It will not specify whether the investigation is civil or criminal;
• It will not identify the precise conduct under investigation or the evidence the SEC already possesses.

The SEC intentionally keeps subpoenas vague to preserve flexibility while gathering additional information.

In March 2025, the SEC adopted a new rule requiring approval by a majority of SEC commissioners before issuing a subpoena to open a formal investigation. As a result, subpoenas are no longer mere “fishing expeditions” and now signal a higher level of internal scrutiny.

Formal Orders of Investigation

A formal order of investigation outlines the securities law violations the SEC believes may have occurred and describes the scope of the inquiry. Although recipients are entitled to request a copy of the formal order, most individuals never do—often because they are unaware that it exists.

A request must be made in writing to the Assistant Director assigned to the investigation. The SEC may deny the request if disclosure would impede the investigation or compromise the privacy of others involved.

Witness vs. Target Status

Your status in an SEC investigation is fluid and may change without notice. Based on documents you produce or statements you make during testimony, you may transition from witness to target—often without being informed.

By the time that shift occurs, you may have already provided the SEC with information it can use against you. This makes early legal representation critical.

The Importance of Legal Representation

Compliance with an SEC subpoena is mandatory, but how compliance is handled can significantly affect the outcome of the investigation. An experienced SEC defense lawyer can:

• Negotiate the scope and timing of document production;
• Assert and preserve attorney-client privilege;
• Prevent inadvertent waiver of privilege through document review;
• Prepare you for testimony and questioning;
• Advocate on your behalf with SEC enforcement staff.

Accidentally producing a privileged document can waive protection not only for the document itself, but for all related communications—potentially impacting future proceedings as well.

Why This Matters

Receiving an SEC subpoena can be a life-altering event regardless of the ultimate outcome. The stakes are high, the rules are unique, and every decision matters. SEC investigations differ significantly from traditional litigation, and missteps can have long-term professional and financial consequences.

Need Legal Guidance for an SEC Subpoena?

The securities attorneys at Corporate Securities Legal LLP have extensive experience defending individuals and companies in SEC subpoena investigations. Our team understands how SEC investigations work, how to interpret enforcement signals, and how to navigate this complex regulatory process while protecting your rights.

Contact us to discuss your situation and ensure you are responding to an SEC subpoena strategically, efficiently, and in full compliance with the law.

August 13, 2019

The Securities and Exchange Commission (“SEC”) charged Antonio Bravata, a repeat securities law violator, with securities fraud after learning that Bravata was offering securities of a company he owned and controlled while serving his sentence for another Ponzi scheme. The SEC was able to put a stop to the securities offering before any money was raised.

According to the SEC, a Ponzi scheme “is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors.”

Bravata was serving out the end of his 5-year federal prison sentence on home confinement as a result of a previous investment fraud with BBC Equities when his latest scheme to defraud investors of their money was uncovered by the SEC. Antonio Bravata was offering securities in a company called Primo World Ventures, LLC (Primo) that he had formed with the help and guidance of his father, John Bravata. John Bravata is currently incarcerated for masterminding the BBC Equities $50 million Ponzi scheme that his son, Antonio Bravata, had also been a part of.

Exactly like the BBC Equities scheme, Antonio Bravata planned to use the money given to him by new investors to pay off old investors, all while taking the biggest cut for himself.

Primo was very similar to BBC Equities, as Antonio Bravata modeled the Primo offering documents off of those that had previously been given to the investors of BBC Equities. The main difference was that with Primo, Antonio Bravata’s name was nowhere to be found. Both Antonio Bravata and John Bravata concealed their involvement in the company behind the façade of an extensive team of analysts, lawyers, and professionals who did not actually exist. In reality, Antonio Bravata was a one man show who ran day-to-day operations, filed Primo’s articles of organization, prepared the offering documents, and obtained permission from a financial institution to hold Primo securities in IRA accounts. While John Bravata advised his son and a former BBC Equities salesman assisted, the involvement of other executives or professionals was simply an attempt to create legitimacy where there was none.

The SEC uncovered the fraud before Antonio Bravata was able to complete any sales of Primo securities, saving many potential investors from losing their money and stopping Antonio Bravata’s plan.

The SEC does not tolerate Ponzi schemes and it remains constantly vigilant to potential schemes. Oftentimes officers can find themselves in a position where they are tempted to pay off prior investors with new investor funds and a company can quickly find itself in a scenario where it unknowingly commits a securities violation. Our firm can readily identify potential issues with securities offerings and prepare compliant investment documentation. More commonly, if you find yourself involved in an investment offering that promises big, consistent returns up front with little to no risk, you may have a Ponzi scheme on your hands.

Wilson Bradshaw LLP is a boutique securities law firm in Irvine, California and New York City. We help companies prepare compliant offering materials and individuals make secure investments. Additionally, if you or your company has received a subpoena from the SEC, we can assist you. We restrict our practice to securities law, focusing on private and public offerings and SEC enforcement work.

We recently posted about the advantages of a Private Placement Memorandum (ppm), and the necessity of complying with all of the requirements to stay within the exemption granted by the Securities and Exchange Commission. This post explores the reasons you need the assistance of a securities attorney in the preparation and execution of your PPM to avoid misunderstandings with your potential investors and the resulting problems to you and to them.

Forbes Magazine suggests some of the more common issues that investors should look for, and the business owner should also be aware of them, so the offering will be clear and understandable to both parties. Understanding the risk factors is critical. These factors should be listed in the term sheet, and the investors should have a working understanding of how much they can lose”, but a thorough and understandable explanation of the risks and the consequences can go a long way in preventing angry, confused investors down the road.

Liquidity of the securities is important, so you need to clarify under what conditions your investors can sell, and how much it will cost them. Are there restricted conditions for making distributions to the investor? Will you be making regular distributions, which the investor can count on, or do you only need to pay the investors when you sell certain assets or other major events?

Are you making the offering on a contingency basis, and if so, are those conditions for concluding the placement clearly explained. A common condition would be that a specified dollar amount needs to be invested before a specified date, or else the placement is canceled. “If any specified conditions or contingencies are not met, the offering document should clearly state that investors will be refunded their investment amount. If there are no contingencies, be wary. An offering that may proceed without a minimum level of investments or other conditions could be a red flag, as the issuer can use the proceeds immediately, regardless of the amount raised from other investors.” That means the wording on your Private Placement Memorandum needs to be very specific on these issues, and clearly understandable.

FINRA emphasizes, “Each year, companies raise billions of dollars selling securities in non-public offerings that are exempt from registration under the federal securities laws. These offerings, known as private placements, can be a key source of capital for American businesses, especially small or start-up companies. But investing in private placements is risky and can tie up your money for a long time. As with other investments, you can also lose some or all of your money.”

If some of this seems a little unnecessary or insignificant, remember, the investors most likely have their attorneys looking at it, and they will be watching to see if you fail to fully advise their clients of all required disclosures.

The law firm of Wilson, Bradshaw & Cao LLP is experienced in all securities issues and transactions, so you can rest assured that your PPM will be handled professionally and accurately.

According to Forbes, “The term sheet is one of the most critical documents an entrepreneur can ever design or sign.” A term sheet is a document that results from initial negotiations between the business owner and potential investors prior to selling your stock to outside investors. It is a non-binding contract document, so it is easy to think that it can be changed without consequences, however, it is the beginning point, resulting from initial negotiations, where both parties map out their risks and obligations.

Both parties are free to back out of the agreement without any obligation, but if one party decides to change the agreed upon terms, it will cause the other party to have to fully reconsider his position on the offer to buy or sell the stock.

Consider your terms carefully. A term sheet is your opportunity to lay out your proposal for all the critical items that will make the deal worthwhile to you. If you overlook essential aspects in the beginning, it will be very difficult to add them in later. It is wise to evaluate ways to optimize such things as option pools, liquidation and participation, dividends, protective provisions, and controlling rights before you ever begin negotiations. The term sheet is the documented results of your negotiations, not the beginning points of negotiation.

Forbes further points out that “Just as founders don’t want difficult or greedy investors on board, investors don’t want hassle or founders that only want to take the money and run. The term sheet should facilitate a win-win for both sides.” It is a waste of everyone’s time to try to negotiate terms that are so unfavorable to one of the parties, that he will end up walking away from the deal before it is ever executed. Consider ahead of time the difference between where you can give in and where you have to draw the line.

It is important to think ahead about issues that are not currently pressing, but will raise serious problems in the future, if not properly negotiated. For example, restrictive debt financing terms might prevent you from getting needed funds when bankruptcy is looming. Giving away a controlling stake in the company may be a subtle sign that you will be replaced after the investors feel more comfortable in running the business. Limitations on future fundraising or projections for too quick of a turnaround may predict that investors are looking for a quick exit, leaving you with investors not of your choice.

As a final word of advice, you can protect yourself and maximize your negotiations by following these three tips: “1) Make the most of your term sheet; 2) Hire the right lawyer; and 3) Know the difference between the terms of preferred and common stockholders.” The attorneys at Wilson, Bradshaw and Cao, LLP, have more than 70 years of combined experience in securities law and can maximize your application for going public and conducting your negotiations for optimal results.

The SEC suspended trading in the securities of Simex, Inc. due to concerns about inaccurate and
insufficient information in the marketplace regarding the company’s products and services and purported regulatory approvals. The SEC order was entered pursuant to Section 12(k) of the Exchange Act.

See: https://www.sec.gov/litigation/suspensions/2018/34-84460.pdf

Earlier this month, Robert A. Cohen, Chief of the SEC Enforcement Division’s Cyber Unit, said that
the SEC “does not endorse or qualify custodians for cryptocurrency” and warned investors to be “skeptical of those attempting to sell digital assets” that make claims about future SECactions. Cohen stated that to allay confusion, the SEC will announce official actions regarding digital assets through official government sources. Examples of official government sources include agency press releases, the Federal Register, an agency’s official government website(SEC.gov, Investor.gov, or
CFTC.gov), or authorized public statements by the agency’s leadership.

See: https://www.investor.gov/additional-resources/news-alerts/alerts-bulletins/investor-alert-watch-out-false-claims-about-sec

The SEC can suspend trading in stock for 10 days and can enjoin a broker-dealer from soliciting
investors until the broker-dealer has met reporting requirements. Pursuant to rule 15c2-11 under the Exchange Act, at the termination of the trading suspension, no quotation can be issued unless they have “strictly complied with all provisions of the rule.”

The SEC’s Office of Investor Education and Advocacy has issued materials to educate investors,
including an Investor Bulletin on initial coin offerings and a mock ICO website. Additional information is available on SEC.gov/ICO and Investor.gov.

If you have questions about SEC regulation of cryptocurrency transactions and complying with rule 15c2-11, call the Bradshaw Law Group before publishing statements that may lead to SEC enforcement action.

The Securities and Exchange Commission recently released its annual report for the year 2018, which focuses on its enforcement-related accomplishments. The Directors said they believe the effectiveness of the program should be measured by assessing the nature, quality, and effects of the Commission’s enforcement actions. They believe they are deterring future harm by bringing meaningful cases that send clear and important messages to market participants.

Of special interest, is the Commission’s emphasis on accountability of individuals. There were 54 entities and 94 individuals in stand-alone actions relating to issuer financial reporting and disclosures in the following categories: revenue and expense recognition problems; faulty valuation and impairment decisions; missing or insufficient disclosures; misappropriation through accounting misrepresentations; inadequate internal controls; and misconduct by financial reporting gatekeepers.

The report emphasizes that in every enforcement action, they seek appropriately tailored remedies that further enforcement goals. In addition to disgorgement and penalties, there are a wide array of potential remedies available. In each case, the Commission seeks those remedies that will be the most meaningful. Many of the individuals charged in FY 2018 include senior officers at prominent issuers, including CEOs, CFOs, accountants, auditors and other public figures. Overall monetary remedies obtained by the SEC (penalties and disgorgement) increased by 4 percent from approximately $3.789 billion in FY 2017 to $3.945 billion in FY 2018.2

With the rise in cybersecurity issues, the commission is focusing on the timeliness and accuracy of disclosures and the need to maintain strong internal accounting controls. It has shown its ability and preference to enhance the usual enforcement tools in creative ways to address the current violations. It’s becoming increasingly difficult to get away with many of the violations that were previously overlooked, now that the Commission is using advanced capabilities in data analytics. The Commission has also sought to penalize individuals and require them to pay back illegal gains. In FY 2018, the Commission obtained judgments or orders for disgorgement and/or penalties from over 500 individuals, representing an increase of 9% over FY 2017.

Making sure you are in full compliance with all SEC regulations and procedures is the primary focus of the law firm of Wilson, Bradshaw & Cao, LLP. Your success in going public and staying in good standing with the SEC will bring lasting benefits to your company. We actively help companies navigate through SEC Enforcement issues. If you receive a subpoena from the SEC we are here to help.