If the SEC knocks on your door, we can help. But obviously it's best not to even show up on their radar screen as potentially being in the "wrong lane."
So how does one steer clear of land mines? Fortunately, many of the potential legal problems that lie just beneath the surface can be anticipated. Unfortunately, many are not obvious, and can lead the SEC or another federal or state regulator to question your actions. Once you're in their web, it's harder to get out, so seek experienced counsel early on in the process.
Managing or raising money. Your outreach to friends and family may seem innocent, but U.S. laws governing money managers and start-up funding are intricate and can implicate specific requirements. Make sure your website makes it clear who your target customers are. We have seen non-U.S. companies get into trouble with the SEC even when they are not soliciting U.S. business, simply because they have a U.S. address listed on their English-language website without adequate disclaimers.
Crypto/blockchain issues. This area is rapidly evolving. The SEC has issued guidance and approved some offerings, but it left many questions unanswered or not clear enough for comfort. Seek counsel before moving forward with any activity that potentially "touches" the U.S.
Just read the law, right? It is essential to consult statutes and regulations to know your obligations. But that's often not the full answer. Much U.S. securities law is further defined by administrative pronouncements. Professional securities-law counsel can help you navigate these waters.
It's "just" a form. I can handle it. You want to register your company's activities, and the questionnaire seems straightforward. But those administrative positions noted above are relevant here as well. Filings are public, so a seemingly-correct but technically-inaccurate answer on a form can be deemed by the SEC to be false and misleading and therefore a securities-law violation worthy of fines or other sanctions.
The SEC is asking questions. What should I do? You might be the target of the inquiry, or you might be a witness. It is often impossible to tell from the inquiry itself. It is important, therefore, to take any inquiry seriously and respond with extreme care. But how did this happen?
All regulatory inquiries are based on "cause." This means that the SEC likely received a tip from a "whistleblower" (an informer), an investor complaint, or a referral from another law-enforcement agency. Congress adopted the whistleblower program after the 2008 financial crisis, and offers financial rewards in exchange for information that leads to a successful case. Whistleblowers even retain advisers to help them maximize opportunities for awards.
Leads also come from state agencies, industry entities such as FINRA or the NYSE, and non-U.S. regulators. The SEC conducts its own "sweeps," targeting specific issues or entire industry segments. The SEC has limited resources, so in order to maximize its reach it employs a sophisticated data-driven methodology for selecting cases.
You are always entitled to legal representation, even if the inquiry seems informal and inconsequential. You should take advantage of that right. Counsel can intercede to understand the source of the inquiry, as well as the focus of the government. This applies to all interactions with the government of any kind. What you say in your responses can get you into trouble, even in cases where you might otherwise have been able to steer clear of the government's grasp.
We are experienced SEC defense and securities law counsel and would be pleased to assist you.
R K Invest Law, PBC
Phone: + 972 (0)52 612 1364
Website: http://www.investlaw.net
