Each year, the Securities and Exchange Commission receives thousands
of letters from investors asking it to investigate the activities of
other investors, corporations, broker-dealers, investment companies,
stock exchanges and others. These complaints generally suggest some
impropriety or misconduct, and sometimes make a plea to the SEC for
direct assistance in resolving a grievance.
The SEC has the authority to investigate whether violations have
occurred, and its staff makes every effort to evaluate promptly and
thoroughly the information provided by investors. However, it cannot
guarantee that its review of a situation will result in a further
investigation or, if it goes forward, that the investigation will be
scheduled for immediate action. While many investor complaints do
lead to full investigations and, where warranted, to enforcement
action, the SEC receives far more requests for investigations than
can possibly be done with its limited resources. Many complaints are
referred to the appropriate self-regulatory organizations (such as
the securities exchanges and the National Association of Securities
Dealers) or to local enforcement agencies.
SEC investigations are normally carried out on a confidential basis,
which is necessary for effective law enforcement and to protect
people against whom unfounded charges might be made. As a rule, the
SEC will not confirm or deny the existence of an investigation
unless, and until, it becomes a matter of public record as the result
of a court action or administrative proceeding.
When there is proof that someone has violated the securities laws,
the sanctions may include a censure, financial penalties, orders to
surrender profits, cease and desist orders, and/or an injunction by a
court to prevent further violations. Individuals may also be barred
by the Commission from working for a securities firm, investment
adviser, or investment company. At the request of the SEC, federal
courts may also bar individuals from being officers and directors of
publicly held companies. In some situations, a case may be referred
to the Department of Justice for possible criminal prosecution.
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