If you receive a subpoena, you should immediately contact an attorney. Do not try to handle the matter on your own.
“I received a subpoena from the [state attorney general’s office] for records about [a client],” “The [U.S. Securities and Exchange Commission] wants me to hand over all my files related to [a firm].” It’s not uncommon for brokers and other financial professionals to hear these phrases. In fact, subpoenas are a common method of investigation used by attorneys general, the SEC and other regulators when they wish to investigate suspicious activity in financial institutions or among their customers.
However, most brokers and advisors have no idea what a subpoena is or how it works. Consequently, they often do not know what to do when they receive one. This article will provide a basic overview of subpoenas and what to do if you receive one.
What is a subpoena?
A subpoena is a document that orders a person to appear in court or to produce documents or other evidence. It is used by attorneys and investigators to compel people to provide information or testify. Subpoenas can be “filed” with a court. However, it is also possible to issue a subpoena without the filing of a court case (i.e., ex parte or administrative subpoenas).
The difference between an ordinary subpoena and an investigative subpoena
Ordinary subpoenas are issued by courts in pending civil cases; investigative subpoenas are issued by attorneys and investigators to gather information in criminal cases. Investigative subpoenas may be issued before a case is filed with the court, without notice to an individual who might be affected by them (ex parte) or after a case has been filed (administrative).
The difference between civil and criminal investigations
In civil matters, the attorney or investigator that issues a subpoena is likely working for an agency such as the SEC and seeks documents and other evidence. The target of a civil investigation has no Fifth Amendment protections against self-incrimination, but might be able to assert privileges such as those involving private information (e.g., marital privilege) or trade secrets. In addition, the laws governing subpoenas in civil cases are generally less strict than in criminal cases.
In a criminal investigation, the attorney or investigator that issues a subpoena is usually working for the prosecutor (e.g., the state attorney general’s office) and seeks testimony. The target of a criminal investigation can assert Fifth Amendment protections against self-incrimination. In addition, the laws governing subpoenas in criminal cases are much stricter than in civil cases. For example, a person receiving a criminal subpoena may be required to appear before a grand jury.
What are the Different Organizations that can issue Subpoenas to Brokers and Advisors?
The federal government and each state have their own agencies and laws that regulate the financial industry. Consequently, there are a multitude of different entities that can issue subpoenas to brokers and advisors. The list below includes some of the more common ones:
SEC: The U.S. Securities and Exchange Commission is an independent federal agency responsible for regulating the securities industry. An SEC subpoena is typically used in civil investigations of securities fraud.
FINRA: The Financial Industry Regulatory Authority is a self-regulatory organization (SRO) that oversees the securities industry. FINRA can issue subpoenas to brokers and advisors as part of its regulatory functions.
Attorneys general: State attorneys general can investigate any activity that might violate state law, including securities fraud and consumer protection issues.
Department of Justice: The Department of Justice has the authority to investigate and prosecute crimes in which the federal government is interested (e.g., insider trading).
Federal Trade Commission: The Federal Trade Commission enforces antitrust laws, which prohibit unfair business practices such as price fixing. It also investigates other matters, such as deceptive trade practices.
Internal Revenue Service: The Internal Revenue Service is responsible for enforcing the Internal Revenue Code, which includes tax laws governing securities transactions.
CFTC: The Commodity Futures Trading Commission enforces federal commodities laws, such as those governing commodity options and futures trading. A CFTC subpoena is typically used in civil investigations.
What is a SEC subpoena?
The SEC is a federal agency that regulates the securities industry. It can issue subpoenas to compel individuals and organizations to provide documents, testimony and other information in connection with its civil enforcement investigations. The SEC may also issue “administrative subpoenas” in connection with its investigations. These administrative subpoenas are issued outside of the normal subpoena process and do not require the filing of a court case.
What is a CFTC subpoena?
The CFTC is a federal agency that regulates the commodities industry. It can issue subpoenas to compel individuals and organizations to provide documents, testimony and other information in connection with its civil enforcement investigations. The CFTC may also issue “administrative subpoenas” in connection with its investigations. These administrative subpoenas are issued outside of the normal subpoena process and do not require the filing of a court case.
The types of subpoenas
There are three types of subpoenas:
– Subpoena ad testificandum orders a person to appear and testify.
– Subpoena duces tecum orders a person to appear and bring certain documents or other physical evidence for use in a proceeding.
– Subpoena requisitio demands that an institution produce company records, which include everything that the company has regarding a particular client or transaction. The subpoena can have a broad or specific request.
What to do if you receive a subpoena
If you receive a subpoena, you should immediately contact an attorney. Do not try to handle the matter on your own. The consequences of violating a subpoena can be severe, including criminal penalties. An experienced regulatory defense attorney can help you understand the implications of the subpoena and guide you through the process.