David, Brody & Dondershine, LLP Experienced General Business Law Attorneys
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Securities Fraud: Surviving a Battle with the SEC


It is not unusual for businesses of all sizes to get caught up in a battle with the SEC. Some businesses are sloppy when handling their books. Other businesses wind up with great luck and the SEC has trouble believing them. Sometimes, the SEC might even accuse a business of committing fraud. Having the SEC comb through every aspect of a business is an unpleasant experience and businesses should take the time to obtain some advice on how to win a battle with the SEC.


Avoid Questionable Practices

While this appears to be obvious, many people don't realize what practices the SEC might consider "questionable." From the top to the bottom, businesses should create a culture of doing things the right way. Make sure that all arms of the business construct fair business deals with any involved party. Make sure that every investment is completely clean and doesn't have any questionable sides to it. Treat every employee fairly and with the respect that they deserve. This culture is important because it decreases the likelihood that an employee or other company will file a complaint with the SEC. The best way to win an argument with the SEC is to avoid it.

Treat Emails with the Attention They Deserve

The first item on the SEC's agenda when investigating a company is to comb through every email associated with the company. This is often the easiest way to trap a company because they produce black and white text of people's intention. Therefore, make sure that executives and office staff use professional language in emails. For anything that is even mildly complicated, use a phone call instead. Any questionable language in an email will be picked apart by the SEC. Companies that don't use caution in emails are only hurting themselves.

Protect a Company with Insurance

For companies that are worried about what happens on the other side of a battle with the SEC, they should purchase commercial insurance. Everyone has heard of home and auto insurance; however, commercial insurance is also a priority. Commercial insurance doesn't only insure the physical structure of a business location but they can also provide funds that can help a business embroiled in a lawsuit or pay for damages. This insurance policy can be the difference between a company going under and a company surviving a battle with the SEC.

Don't Give Up for the SEC

The SEC hopes to put enough pressure on businesses that companies will simply settle rather than fight the accusations. While these fights can be costly, SEC settlement terms are often extremely damaging to a company and the business may not survive in this tough economic climate. For a business that is certain they haven't done anything wrong, don't roll over. Take the time and energy to fight the accusations. Find an attorney who can offer the appropriate advice regarding a battle with the SEC, as settling isn't always the best option.

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