Can an SEC Investigation Lead to Federal Criminal Charges?

 Posted on October 12, 2026 in Fraud

An SEC investigation can lead to federal criminal charges. The Securities and Exchange Commission (SEC) handles civil enforcement, but the Department of Justice (DOJ) handles criminal prosecutions. Both agencies can investigate the same conduct at the same time.

This creates serious risks because statements and evidence from an SEC investigation can also affect a criminal case. If you are under investigation in 2026, a Dallas County securities fraud defense lawyer can help protect your rights.

What Is the Difference Between SEC and Criminal Enforcement?

The SEC is a civil agency. It can seek financial penalties, repayment of unlawful profits, and orders prohibiting certain activities. It can also prevent individuals from serving as corporate officers or working in the securities industry. However, the SEC cannot sentence anyone to prison.

Criminal charges are brought by the Department of Justice, usually through a United States Attorney’s Office. Federal prosecutors must prove guilt beyond a reasonable doubt, while the SEC uses a lower standard of proof in civil cases.

Under 15 U.S.C. § 78j, federal law prohibits certain forms of securities fraud. Criminal charges involving violations of this law require proof of willfulness. Other federal fraud laws have different requirements. Prosecutors can also bring charges involving wire fraud, conspiracy, false statements, or obstruction of justice.

How Can an SEC Investigation Lead to Criminal Charges?

The SEC can refer suspected criminal activity to the DOJ during an investigation. Federal prosecutors can also open their own investigation without waiting for an SEC referral.

The two investigations can create difficult decisions. For example, testimony you provide to the SEC could be used against you in a criminal case. You can use your Fifth Amendment right to refuse to answer questions that could help build a criminal case against you. In a civil case, though, the court can sometimes consider your silence as evidence against you. An attorney can help you understand these risks before you respond.

Attorney Arnold Spencer has handled cases involving multiple investigations at once. He represented the chief accounting officer of a publicly traded company. The client faced a federal investigation and an SEC lawsuit. He was also involved in a securities fraud class action and a state accounting board proceeding. Attorney Spencer resolved every matter without sanctions, except for a minimal SEC fine.

What Happens During an SEC Investigation?

SEC investigations often begin privately with requests for documents or interviews. During a formal investigation, the SEC can issue subpoenas and require sworn testimony.

A Wells notice means SEC staff have made an initial decision to recommend civil charges. You have a chance to explain why the SEC should not bring a case. Under the SEC’s February 2026 procedures, you usually have four weeks to respond. Your attorney can review the allegations and prepare your response. The SEC could also close the investigation without filing charges.

What Should You Do if the SEC Contacts You?

An SEC investigation does not mean you will face criminal charges. However, your response can affect what happens next. Taking the right steps early can help protect your legal position.

Important steps include:

• Contact a defense attorney before responding to investigators.
• Preserve emails, text messages, financial records, and other evidence.
• Do not destroy or change documents related to the investigation.
• Review any subpoena or document request with your attorney.
• Avoid discussing the investigation with potential witnesses without legal guidance.
• Find out whether company attorneys represent you personally.
• Check whether company insurance or agreements cover your legal fees.

One important concern involves internal company investigations. Attorneys hired by your employer usually represent the company, not you. The company controls the legal privilege over those interviews and can choose to share information with investigators.

An attorney who represents you personally can help you respond to the SEC while protecting your interests in any possible criminal case.

What Are the Penalties for Federal Securities Fraud?

Federal securities fraud convictions carry serious penalties. These include up to 20 or 25 years in prison, depending on the charge. Courts consider financial losses, the number of victims, and the defendant's role when deciding on a sentence. Penalties can also include fines, restitution, and loss of professional licenses. Noncitizens could face immigration consequences.

Schedule a Free Consultation With Our Dallas, TX Securities Fraud Defense Attorney

Attorney Spencer served as a federal prosecutor for 10 years and prosecuted more than 100 federal cases. He also helped prosecute cases related to Enron’s collapse. He now defends clients in federal investigations, SEC enforcement actions, and related civil cases. His goal is to resolve cases without litigation when possible. However, at Spencer & Associates, we’re prepared to take a case to trial when necessary.

If you are facing an SEC investigation or possible criminal charges, we can review the allegations and help you develop a defense. Contact us at 214-376-4441 to talk to our Dallas County federal white collar crimes defense lawyer today.