Enforcement The Process
Once opened, an investigation involves fact-gathering by Enforcement staff through customary discovery methods such as data and document requests, interrogatories, interviews, and depositions. The time needed to complete an investigation depends on many factors, including the complexity of the conduct involved and the nature of the alleged violations. During this process, staff is in frequent contact with the subject being investigated, and will meet or otherwise converse with company representatives to discuss relevant facts, data, and legal theories. Subjects of an investigation are always free to contact Enforcement staff to provide additional information or explanations of their conduct.
At any time during the course of its investigation, staff may determine to close the investigation without taking any further action. This happens when staff determines that no violation occurred, the evidence is insufficient to warrant further investigation, or no further action is otherwise called for based on a totality of the circumstances. In such a case, staff notifies the subject that the investigation is closed.
If staff reaches the preliminary conclusion that a violation occurred that warrants sanctions, staff shares with the subject of the investigation its views, including both the relevant facts and legal theories. This is typically done in writing. Staff also provides the subject with an opportunity to respond and to furnish any additional information it may deem to be helpful. If this process alters the complexion of the investigation, staff may reconsider its views. In some situations, such reconsideration has resulted in staff closing an investigation, or revising its view of the appropriate sanction. If staff continues to believe that sanctions are warranted, the Director of the Office of Enforcement will authorize the Secretary of the Commission to issue a public Preliminary Notice of Violations. Enforcement staff will then submit its views and recommendations along with the subjectís response to the Commission and will proceed in accordance with the guidance provided by the Commission.
Typically, staff will then engage in settlement discussions with the subject of an investigation consistent with the Commissionís guidance. Settlement is the preferred resolution. From the subjectís point of view, settlement can often result in significantly lower penalty amounts than those that would result from a public proceeding, and avoids litigation risk, as well as, the time and costs of a proceeding. From the Commission's point of view, the public interest is often better served through settlements because compliance problems are remedied faster disgorged profits may be returned to customers quicker, and staff is able to reallocate resources to other enforcement matters. If staff and the subject agree on the terms, an executed Stipulation and Consent Agreement is submitted to the Commission for its consideration. If approved by the Commission, the Stipulation and Consent Agreement and the accompanying order are generally released publicly.
If Enforcement staff and the subject cannot reach settlement consistent with the Commissionís guidance, under 18 C.F.R. § 1b.19 , staff will notify the subject of the investigation that it plans to recommend that it be made the subject of an administrative proceeding or civil action. The subject is then given 30 days to respond. Staff will then submit its recommendation to the Commission along with the subjectís response for consideration. If the Commission initiates further public proceedings, they will be conducted under the Commissionís procedural rules.