It depends on the case. Investigations where the SEC believes there is an ongoing harm can be in court in a matter of days. In fact, some investigations move to court before the target is even aware of the investigation.
But that is rare, and it is hard to say how long an investigation takes. All SEC investigations are conducted privately. Investigators attempt to obtain facts and evidence, first through informal inquiries, then by interviewing witnesses, examining brokerage records, and reviewing trading data.
There is a statutory requirement that the SEC is required to bring an action within 5 years
28 U.S.C. § 2462 states that “[e]xcept as otherwise provided by Act of Congress, an action, suit or proceeding for the enforcement of any civil fine, penalty, or forfeiture, pecuniary or otherwise, shall not be entertained unless commenced within five years from the date when the claim first accrued if, within the same period, the offender or the property is found within the United States in order that proper service may be made thereon.”
However, this is subject to interpretation, the most significant of which is "when the claim first accrued."
Using 5 years from the last date of an alleged violation is not very helpful to someone who is the subject of a subpoena. However, investigations are completed much earlier than that.
Investigations begin with a Formal Order of Investigation, which, among other things, allows the Staff to subpoena witnesses to testify and produce documents.
It is not until that process is completed that the investigation is "finished." At that time a decision is made to file a case in federal court or bring an administrative action. In many cases, the Commission and the party charged decide to settle a matter without trial, and in others, the matter is simply dropped.
If there is a decision to charge someone, the Staff will typically send a Wells Notice to that individual or entity, notifying them that the Staff intends to file proceedings. However, when the SEC decides not to file a proceeding, there are limits on who the Staff is required to notify.
Specifically, the Staff must notify anyone who:
- is identified in the caption of the formal order;
- submitted or was solicited to submit a Wells submission; or
- to the staff’s knowledge, reasonably believes that the staff was considering recommending an enforcement action against them.
Unfortunately, witnesses who have received subpoenas often never hear back from the SEC.
