In the last decade, a variety of government agencies have become extremely aggressive in their approach to state and federal securities laws. In some cases, bankers have even gone to prison based on charges arising from novel legal theories which would previously have been unimaginable.
In just one recent example, a trader was sent to federal prison for selling securities to an experienced sophisticated client who not only thought the price was completely fair and appropriate based on his own research, but also went on to make a great profit on those same securities. However, an especially aggressive prosecutor, applying a stringent standard which may later result in thousands of other prosecutions, indicted and later convicted that trader, with a prison sentence resulting.
The aggressive prosecutions are almost certain to continue in a political climate where some leaders are intent on demonizing Wall Street, and ambitious prosecutors want to score political points by charging financial officials with crimes in order to win publicity for themselves.
Two other important factors are also certain to lead to enhanced prosecutions:
In many cases, the criminal charges are the result of initial non-criminal allegations by various agencies such as FINRA, the Securities and Exchange Commission, or various state agencies.
In some cases, a trader or salesperson will receive an innocuous-seeming letter from FINRA or the SEC asking for additional information surrounding a transaction, or they will be asked to appear for an “OTR” or “on the record” discussion.
Because these investigations are not, on their face, criminal in nature, in some instances the target of the letter will agree to speak with investigators with no counsel, with inexperienced counsel, or with a lawyer provided by their employer, who may be far more interested in protecting the firm than in protecting the individual. As a result, the target of the investigation ends up saying things that result in making the situation for worse, providing information which ends up forming the basis of a criminal investigation.
In many instances, bankers face a dilemma in these situations—they can be represented by a lawyer with compliance experience, who understands the securities business but has little criminal law experience. Or they can hire a criminal attorney who, though versed in criminal procedure, has no real in-depth knowledge of the securities business.
Elliot Felig is the rare exception, as he is an experienced criminal attorney who also has worked in sales and trading, having worked on one of the busiest trading floors in the world, having held Series 7 and Series 63 licenses, and also having an MBA in Finance from Cambridge University. Please contact our office today at 212-828-2770 for a free consultation.
