DEFINITION of 'Cease And Desist'
Cease and desist is an order given by a government administrative agency or the courts to stop any suspicious or illegal activities. Falling under the Financial Institutions Regulatory and Interest Rate Control Act of 1978, a cease and desist order places an injunction on a company or person, prohibiting the activities that are deemed suspect. For corporations or financial institutions, a cease and desist order may be issued to prevent risky banking practices or the sale of fraudulent securities.
BREAKING DOWN 'Cease And Desist'
A cease and desist letter is often the first step to ask a party to stop performing an illegal activity. These letters may be sent in situations of defamation, slander, libel, trademark infringement, copyright infringement or patent infringement. Other suitable situations also include harassment, debt collection or a breach of contract. A cease and desist letter may also be issued to force an entity to refrain from labor practices or unfair compensation.
The letter must comply with laws in the jurisdiction where it is sent. After notification is given, a hearing is usually called to determine whether any wrongdoing has occurred or if the action may continue. Failure to comply with a cease and desist order is punishable by the courts, although a cease and desist letter by itself is not a guarantee of a lawsuit. During the period of time between when the letter is served and the trial, an entity is required to suspend certain activities.
Ramifications of a Cease and Desist Letter
A cease and desist letter is not legally binding. It is an opinion of one individual, typically an attorney. In addition, the ABA Model Code of Professional Responsibility dictates a lawyer “shall not present, participate in presenting, or threaten to present a criminal charge solely to obtain an advantage in a civil matter.” Such a legal threat has no legal significance other than being a negotiation tactic. Cease and desist letters often require a signature upon delivery. The letter is typically sent with a return receipt requested although this is not required.
Three preconditions usually have to be met before an attorney may raise the prospect of charges without violating his professional conduct code. First, the charges must be related to a civil matter. Second, the attorney must believe the civil claim and associated criminal charges are based on merit in relation to the law. Finally, an attorney must not attempt to exert or improperly influence the criminal process. An attorney must not appear to have authority over the potential judicial proceedings.