What is the Division Of Enforcement

The Division of Enforcement is a branch of the U.S. Securities and Exchange Commission (SEC) which is responsible for collecting evidence of possible securities law violations and recommending prosecution when necessary. It was created in 1972, and it works with the SEC’s other divisions and Commission offices to investigate securities law and regulatory violations and act against violators.

BREAKING DOWN Division Of Enforcement

The Division of Enforcement is somewhat like the police force for the SEC. Since the chief goal of the SEC is securities law enforcement, this division is central to accomplishing its mandate. According to the SEC website, common securities law violations include manipulation of market prices, stealing a customer's fund or securities, insider trading, violating the broker-dealers' responsibility to treat customers fairly and misrepresentation or omission of material facts relating to securities.

How the Division of Enforcement Conducts Investigations

Evidence of possible violations is collected through market surveillance activities, investor complaints, other divisions of the SEC and other securities industry sources. The SEC may ask suspected violators to voluntarily hand over relevant documents and make voluntary testimony regarding alleged violations, but it can also seek a formal order of investigation, allowing SEC staff to compel alleged violators and witnesses to produce documentary evidence and give testimony.

Civil and Administrative Proceedings

The Division of Enforcement can bring civil actions against regulatory violators in U.S. District Court, or in an administrative proceeding presided over by an independent administrative law judge (ALJ). Neither the SEC nor the Division of Enforcement have true authority to bring criminal charges against alleged violators, but they can recommend the bringing of such charges to federal or state prosecutors.

The SEC can seek orders, or injunctions, in civil suits that prohibit future regulatory violations. A person so ordered could face imprisonment or fines for contempt of court if he or she violates the injunction. The SEC can also seek a court order to ban an individual from acting as a director or corporate officer.

There are also a number of different administrative proceedings available to the SEC, including cease and desist orders; revocation or suspension of registration; suspension from employment; or bars from employment. Furthermore, the Commission can order civil fines or seize any ill-gotten gains obtained by violators. Other bars may be available to the SEC, based on conduct, industry or associational links of the violators.