Filing a Complaint With the SEC

Friday, July 25 2003 @ 06:29 AM EDT

Contributed by: PJ

I've been getting requests for information on how to file a complaint with the SEC. I didn't respond immediately, because I wanted to think about it first. I've decided that just as I can't give you advice on what to do, I also can't give advice on what not to do. So I will simply explain the process, for educational purposes only, in response to your requests. What you do with the information is up to you.

The only advice I ever give is: ask a lawyer. Don't enter the legal arena without one, not ever. Any of you guys out there ever go through Family Court, where they tell you that you don't need a lawyer? How'd it work out? Or if you have been involved in an ICANN domain name fight, where again you supposedly don't need a lawyer, how did you fare without one?

The law is complex. Not even lawyers grok the entire field. They have to specialize, because there is quite simply too much to know. You can read up on an area of law when you need to, but it's never the same in real life as in the books, so a specialist in a particular field will always do better than a visitor to the field, no matter how skilled. For one reason, the law, unlike chess, doesn't stay the same. The rules keep changing, and you have to keep up.

Boies, for example, for whom I have the highest respect as far as his skills are concerned, isn't an IP attorney. Perhaps you've noticed some glitches? Part of that may be because others in the office have been doing some of the work, while he was working on other cases (he lost the NY case I wrote about before, by the way), but part of it is because this isn't his area of particular expertise. And it showed. He'll get up to speed, I have no doubt, but he'll never be as comfortable as an attorney who works in this area of the law. He just can't. Nobody can.

Law is like chess, but with people instead of pawns, with all the complications that people bring to the table. There is complicated, long-range planning and strategy involved, just like chess. Spontaneity isn't generally a plus. So, if you want to Do Something about SCO, the first thing to do is think. Ask an attorney how to be effective before you act.

If you can't afford one by yourself, pool. Lots of you belong to LUGs. Make a list of questions you want answered, call up an IP attorney or one who specializes in pump-and-dump/stock fraud cases or whatever area you think is the right one (the ABA can give you a referral to three names in any particular area of law, if a friend can't give you a name, or look on Google for names of attorneys in the news that acted the way you think they should or who seem to win more than others in the same field) and call them up and ask how much they would charge for an hour of their time to answer some questions. Pay them. They won't do research without being paid, so decide how many hours of research you are willing to pay for, and tell them that limit when you see them, so they can then do the research, if it's needed. Yes, even a specialist may have to do research before he can answer all your questions. It's complicated, as I said.

After you find out the answers to your questions, and those questions should include the "what can I do" question, then follow the advice. Or contact the FSF's attorneys and ask them what you can do to help or if you need help.

The community can help in other ways too. Non-geeks don't know things that you know. That includes lawyers. They can't find evidence that you know just where to look to find. If they find something, they may not recognize what it means. They may not even know what to look for. Did you read SCO's initial Complaint? Notice some tech gaffes? This is an advantage on your side. Part of my purpose in doing this blog is to look for helpful things myself and put them out there, and to explain and show what kinds of things are useful.

With that preamble, here is the info about the SEC:

Here is the SEC's pump and dump info page, if that is what you are interested in learning about. It includes a description and this information:

"Caution:   By law, the reports that companies file with the SEC must be truthful and complete, presenting the facts investors find important in making decisions to buy, hold, or sell a security. But the SEC cannot guarantee the accuracy of the reports companies file. Some dishonest companies break the law and file false reports. Every year, the SEC brings enforcement actions against companies who've 'cooked their books' or failed to provide important information to investors. Read SEC filings [~] and all other information [~] with a questioning and critical mind. . . .

"Questionable Press Releases  -- Fraudsters often issue press releases that contain exaggerations or lies about the microcap company's sales, acquisitions, revenue projections, or new products or services. These fraudulent press releases are then disseminated through legitimate financial news portals on the Internet."


They suggest some things you can do to avoid being taken in by a pump and dump scheme, or who to tell if you feel you have been:

"We strongly urge you to contact your state securities regulator to find out whether they have information about a company and the people behind it. Look in the government section of your phone book or visit the website of the North American Securities Administrators Association to get the name and phone number. Even though the company does not have to register its securities with the SEC, it may have to register them with your state. Your regulator will tell you whether the company has been legally cleared to sell securities in your state. Too many investors could easily have avoided heavy and painful financial losses if they only called their state securities regulator before they bought stock.

". . . . Visit your local public library or the nearest law or business school library. You'll find many reference materials containing information about companies. You can also access commercial databases for more information about the company's history, management, products or services, revenues, and credit ratings. The SEC cannot recommend or endorse any particular research firm, its personnel, or its products. But there are a number of commercial resources you may consult, including: Bloomberg, Dun & Bradstreet, Hoover's Profiles, Lexis-Nexis, and Standard & Poor's Corporate Profiles. Ask your librarian about additional resources.

". . . .  Contact the secretary of state where the company is incorporated to find out whether the company is a corporation in good standing. You may also be able to obtain copies of the company's incorporation papers and any annual reports it files with the state. Please visit the National Association of Secretaries of State website at www.nass.org for contact information regarding a particular Secretary of State."


Delaware's secretary of state is here. Contact information is here. DE's FAQ page is here.

Here is the online complaint form:

You can also print out the form and mail it to:

SEC Complaint Center
450 Fifth Street, NW
Washington, D.C. 20549-0213
Fax: 202-942-9634


If you own stock in a company and you feel you wish to report something, you can instead write to:

Securities and Exchange Commission
Office of Investor Education and Assistance
450 Fifth Street N.W.
Washington, D.C. 20549-0213


Note this procedural info:

"At the SEC, we will research your complaint, contact the firm or person you have complained about and ask them to respond to your specific complaint or question. Sometimes our intervention yields a satisfactory result. If these steps don't work, you may need to take legal action on your own. We can send you information on mediation, arbitration, and suggest how to locate a lawyer if you need one."

After you click on the complaint link, you'll arrive onthis page, where you will have to choose from this list:

  Problems with buy or sell orders
  Problems with my brokerage firm or broker
  Manipulation of security price or volume
  Fraudulent or unregistered offer or sale of securities
  Financial privacy complaint
  Cold calling
  Problems with my investment adviser or financial planner
  Problems with my mutual fund
  Problems with 401(k), pension or retirement
  Problems with IPO allocation or eligibility
  Failure to file required reports with the SEC
  False or misleading statements about a company (including false or misleading SEC reports or financial statements)
  Fraud in the marketing of a securities trading course, program or similar product
  Other


No matter which topic you choose, the form is identical. The SEC also suggests contacting your state securities regulator. Normally this is for complaints against brokers and brokerage firms. To find your state's regulator, go here.

What should you say in a complaint and what happens after you file a complaint? Here's what the SEC has to say about that:

"What Should I Say in My Complaint?

"We can best review a complaint if we receive accurate and complete information from you. Though you are not required to furnish any more information than you wish, critical information for us to completely evaluate your complaint includes:

"--Your name, mail and email addresses, and telephone numbers.
"-- The name, mail and email addresses, telephone numbers, and website address of any individual or company you mention in the complaint.

"--Specific details of how, why, and when you were defrauded or encountered problems with investments or your broker or adviser.

"What Happens After I File a Complaint

"We thoroughly review and evaluate each complaint so that we may refer it to the appropriate SEC office. The Office of Investor Education and Assistance will handle certain general questions about the securities laws and complaints relating to financial professionals or a complainant's personal financial matters. The professionals in this office can counsel you regarding possible remedies and may, under appropriate circumstances, approach brokerage firms, advisers or other financial professional concerning matters you have raised.

"Attorneys in the Division of Enforcement evaluate complaints implicating violations of the federal securities laws. It is the general policy of the SEC to conduct its investigations on a confidential basis to preserve the integrity of its investigative process as well as to protect persons against whom unfounded charges may be made or where the SEC determines that enforcement action is not necessary or appropriate.

"Subject to the provisions of the Freedom of Information Act, the SEC cannot disclose the existence or non-existence of an investigation and any information gathered unless made a matter of public record in proceedings brought before the SEC or in the courts. You can find information about public enforcement actions on our Web site."


There is a Privacy page that you should read before you file a complaint, that basically lets you know the SEC is free to use any information you provide without limitation:

"Our principal purpose for requesting information from you is to respond to inquiries and complaints from members of the public. The SEC may also use your information to determine whether any person has violated, is violating, or is about to violate the federal securities laws or rules that the SEC enforces, such as the rules of the securities exchanges and the Municipal Securities Rulemaking Board. The SEC may use the information you provide in an enforcement proceeding. If the information points to violations of other laws or regulations, we may turn it over to other government agencies, including United States Attorneys and state prosecutors. We generally do not disclose to you whether we have done so or not.

"The SEC will not agree to limit its use of your information in any way, unless the SEC or its staff explicitly agrees to do so in writing."


There's more on that page, so read it all. The SEC also has a Fast Answers page, where you can seach for information by key words or key topics, and on that page it suggests if you have certain types of questions, a phone call to them is best. The Division of Corporation Finance, Office of Chief Counsel's number is (202) 942-2900. There are regional offices, too. To find your region, look on this page. To find your state's attorney general, look for the tool here. So that's how you file a complaint with the SEC, if you are so inclined. I can't advise you as to whether or not to do it, even if I knew. And I honestly don't know. The only suggestion I've seen from any attorney mentioned trade libel as a possible cause of action. Look for the second story down on the page. Here is some information on defamation.

Maybe you're puzzling over how I can admire Boies, under the current circumstances? In addition to his talent, it's because his whole career he has been willing to represent clients with nearly hopeless cases. He was willing to represent Napster, remember? It takes a certain character to do that.

Also, I know, being in the field, that lawyers don't always have the luxury of representing only clients they like or respect. That's too short a list to pay the rent. Even if they did, the good ones wouldn't limit themselves to only people they like, because they are dedicated to a particularly American ideal, that our system of justice depends on somebody being willing to represent the most loathsome clients. It is, if you think about it, the difference between rule of law and mob action. That is especially true in criminal justice, but it's also important in civil matters. Nobody can represent themselves, if they aren't trained as a lawyer, and do well. So somebody has to represent everybody.

And truthfully, the client isn't what intrigues a lawyer so much as what the case is about legally. That's the interesting part to a lawyer and his or her team. So, while I am sorry he's on the other side, I don't despise him for representing SCO, although I wish he'd jump ship. By now, he may be wishing he'd made a different choice himself. Who knows? He's stuck now, though, because it isn't so easy to stop representing a client, once you are retained, so we'll just have to beat him with skill and effort, fair and square.

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