Welcome to Spodek Law Group. Our goal is to give you the reality of federal securities charges - not the sanitized version law firms present, not the regulatory fiction about "compliance violations," but the actual truth about what happens when the federal government decides a securities broker crossed the line. And that truth is more devastating than most brokers understand until its too late.
The federal conviction rate for securities fraud is 93%. Read that number again. If the Department of Justice charges you with securities fraud, you have less than a 7% chance of walking away clean. This isnt because prosecutors are infallible. Its because they dont charge cases they might lose. By the time you receive notice of an indictment, the government has spent years building a case so comprehensive that your defense attorney is essentially performing damage control rather than mounting a genuine defense.
Heres the reality that defense attorneys understand but rarely explain to prospective clients until the consultation: the investigation into your conduct likely started 2-5 years before you knew anything was wrong. The SEC's data analytics program has been scanning trading patterns across millions of accounts, looking for anomalies. Your compliance records, your recorded phone calls with clients, your text messages - all of this has been gathered, organized, and analyzed while you were still sitting at your desk thinking everything was fine.
The 93% Reality Nobody Explains
Most people hear "93% conviction rate" and assume it means federal prosecutors are brilliant. That's not quite right. The 93% exists becuase federal prosecutors are selective. They dont bring cases unless the evidence is overwhelming. And in securities cases, that evidence often comes from a source the broker never anticipated - the broker themselves.
Think about what your job requires you to create every single day. Every client call is recorded. Every email is archived. Every trade is documented with timestamps, reasons, and client communications. Every compliance form you signed. Every supervisory review. You probably thought this paperwork protected you - it shows you followed procedures, documented everything, did your job by the book. Heres the kicker: that same documentation is exactly what prosecutors use to convict you.
When the SEC investigates a securities broker, they dont have to do traditional detective work. They issue a subpoena to your broker-dealer, and your employer hands over everything. Your recorded calls where you explained the investment to the client. Your emails where you discussed risk. Your trade confirmations. Your compliance attestations. Every single piece of paper you created while "protecting yourself" becomes an exhibit at trial.
This is what Todd Spodek calls the compliance paradox - the more thorough your documentation, the more complete the prosecution's case against you. A broker who kept sloppy records might actualy have a better defense than one who documented everything perfectly, because the sloppy broker didnt create a roadmap for prosecutors to follow.
How Your Compliance Records Become Prosecution Exhibits
Lets be specific about how this works in practice. Imagine your being investigated for unsuitable recommendations - the accusation that you put clients into investments that didnt match there risk tolerance or investment objectives.
The prosecutor pulls your compliance records. They find your client profile forms showing the client had a "moderate" risk tolerance. Then they pull your trade records showing you put that client into high-risk options strategies. Then they pull your recorded calls where you explained the strategy. Maybe you said something like "this is a bit aggressive but the upside potential is worth it." You were trying to be honest with the client. At trial, thats an admission that you knew the investment didnt match their profile.
Now multiply that across 50 clients. Or 100. Each one is a separate count. Securities fraud under 18 U.S.C. § 1348 carries up to 25 years per count. Wire fraud under 18 U.S.C. § 1343 carries up to 20 years per count - and every email, every phone call using interstate communications is a separate wire fraud count. Conspiracy charges get stacked on top.
Bernie Ebbers got 25 years. Jeff Skilling got 24 years. Sam Bankman-Fried got 25 years. Bernie Madoff got 150 years. These arent exceptions - there the examples of what happens when the charge stacking adds up.
This is critical: the charges against you are not determined by what you intended. They are determined by what prosecutors can prove you did, using your own records as evidence.
The Civil Investigation Thats Actually Criminal
Heres were most brokers make there fatal mistake. The SEC sends a letter. Maybe it says they want your voluntary cooperation with a "civil inquiry." Maybe its a request for documents. Maybe its an invitation to come in and explain your side of things. This sounds reasonable. You havent done anything wrong. You want to clear your name. Your employer's compliance department might even tell you to cooperate.
But what your not being told is that the SEC shares information with the Department of Justice. Theres no wall between civil and criminal. The same facts that support an SEC civil enforcement action also support a DOJ criminal prosecution. SEC attorneys sometimes literally join DOJ prosecution teams. Research shows an average SEC enforcement action involves 0.56 criminal filings - meaning more then one in four SEC cases have a criminal component.
So you walk into what you think is a regulatory interview. You explain your trades. You describe your thought process. You answer questions honestly becuase you beleive honesty is the best policy. Every word your saying is being recorded. And if the SEC decides to refer your case to DOJ, that recording becomes your confession.
This happens constantly. A broker cooperates fully with the SEC, thinking theyre dealing with a civil matter. Six months later, there indicted for securities fraud, and the primary evidence is there own statements from the "civil" interview. No Miranda warning was required because you werent technically in custody. No right to remain silent was invoked becuase you didnt know you needed one.
Heres the thing - by the time you recieve a Wells Notice (the SEC's formal notification that they intend to recommend enforcement action), the investigation has been going on for months or years. The documents have been gathered. The trading patterns have been analyzed. The witness interviews have been conducted. Your walking into a situation where the conclusions have basicly already been drawn.
What Happens in the Years Before Your Charged
Let me show you what a typical securities investigation timeline looks like, becuase understanding this timeline is essential to understanding why the 93% conviction rate exists.
Year 1-2: The Invisible Investigation
The SEC's Division of Enforcement uses sophisticated data analytics to scan trading activity across markets. There looking for patterns - unusual trading before corporate announcements, clusters of similar trades across multiple accounts, deviations from stated investment strategies. Your name pops up on a list somewhere. Maybe its becuase your trading patterns matched a statistical anomaly. Maybe a client complained. Maybe a whistleblower at your firm flagged something. You have no idea this is happening.
SEC staff send informal requests to your broker-dealer. Nothing formal - just a letter asking for certain records. Your compliance department hands them over without telling you, becuase the request didnt specifically name you or trigger notification requirements. Now the SEC has your trading records, your client files, your compliance attestations.
Year 2-3: The Formal Investigation
The SEC issues a Formal Order of Investigation. This gives them subpoena power. They can compel testimony. They can demand documents. Maybe at this point your broker-dealer tells you there's an investigation - or maybe they dont. Depends on the firm's policies and the nature of the subpoena.
SEC staff interview witnesses. They talk to your clients. They talk to your colleagues. They review your emails. There building a narrative - not trying to figure out what happened, but documenting what they beleive happened.
Year 3-4: The Referral
If the SEC believes criminal charges are warranted, they refer the case to DOJ. The U.S. Attorney's office in the relevant district recieves the complete SEC file - all the documents, all the interview transcripts, all the analysis. A DOJ prosecutor reviews it, decides whether the evidence supports criminal charges, and if so, begins preparing for grand jury presentation.
Year 4-5: The Indictment
A grand jury hears the government's evidence. Grand juries almost always indict - the old saying is that a prosecutor could indict a ham sandwich. Your not present. You cant offer your side. The grand jury votes, and suddenly your facing federal criminal charges.
Consider what this means practicaly. For years, while you were going to work, meeting with clients, attending compliance training, maybe getting promoted - the government was building a case against you. Your career continued normally. Your life went on. And the whole time, investigators were assembling evidence that would eventualy be used to take everything away.
This is why the 93% conviction rate isnt really about what happens at trial. Its about what happens in those years before trial. The government dosent charge unless they've already won. They spend years making sure the evidence is overwhelming, the witnesses are lined up, the paper trail is complete. By the time you hire a lawyer, the prosecutions case is basicly finished.
Notice what didnt happen in this timeline: nobody gave you the opportunity to explain yourself before you were charged. The "investigation" happened without your input. By the time you know your charged, the case is essentially complete.
The Charges Theyll Stack Against You
Federal prosecutors dont charge you with one crime. They stack charges to maximize pressure and exposure. Heres what a typical securities broker indictment looks like:
Securities Fraud (18 U.S.C. § 1348): Up to 25 years per count. If you made misrepresentations or omissions to multiple clients, each client is a separate count.
Wire Fraud (18 U.S.C. § 1343): Up to 20 years per count. Every email you sent, every phone call you made, every electronic communication related to the alleged scheme is a separate count. This is the "catch-all" charge prosecutors use becuase its almost impossible to conduct securities business without wire communications.
Mail Fraud (18 U.S.C. § 1341): Up to 20 years per count. Same logic as wire fraud but for mailed communications.
Conspiracy (18 U.S.C. § 371): Up to 5 years. If prosecutors can argue you worked with anyone else - even if that "conspiracy" was just you and your supervisor making trading decisions together - they add this charge.
Money Laundering (18 U.S.C. § 1956): Up to 20 years per count. If you recieved commissions from the allegedly fraudulent activity, prosecutors can argue those commissions were proceeds of fraud that you "laundered" by depositing them in your bank account.
The math gets terrifying quickly. Twenty clients means twenty potential securities fraud counts. One hundred emails means one hundred potential wire fraud counts. Even with sentences running concurrently, the Guidelines range can be decades.
At Spodek Law Group, weve seen brokers facing 30, 40, 50 year potential sentences - not because they ran Ponzi schemes, but becuase there trading activity with legitimate clients got characterized as unsuitable recommendations or inadequate disclosure, and the charge stacking did the rest.
Why Most Defense Strategies Fail
OK so you've been charged. Your facing multiple counts. You hire a defense attorney. What now?
Heres the uncomfortable truth: most traditional defense strategies dont work in federal securities cases, and the 93% conviction rate proves it.
"I didn't know it was illegal" - Doesnt help. The "willful blindness" doctrine means that deliberatly avoiding knowledge is treated the same as having knowledge. If prosecutors can show you should have known something was wrong and chose not to look closely, thats legally equivalent to knowing it was wrong.
"My clients were sophisticated investors who understood the risks" - Maybe helps at sentencing, but doesnt prevent conviction. The question isnt whether your clients were sophisticated. The question is whether you made accurate disclosures and suitable recommendations based on their stated objectives.
"I relied on compliance department approval" - Rarely works. Compliance approval might show you acted in good faith, but it doesnt mean your conduct was legal. Compliance departments clear things all the time that later turn out to violate securities laws.
"The government is misinterpreting normal business practices" - This is often actualy true, but good luck convincing a jury. Jurors hear "securities fraud" and think Bernie Madoff. They see complex trading strategies and assume something shady must be happening. Securities cases are some of the most difficult for juries to understand, and confusion usually benefits the prosecution.
"I'll take it to trial and prove my innocence" - Statistically disastrous. Of the roughly 80,000 federal defendants each year, only about 2% go to trial. Of those, about 83% are convicted. Trial penalties are real - defendants who lose at trial typically recieve harsher sentences then those who plead guilty.
So what does work? Intervention before charges are filed. Negotiation during the investigation phase. Convincing prosecutors that the case has weaknesses before they commit to an indictment. This is why the moment you learn your under investigation - not the moment your charged - is when your legal representation matters most.
What A Real Defense Looks Like
Todd Spodek explains this to clients constantly: the defense that matters happens before indictment, not after. Once your charged with federal securities crimes, your playing a fundamentally defensive game. Your goal becomes minimizing damage rather than achieving vindication.
A real defense strategy starts the moment you suspect something is wrong. Maybe you recieved an informal inquiry letter. Maybe your compliance department mentioned that regulators were asking questions. Maybe a colleague told you the SEC contacted them about trades you were involved in. Whatever the signal, thats when you need criminal defense counsel - not securities litigation attorneys, not regulatory compliance advisors, but attorneys who understand federal criminal prosecution.
Heres what effective pre-indictment defense looks like:
Document Preservation and Analysis: Before you respond to any government inquiry, you need to understand what documents exist and what they show. This means reviewing your own records - not to destroy anything, which would be obstruction - but to understand what narrative those records support.
Witness Coordination: If colleagues, supervisors, or clients will be interviewed by investigators, understanding what they're likely to say is crucial. Again, this isnt witness tampering - its basic preparation.
Proactive Government Engagement: In some cases, proactively approaching prosecutors with your side of the story - through counsel - can change the trajectory of an investigation. This requires experienced judgment about when engagement helps versus when it hurts.
Parallel Civil Defense: SEC civil matters and DOJ criminal matters often proceed simultaneously. Coordinating defense across both tracks prevents you from making statements in the civil context that damage your criminal defense.
Cooperation Negotiation: If the evidence against you is strong, early cooperation can sometimes result in no charges at all, or significantly reduced charges. But cooperation has to be negotiated properly - cooperating without a cooperation agreement in place just gives prosecutors more evidence without getting you anything in return.
The attorneys at Spodek Law Group have navigated these situations for brokers, advisors, and financial professionals facing federal scrutiny. The difference between a case that ends in declined prosecution versus one that ends in a 15-year sentence often comes down to what happens in the 6-12 months before any charges are filed.
The Window Is Closing
Think about that timeline again. Years of investigation before you know anything is happening. Documents gathered. Patterns analyzed. Witnesses interviewed. By the time the formal accusation arrives, the government has assembled its case completely.
But there's usually a window - sometimes just a few months - between when you first learn of the investigation and when prosecutors make their charging decision. That window is everything.
The clock started when you learned about this. Maybe today is that day. Maybe it was last week when compliance mentioned the SEC was asking questions. Maybe you've been sitting on this information for months, hoping it would go away.
It wont go away. SEC investigations that reach the formal stage almost never end with "never mind, everything's fine." The question is only what comes next - declined prosecution, deferred prosecution agreement, civil resolution, or federal criminal charges.
Call Spodek Law Group at 212-300-5196. The conversation is confidential. We've represented securities professionals facing exactly this situation, and we understand that the real battle happens before the public battle begins.
They had years to build this case. You have weeks to respond to it. The asymmetry is intentional - the system is designed to give the government every advantage before you even know the game has started. But that window between learning and being charged is your one opportunity to change the outcome.
Use it. Call now: 212-300-5196.
