EPAct 2005 increased both the Commission's jurisdiction and its penalty authority, thereby increasing the importance of the Commission's enforcement program.

The Commission's regulations allow Enforcement staff to conduct investigations relating to any matter subject to the Commission's jurisdiction. The investigative staff initiates investigations from information received through a variety of sources, both internal and external. Internally, information is received from the Division Analytics and Surveillance or other Commission offices, or from the Commission itself, or in the course of another investigation. Externally, information may be received from:

All information and documentation received during an investigation, as well as the existence of an investigation, is treated as non-public (only the Commission can authorize the public disclosure of the existence of an investigation or information obtained during an investigation).

More information regarding investigations may be found in the annual staff Reports on Enforcement, which are issued in the last quarter of each calendar year. These annual reports highlight significant investigations, including those that have proceeded to Commission Orders to Show Cause and those litigated in Federal District Court. They also provide descriptions and statistics on settlements, self-reports, investigations, and Hotline matters for the relevant fiscal year.

Our Enforcement Resources page provides a comprehensive list and links to statutes, regulations, Commission orders and policy statements, and staff reports relevant to how the Office of Enforcement conducts its investigations.

Before the Investigation

Prior to opening an investigation, staff reviews the information received and typically conducts a preliminary examination of the identified activity. Staff may consult publicly or commercially available sources of data, seek input from Commission staff with expertise in the subject matter, or contact the entity involved for an explanation of its actions. In some situations, this preliminary examination establishes an adequate justification for the subject activity or otherwise indicates that no further inquiry is needed. In other cases, staff determines that a fuller inquiry into the subject conduct is required, and opens an investigation.

To determine whether there is a basis for opening an investigation, staff considers available information concerning the following factors:

  • Nature and seriousness of the alleged violation;
  • Nature and extent of the harm, if any;
  • Efforts made to remedy the violation;
  • Whether the alleged violations were widespread or isolated;
  • Whether the alleged violations were willful or inadvertent;
  • Importance of documenting and remedying the potential violations to advance Commission policy objectives;
  • Likelihood of the conduct reoccurring;
  • Amount of detail in the allegation or suspicion of wrongdoing;
  • Likelihood that staff could assemble a legally and factually sufficient case;
  • Compliance history of the alleged wrongdoer; and
  • Staff resources.

If, based on a consideration of the foregoing factors, staff determines that an investigation is not warranted, it will so notify the subject of the inquiry, assuming the subject is aware that an investigation is under consideration.  If staff determines that an investigation should be opened, it will notify the subject of that fact.

The Process

Fact Gathering - An investigation involves fact-gathering by Enforcement staff through customary discovery methods such as data and document requests, interrogatories, interviews, and depositions. The time needed to complete an investigation depends on many factors, including the complexity of the conduct involved and the nature of the alleged violations. Staff will discuss with company representatives relevant facts and data as the fact gathering progresses, and subjects of an investigation may at any time contact Enforcement staff to provide additional information or explanations of their conduct.


At any time during the course of its investigation, staff may determine to close the investigation without taking any further action. This happens when staff determines that no violation occurred, that the evidence is insufficient to warrant further investigation, or that no further action is otherwise called for based on a totality of the circumstances. In such cases, staff notifies the subject that the investigation is closed.


Preliminary Conclusions - If staff reaches the preliminary conclusion that a violation occurred that warrants sanctions, it will share its views of the facts and the law with the subject either orally or in writing. The subject may respond with any additional information it deems to be helpful. When this exchange alters the complexion of the investigation, staff may reconsider and potentially close the investigation or revise its view of the appropriate sanction. If staff continues to believe that sanctions are warranted, staff will submit its views and recommendations along with the subject’s response to the Commission and proceed according to Commission guidance.


Settlement Discussions - Should the Commission agree to sanctions, the Director of the Office of Enforcement will authorize the Secretary of the Commission to issue a public Preliminary Notice of Violations.  Staff will engage in settlement discussions first as the preferred resolution. The public interest is often better served through settlements because compliance problems are remedied faster, disgorged profits may be returned to customers sooner, and staff is able to reallocate resources to other enforcement matters. For the subject, settlement can often result in significantly lower penalty amounts than those resulting from a public proceeding, and avoids litigation risk and the time and costs of a proceeding. If staff and the subject agree on the terms, staff submits a Stipulation and Consent Agreement to the Commission for approval. The Commission publicly orders the Stipulation and Consent Agreements it approves.


Civil Prosecution - In cases in which staff and the subject cannot reach settlement consistent with the Commission’s guidance, staff will notify the subject pursuant to 18 C.F.R. § 1b.19 that it plans to recommend the matter for an administrative proceeding or civil action. The subject has 30 days to respond, at which time staff submits both its recommendation, in the form of a staff report, and the subject’s response to the Commission for consideration. Should the Commission decide to issue an Order to Show Cause, the Commission does not make any finding as to whether there has been a violation of the law.  Rather, an Order to Show Cause commences a formal proceeding under Part 385 of the Commission’s regulations.  The Office of General Counsel will take the lead in advising the Commission regarding the disposition of arguments made in response to, and support of, the Order to Show Cause.


Following issuance of the Order to Show Cause, potential settlement may proceed at any time in accordance with the requirements of Rule 602 of the Commission’s Rules of Practice and Procedure.  In the event there is no settlement, the proceeding will continue as prescribed by the particular statute governing the violation at issue, as well as in accordance with any additional procedures set forth by the Commission in orders issued in the particular proceeding.  During every stage of an investigation, subjects being investigated have the opportunity to make submissions to Enforcement staff to demonstrate that a violation did not occur, or to offer an explanation of why one occurred.   Moreover, the Commission clarifies that, under section 1b.18, the subject of an investigation has the right, at any time during an investigation, to submit documents directly to the Commission, not just to Enforcement staff. 


Should the Commission or a federal district court issue a final order assessing penalties or other remedies, the subject may petition the United States Court of Appeals for review of the order.

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This page was last updated on August 28, 2020