Baker Marquart Client Resource Center: COVID-19 Client Advisories

Federal and state regulators and law enforcement agencies continue to introduce enforcement initiatives in response to disruptions caused by COVID-19. Baker Marquart can help you navigate this rapidly changing environment.

The coronavirus has caused volatility in the securities markets and threatens a global recession. Seeking to support investor and consumer confidence, federal regulatory agencies, including the SEC, FTC, and CFPB, have issued releases indicating they are hard at work policing the capital markets and protecting consumers and investors. These government agencies have warned against potential scams involving microcap stocks, coronavirus-related research, drug-treatment regimens, vaccinations, and test kits, and have stated they will be proactive in investigating any alleged scams. Public companies’ disclosures will also be under the SEC’s proverbial microscope, particularly those that experience high levels of volatility in their stock prices or substantial price decreases.

The Department of Justice has indicated that not only will it investigate and charge coronavirus-related scams as criminal offenses, but it also will pursue individuals who amass critical medical supplies or engage in profiteering. DOJ has already announced several newly-filed cases; such prosecutions will surely only increase over time and, in some cases, play out over years.

In California, Attorney General Becerra has warned that he will lead the stepped-up enforcement of price-gouging, defined as charging a price more than 10% more than pre-crisis prices, and he has invited consumers to file complaints. Like the DOJ, we can expect aggressive action from the Attorney General.

While government regulators and law enforcement agencies have an important mission to prevent fraud and consumer abuse, it is wholly foreseeable that legitimate projects and companies will also be investigated and may receive subpoenas, as government enforcement officials cast a wide net. This is not unprecedented. After the 2008 financial crisis, the SEC claimed that it charged 204 entities and individuals for financial crisis-related misconduct; 93 of the charged individuals were corporate officers and 54 received officer and director bars, industry bars, or commission suspensions. These statistics of course do not take into account individuals or companies who were investigated by the SEC but not charged.

Companies and individuals should realize that the COVID-19 pandemic will create pressure on prosecutors and government enforcement officials to take swift and decisive public action by filing lots of cases. In these critical times, we recommend that you treat any government inquiry as a serious investigation and, upon hearing from any government agent – whether it be in the form of a formal subpoena or an apparently casual phone call –immediately retain qualified outside counsel to intercede with the investigating agency. We have seen individuals and small companies nearly bankrupted by investigations that ultimately led to no charges. While it may seem counter-intuitive, early intercession by a qualified lawyer can help government agencies reach the conclusion not to further investigate, or to reach a declination decision, sooner rather than later.

If you hear from a regulator or law enforcement agency, or if you want to discuss ways in which you might prepare for such an inquiry, we are here to help.


This communication is for general information purposes only, is not a full analysis of the matters discussed, and should not be relied upon as legal advice.

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