One reason the Securities And Corporate (SEC) Investigations might investigate you is if they feel you did not adequately disclose information to investors.
Potential investors can only make informed decisions if they have the material necessary to inform themselves. As a company looking for investors, that means you will need to pass them some of the information you may have held in private up till now.
Cherry-picking the information that maes you sound good and failing to share that which doesn’t could be construed as inadequate disclosure. If an investor feels you misled them, they may complain to the SEC, who could decide to investigate.
This is pretty much what happened in the Theranos case, which ended with CEO and founder Elizabeth Holmes being sentenced to prison.
You don’t need to lie to face legal problems
Lying about a product’s effectiveness or your results is fraudulent behavior. It breaches the standards of honesty and integrity that potential investors and the SEC expect. Yet failing to mention things is also a lie of sorts.
Let’s say you invent a drug that helps people suffering from a particular disease. You tell investors that seven out of ten people improved after taking the drug. What you don’t mention is the other 30% got much worse after taking it. That is something they need to know, and you should have shared. So even though you might not have lied, you failed to disclose enough.
Understanding what to disclose can be a fine line, so it’s wise to take legal help to reduce the chance you’re found to be on the wrong side of that line.