SEC Announces New Tools to Secure Cooperation in Investigations and Enforcement Proceedings
The Securities and Exchange Commission announced this week a new initiative to encourage private individuals and corporations to cooperate in SEC investigations and enforcement. The SEC will revise its Enforcement Division's enforcement manual to add a new section entitled "Fostering Cooperation." The section will allow SEC investigators to use the following "tools":
Cooperation Agreements — Formal written agreements in which the Enforcement Division agrees to recommend to the Commission that a cooperator receive credit for cooperating in investigations or related enforcement actions if the cooperator provides substantial assistance such as full and truthful information and testimony.
Deferred Prosecution Agreements — Formal written agreements in which the Commission agrees to forego an enforcement action against a cooperator if the individual or company agrees, among other things, to cooperate fully and truthfully and to comply with express prohibitions and undertakings during a period of deferred prosecution.
Non-prosecution Agreements — Formal written agreements, entered into under limited and appropriate circumstances, in which the Commission agrees not to pursue an enforcement action against a cooperator if the individual or company agrees, among other things, to cooperate fully and truthfully and comply with express undertakings.
The proposed changes also streamline the process for requesting immunity from the Justice Department for witnesses assisting in SEC investigations and enforcement actions. They futhermore set forth considerations for evaluating cooperation by individuals, including:
The assistance provided by the cooperating individual.
The importance of the underlying matter in which the individual cooperated.
The societal interest in ensuring the individual is held accountable for his or her misconduct.
The appropriateness of cooperation credit based upon the risk profile of the cooperating individual.
As the announcement recognizes, the "tools" are tools which the Department of Justice has long employed to secure cooperation and obtain information. Professor Ellen S. Podgor of Stetson University College of Law and the White Collar Crime Prof Blog has listed concerns regarding the SEC's new cooperation criteria.
