Publications

The Securities and Exchange Commission announced a series of measures on Wednesday designed to incentivize companies and individuals to provide earlier and more meaningful cooperation in Enforcement Division investigations.  First, the Division of Enforcement has authorized its staff to use cooperation tools frequently employed by the Department of Justice in criminal investigations that have not previously been used by the SEC, including formal written cooperation agreements, deferred prosecution agreements and non-prosecution agreements.  Second, the Commission has developed a framework for evaluating and providing credit for cooperation by individuals, similar to the guidelines already in place for cooperation by corporations.  The new initiatives were characterized by the SEC’s Director of Enforcement, Robert Khuzami, as a “potential game-changer” for the Division of Enforcement and they clearly reflect the Director’s criminal prosecution background.  It remains unclear, however, whether these techniques imported from the criminal sphere will prove to be easily adaptable to the civil and regulatory context, and whether and to what extent the SEC will modify the use of these techniques in its civil investigations.  Individuals and corporations involved in SEC matters should carefully evaluate both the opportunities and the risks posed by the new initiatives.  In particular, while the prospect of entering into a deferred prosecution or non-prosecution agreement as an alternative to consenting to a Judgment in an SEC injunctive action may appear enticing at first blush, very real risks of increased liability in private civil cases may result from pursuing that course of action.