What Is an SEC Deferred Prosecution Agreement?
Our Former Federal Prosecutors and SEC Defense Attorneys Help Companies and Their Executives Secure Favorable Resolutions During and Prior to SEC Investigations
In recent years, the U.S. Securities and Exchange Commission (SEC) has increasingly offered deferred prosecution agreements to companies and individuals accused of securities law violations. When facing the potential for civil or criminal prosecution by the SEC and the U.S. Department of Justice (DOJ), securing a deferred prosecution agreement can provide a favorable resolution—though it is still imperative to ensure that the terms of the agreement are fair and reasonable in light of the relevant facts and circumstances involved.
The SEC’s use of deferred prosecution agreements began in 2010. One year after the U.S. Department of Justice (DOJ) began employing non-prosecution agreements under its Foreign Corrupt Practices Act (FCPA) Corporate Enforcement Policy, the SEC announced its new Cooperation Initiative. The SEC described the initiative as “a series of measures to encourage individuals and companies to cooperate with SEC investigations and enforcement actions,” and these measures included both deferred prosecution agreements and non-prosecution agreements.
The SEC has continued to use deferred prosecution agreements in the years since. As the SEC explains, “A deferred prosecution agreement is a written agreement between the Division [of Enforcement] and a company . . . in which the Division agrees to forego an enforcement action against the company if, among other things, the company agrees to certain undertakings, or changes in behavior.” For companies (and individual executives and employees), securing a deferred prosecution agreement can provide a means to avoid facing the time, burden, expense, and risk of litigation or a federal trial.
Deferred Prosecution Agreements in SEC Cases
Deferred prosecution agreements offer advantages for both companies (or individuals) and the U.S. government. A deferred prosecution agreement is, in essence, a contract between the parties that provides for the government to release its claims if the counterparty satisfies certain conditions. In SEC matters, these conditions typically include paying a monetary settlement, fully cooperating with authorities, and ceasing the unlawful practices that gave rise to the SEC’s investigation.
For companies and individuals that are able to meet these conditions, entering into a deferred prosecution agreement with the SEC allows them to avoid the risks and uncertainties of civil or criminal litigation. This can be particularly important for individuals facing criminal charges, as a conviction in federal court can result in substantial fines and long-term imprisonment. For companies, avoiding adverse verdicts in federal district court is also critical, as the costs of such verdicts can be astronomical.
