§ 202.12Policy statement concerning cooperation by individuals in its investigations and related enforcement actions.
Cooperation by individuals and entities in the Commission's investigations and related enforcement actions can contribute significantly to the success of the agency's mission. Cooperation can enhance the Commission's ability to detect violations of the federal securities laws, increase the effectiveness and efficiency of the Commission's investigations, and provide important evidence for the Commission's enforcement actions. There is a wide spectrum of tools available to the Commission and its staff for facilitating and rewarding cooperation by individuals, ranging from taking no enforcement action to pursuing reduced charges and sanctions in connection with enforcement actions. As with any cooperation program, there exists some tension between the objectives of holding individuals fully accountable for their misconduct and providing incentives for individuals to cooperate with law enforcement authorities. This policy statement sets forth the analytical framework employed by the Commission and its staff for resolving this tension in a manner that ensures that potential cooperation arrangements maximize the Commission's law enforcement interests. Although the evaluation of cooperation requires a case-by-case analysis of the specific circumstances presented, as described in greater detail below, the Commission's general approach is to determine whether, how much, and in what manner to credit cooperation by individuals by evaluating four considerations: the assistance provided by the cooperating individual in the Commission's investigation or related enforcement actions (“Investigation”); the importance of the underlying matter in which the individual cooperated; the societal interest in ensuring that the cooperating individual is held accountable for his or her misconduct; and the appropriateness of cooperation credit based upon the profile of the cooperating individual. In the end, the goal of the Commission's analysis is to protect the investing public by determining whether the public interest in facilitating and rewarding an individual's cooperation in order to advance the Commission's law enforcement interests justifies the credit awarded to the individual for his or her cooperation.
(a)Assistance provided by the individual. The Commission assesses the assistance provided by the cooperating individual in the Investigation by considering, among other things:
(1) The value of the individual's cooperation to the Investigation including, but not limited to:
(i) Whether the individual's cooperation resulted in substantial assistance to the Investigation;
(ii) The timeliness of the individual's cooperation, including whether the individual was first to report the misconduct to the Commission or to offer his or her cooperation in the Investigation, and whether the cooperation was provided before he or she had any knowledge of a pending investigation or related action;
(iii) Whether the Investigation was initiated based on information or other cooperation provided by the individual;
(iv) The quality of cooperation provided by the individual, including whether the cooperation was truthful, complete, and reliable; and
(v) The time and resources conserved as a result of the individual's cooperation in the Investigation.
(2) The nature of the individual's cooperation in the Investigation including, but not limited to:
(i) Whether the individual's cooperation was voluntary or required by the terms of an agreement with another law enforcement or regulatory organization;
(ii) The types of assistance the individual provided to the Commission;
(iii) Whether the individual provided non-privileged information, which information was not requested by the staff or otherwise might not have been discovered;
(iv) Whether the individual encouraged or authorized others to assist the staff who might not have otherwise participated in the Investigation; and
(v) Any unique circumstances in which the individual provided the cooperation.
(b)Importance of the underlying matter. The Commission assesses the importance of the Investigation in which the individual cooperated by considering, among other things:
(1) The character of the Investigation including, but not limited to:
(i) Whether the subject matter of the Investigation is a Commission priority;
(ii) The type of securities violations;
(iii) The age and duration of the misconduct;
(iv) The number of violations; and
(v) The isolated or repetitive nature of the violations.
(2) The dangers to investors or others presented by the underlying violations involved in the Investigation including, but not limited to:
(i) The amount of harm or potential harm caused by the underlying violations;
(ii) The type of harm resulting from or threatened by the underlying violations; and
(iii) The number of individuals or entities harmed.1
1 Cooperation in Investigations that involve priority matters or serious, ongoing, or widespread violations will be viewed most favorably.
(c)Interest in holding the individual accountable. The Commission assesses the societal interest in holding the cooperating individual fully accountable for his or her misconduct by considering, among other things:
(1) The severity of the individual's misconduct assessed by the nature of the violations and in the context of the individual's knowledge, education, training, experience, and position of responsibility at the time the violations occurred;
(2) The culpability of the individual, including, but not limited to, whether the individual acted with scienter, both generally and in relation to others who participated in the misconduct;
(3) The degree to which the individual tolerated illegal activity including, but not limited to, whether he or she took steps to prevent the violations from occurring or continuing, such as notifying the Commission or other appropriate law enforcement agency of the misconduct or, in the case of a violation involving a business organization, by notifying members of management not involved in the misconduct, the board of directors or the equivalent body not involved in the misconduct, or the auditors of such business organization of the misconduct;
(4) The efforts undertaken by the individual to remediate the harm caused by the violations including, but not limited to, whether he or she paid or agreed to pay disgorgement to injured investors and other victims or assisted these victims and the authorities in the recovery of the fruits and instrumentalities of the violations; and
(5) The sanctions imposed on the individual by other federal or state authorities and industry organizations for the violations involved in the Investigation.
(d)Profile of the individual. The Commission assesses whether, how much, and in what manner it is in the public interest to award credit for cooperation, in part, based upon the cooperating individual's personal and professional profile by considering, among other things:
(1) The individual's history of lawfulness, including complying with securities laws or regulations;
(2) The degree to which the individual has demonstrated an acceptance of responsibility for his or her past misconduct; and
(3) The degree to which the individual will have an opportunity to commit future violations of the federal securities laws in light of his or her occupation—including, but not limited to, whether he or she serves as: A licensed individual, such as an attorney or accountant; an associated person of a regulated entity, such as a broker or dealer; a fiduciary for other individuals or entities regarding financial matters; an officer or director of public companies; or a member of senior management—together with any existing or proposed safeguards based upon the individual's particular circumstances.
Before the Commission evaluates an individual's cooperation, it analyzes the unique facts and circumstances of the case. The above principles are not listed in order of importance nor are they intended to be all-inclusive or to require a specific determination in any particular case. Furthermore, depending upon the facts and circumstances of each case, some of the principles may not be applicable or may deserve greater weight than others. Finally, neither this statement, nor the principles set forth herein creates or recognizes any legally enforceable rights for any person.
[75 FR 3123, Jan. 19, 2010]
Title 17 published on 2012-04-01
no entries appear in the Federal Register after this date.
This is a list of United States Code sections, Statutes at Large, Public Laws, and Presidential Documents, which provide rulemaking authority for this CFR Part.