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Cooperation: SEC enforcement boss talks about benefits to individuals

SEC enforcement chief Andrew CeresneyDuring a speech Wednesday at the University of Texas law school in Dallas, Andrew Ceresney, chief of the SEC’s enforcement division, talked about the three main benefits of cooperation for individuals.

First, individuals who cooperated might not be charged. That’s not true for senior employees who engaged in “serious misconduct,” Ceresney said. But “peripheral or lower-level” players might not face charges.

In other cases, the SEC might recommend reduced charges — such as technical violations instead of those based on intentional behavior — partly because of the cooperation.

How often does all that happen? The SEC won’t say. But “I can tell you,” Ceresney said, “based on an analysis of our cooperation agreements, that a significant percentage involved instances where the [enforcement division] declined to recommend charges” even when the cooperators weren’t blameless.

Second, Ceresney said, cooperation can lead to “a significant reduction in monetary relief.” When a defendant, determining his or her civil penalty waits until the cooperation is complete, such as after giving testimony at a trial. “

“Again, the numbers bear out that cooperators receive significant benefits,” Ceresney said.  “In cases where a cooperator has been charged and we have resolved the penalty question, two-thirds of the time the cooperator has paid no penalty at all.”

Cooperation is less likely to impact the amount a defendant has to disgorge. If the cooperator is in possession of the “proceeds of wrongdoing,” the SEC typically seeks disgorgement of all of it. But even then, Ceresney said, when there’s flexibility as to how to calculate disgorgement, the SEC might “take a narrower view of what should be disgorged in recognition of cooperation.”

Third, cooperation can impact the need for remedial relief such as industry suspensions or bars. True cooperation, Ceresney said, bears directly on some factors the SEC and courts will look at when deciding whether remedial relief is necessary — such as “recognition of the wrongful nature of the conduct, and sincerity of assurances against future violations.”

An individual’s future risk profile is also important to decisions about debarments. And cooperation “can greatly influence how one assesses the degree of future risk to investors and the markets that is posed by the individual.”

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The full text of Andrew Ceresney’s speech called “The SEC’s Cooperation Program: Reflections on Five Years of Experience” delivered May 13, 2015 at the University of Texas School of Law’s Government Enforcement Institute in Dallas, Texas is here.


Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

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