SEC Framework for Evaluating Cooperation by Companies and Individuals

for individuals, organizations can qualify for departures limit SEC’s broad discretion to evaluate every case indi- pursuant to § 8C4.1 of the Guidelines for cooperating in vidually on its own unique facts and circumstances. Similar the prosecution of others. to SEC’s treatment of cooperating individuals, credit for cooperation by companies may range from taking no Civil Cases enforcement action to pursuing reduced sanctions in con- SEC’s Framework for Evaluating Cooperation by Companies SEC’s framework for evaluating cooperation by com- panies is set forth in its 2001 Report of Investigation Pursuant to Section 21 (a) of the Securities Exchange Act of 1934 and Commission Statement on the Relationship of Cooperation to Agency Enforcement Decisions, which is commonly known as the Seaboard Report.”* The report, which explained the Commission’s decision not to take enforcement action against a public company for certain accounting violations caused by its subsidiary, details the many factors SEC consid- ers in determining whether, and to what extent, it grants leni- ency to companies for cooperating in its investigations and for related good corporate citizenship. Specifically, the report identifies four broad measures of a company’s cooperation: e self-policing prior to the discovery of the miscon- duct, including establishing effective compliance procedures and an appropriate tone at the top; e self-reporting of misconduct when it is discovered, including conducting a thorough review of the nature, extent, origins, and consequences of the mis- conduct, and promptly, completely, and effectively disclosing the misconduct to the public, to regula- tory agencies, and to self regulatory organizations; e remediation, including dismissing or appropriately disciplining wrongdoers, modifying and improv- ing internal controls and procedures to prevent recurrence of the misconduct, and appropriately compensating those adversely affected; and * cooperation with law enforcement authorities, including providing SEC staff with all informa- tion relevant to the underlying violations and the company’s remedial efforts. Since every enforcement matter is different, this ana- lytical framework sets forth general principles but does not 55 nection with enforcement actions. SEC’s Framework for Evaluating Cooperation by Individuals In 2010, SEC announced a new cooperation program for individuals.” SEC staff has a wide range of tools to facilitate and reward cooperation by individuals, from tak- ing no enforcement action to pursuing reduced sanctions in connection with enforcement actions. Although the evalu- ation of cooperation depends on the specific circumstances, SEC generally evaluates four factors to determine whether, to what extent, and in what manner to credit cooperation by individuals: the assistance provided by the cooperating indi- vidual in SEC’s investigation or related enforce- ment actions, including, among other things: the value and timeliness of the cooperation, including whether the individual was the first to report the misconduct to SEC or to offer his or her coopera- tion; whether the investigation was initiated based upon the information or other cooperation by the individual; the quality of the cooperation, includ- ing whether the individual was truthful and the cooperation was complete; the time and resources conserved as a result of the individual's coopera- tion; and the nature of the cooperation, such as the type of assistance provided; the importance of the matter in which the indi- vidual provided cooperation; the societal interest in ensuring that the cooperat- ing individual is held accountable for his or her misconduct, including the severity of the individ- ual’s misconduct, the culpability of the individual, and the efforts undertaken by the individual to remediate the harm; and HOUSE_OVERSIGHT_022557