SEC Enforcement Manual outlines factors for corporate investigations and prosecutions

53 than indictment, including non-prosecution and deferred prosecution agreements, may be appropriate in certain cir- cumstances. Nine factors are considered in conducting an investigation, determining whether to charge a corporation, and negotiating plea or other agreements: e the nature and seriousness of the offense, including the risk of harm to the public; e the pervasiveness of wrongdoing within the corpo- ration, including the complicity in, or the condon- ing of, the wrongdoing by corporate management; e the corporation’s history of similar misconduct, including prior criminal, civil, and regulatory enforcement actions against it; e the corporation’s timely and voluntary disclosure of wrongdoing and its willingness to cooperate in the investigation of its agents; e the existence and effectiveness of the corporation’s pre-existing compliance program; e the corporation’s remedial actions, including any efforts to implement an effective corporate compli- ance program or improve an existing one, replace responsible management, discipline or terminate wrongdoers, pay restitution, and cooperate with the relevant government agencies; e collateral consequences, including whether there is disproportionate harm to shareholders, pension holders, employees, and others not proven person- ally culpable, as well as impact on the public arising from the prosecution; e the adequacy of the prosecution of individuals responsible for the corporation’s malfeasance; and e the adequacy of remedies such as civil or regulatory enforcement actions. As these factors illustrate, in many investigations it will be appropriate for a prosecutor to consider a corpora- tion’s pre-indictment conduct, including voluntary disclo- sure, cooperation, and remediation, in determining whether to seek an indictment. In assessing a corporation's coopera- tion, prosecutors are prohibited from requesting attorney- client privileged materials with two exceptions—when a corporation or its employee asserts an advice-of-counsel defense and when the attorney-client communications were in furtherance of a crime or fraud. Otherwise, an organi- zation’s cooperation may only be assessed on the basis of whether it disclosed the relevant facts underlying an inves- tigation—and not on the basis of whether it has waived its attorney-client privilege or work product protection.”! What Does SEC Consider When Deciding Whether to Open an Investigation or Bring Charges? SEC’s Enforcement Manual, published by SEC’s Enforcement Division and available on SEC’s website,” sets forth information about how SEC conducts inves- tigations, as well as the guiding principles that SEC staff considers when determining whether to open or close an investigation and whether civil charges are merited. There are various ways that potential FCPA violations come to the attention of SEC staff, including: tips from informants or whistleblowers; information developed in other inves- tigations; self-reports or public disclosures by companies; referrals from other offices or agencies; public sources, such as media reports and trade publications; and proactive investigative techniques, including risk-based initiatives. Investigations can be formal, such as where SEC has issued a formal order of investigation that authorizes its staff to issue investigative subpoenas for testimony and documents, or informal, such as where the staff proceeds with the inves- tigation without the use of investigative subpoenas. In determining whether to open an investigation and, if so, whether an enforcement action is warranted, SEC staff considers a number of factors, including: the statutes or rules potentially violated; the egregiousness of the poten- tial violation; the potential magnitude of the violation; whether the potentially harmed group is particularly vul- nerable or at risk; whether the conduct is ongoing; whether the conduct can be investigated efficiently and within the statute of limitations period; and whether other authorities, including federal or state agencies or regulators, might be better suited to investigate the conduct. SEC staff also may HOUSE_OVERSIGHT_022555