Brownstein Hyatt Farber Schreck attorneys recently worked with staff in the Denver Regional Office of the U.S. Securities and Exchange Commission (“SEC”) to negotiate both a proffer agreement and a cooperation agreement on behalf of a client who faced a serious SEC regulatory investigation. For a host of reasons the client viewed this as preferable to being sued by the SEC in an enforcement action. Individuals facing the prospect of an SEC enforcement action traditionally have had to choose between settling early, with the hope that the SEC would be willing to reduce penalties to avoid a costly enforcement action, and litigating against the SEC in an adversarial context. That changed somewhat in the wake of the SEC’s January 2010 Cooperation Initiative, which was intended to provide incentives for companies and individuals to cooperate with the SEC to provide it with valuable information and assistance in its investigations and enforcement actions. Under the Cooperation Initiative, the SEC may employ a number of tools, ranging from proffer agreements and cooperation agreements to deferred- or non-prosecution agreements, to encourage and reward meaningful cooperation by individuals and companies facing enforcement actions. Individuals who agree to provide substantial cooperation may receive credit for doing so, which may include reduced financial penalties, reduced charges, deferred prosecution, or no prosecution at all. Since the program was introduced in 2010, the SEC has publicly announced only a handful of agreements with individuals who received credit for cooperation. Those who face threats by regulators should be aware of the entire array of defenses available to them to respond to regulatory allegations.
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