The SEC Enforcement Division encourages cooperation by entities and individuals in SEC investigations and enforcement actions. Parties that meaningfully cooperate with the Division can receive benefits ranging from reduced charges, civil penalties, and other sanctions to no charges, civil penalties, or sanctions at all. 

Speech: Five Principles of Effective Cooperation in SEC Investigations

Cooperation can take various forms. It may involve “informal” cooperation with Enforcement staff during investigations, or it may occur through the SEC’s formal Cooperation Program in which the parties execute a formal Cooperation Agreement, Deferred Prosecution Agreement, or Non-Prosecution Agreement. We encourage parties to discuss with SEC Staff whether participation in the SEC’s formal cooperation program may be appropriate. Staff may exercise their own judgment as to when or whether it would be beneficial to move from informal to formal cooperation in a given matter.

Cooperation by Entities

In October 2001, the Commission issued a Report of Investigation and Statement explaining its decision not to take enforcement action against a public company it had investigated for financial statement irregularities. In this report, commonly referred to as the Seaboard Report, the Commission articulated an analytical framework for evaluating cooperation by companies. The report detailed many factors the Commission considers in determining whether, and to what extent, it grants leniency to investigated companies for cooperating in its investigations and for related good corporate conduct.

Specifically, the report identifies four broad measures of a company’s cooperation:

• Self-policing prior to the discovery of the misconduct, including establishing effective compliance procedures and an appropriate tone at the top;
• Self-reporting of misconduct when it is discovered, including conducting a thorough review of the nature, extent, origins, and consequences of the misconduct, and promptly, completely, and effectively disclosing the misconduct to the public, to regulatory agencies, and to self-regulatory organizations;
• Remediation, including dismissing or appropriately disciplining wrongdoers, modifying and improving internal controls and procedures to prevent recurrence of the misconduct, and appropriately compensating those adversely affected; and
• Cooperation with law enforcement authorities, including providing the Commission staff with all information relevant to the underlying violations and the company’s remedial efforts.

Cooperation by Individuals

In January 2010, the Commission issued a policy statement articulating a framework for evaluating cooperation by individuals in the Commission’s investigations and actions.

This policy statement identified four general considerations to use in assessing cooperation:

• Assistance provided by the cooperator. This includes considerations such as the value and nature of the cooperation;
• Importance of the underlying matter. This includes considerations such as the danger posed to investors by the underlying misconduct;
• Interest in holding the individual accountable. This includes considerations such as a cooperator’s culpability relative to that of other violators; and
• Profile of the individual. This includes considerations such as acceptance of responsibility for the misconduct.

Information concerning the circumstances under which individuals may receive credit as part of the SEC’s cooperation initiative: SEC Credits Former AXA Rosenberg Executive for Substantial Cooperation During Investigation.
 

Examples of Cooperation

The Commission routinely imposes reduced penalties and sanctions based on the above factors. For example, in the following cases, the Commission recognized cooperation by entities in deciding to impose no penalty against them:

• In February 2024, the Commission announced settled accounting fraud charges against Cloopen Group Holding Limited, a China-based provider of cloud communications products and services whose shares formerly traded on the New York Stock Exchange. According to the settled order, two Cloopen managers orchestrated a fraudulent scheme to prematurely recognize revenue. As a result of this misconduct and other accounting errors, Cloopen overstated its financial results and revenue guidance for several quarters. According to the order, within a few days of starting an internal investigation, Cloopen self-reported the accounting violations to the SEC and subsequently provided substantial cooperation to the staff, including summarizing interviews of witnesses located in China and identifying and translating key documents. Cloopen also implemented prompt remedial measures, including firing or disciplining the people involved in the fraudulent scheme, reorganizing the departments engaged in the misconduct, strengthening its accounting controls, and recruiting new finance and accounting staff with expertise in generally accepted accounting principles in the United States. The SEC determined not to impose civil penalties against Cloopen in light of the company’s self-report and cooperation.
   
• In September 2023, the Commission settled charges against GTT Communications, Inc., a publicly traded telecommunications and internet service provider, for failing to disclose material information about unsupported adjustments the company made in several Commission filings, which increased GTT’s reported operating income by at least 15 percent in three quarters. The SEC did not impose a civil penalty against the company in light of its self-reporting, cooperation, and remediation. According to the settled order, GTT promptly self-reported to the Commission and provided assistance to Commission staff by, among other things, providing multiple presentations concerning the findings of an internal investigation, including presentations before the company had reached final conclusions about the nature and scope of potential issues; identifying key documents and witnesses; and facilitating testimony from former employees.
   
• In July 2023, the Commission settled charges against View, Inc., a publicly traded manufacturer of “smart” windows, for failing to disclose $28 million in warranty-related liabilities. The SEC decided not to impose civil penalties against View because the company self-reported the conduct to the SEC, promptly undertook remedial measures, and cooperated with the staff’s investigation. According to the settled order, after self-reporting the conduct, View provided assistance to Commission staff by, among other things, providing detailed financial analyses, explanations, and summaries of factual issues; proactively identifying key documents and witnesses; and following up on several requests from the staff without requiring subpoenas. 
   
• In June 2023, the Commission settled charges against Stanley Black & Decker Inc., a publicly traded tools company, for failing to disclose at least $1.3 million worth of perquisites and personal benefits paid to, or on behalf of, four of its executive officers and one of its directors. The Commission did not impose a civil penalty against Stanley Black & Decker. According to the settled order, in agreeing to this resolution, the Commission considered that Stanley Black & Decker self-reported the perquisite disclosure failures and other conduct potentially implicating the federal securities laws, cooperated with the SEC’s investigation, and implemented remedial measures.

Commission orders in the following cases included reduced penalties in recognition of cooperation by settling parties:

• In September 2023, the Commission announced settled charges against ten firms for widespread recordkeeping failures. One of those firms, broker-dealer Perella Weinberg, self-reported the conduct and agreed to pay a civil penalty of $2.5 million to settle the charges. Other firms that were charged as part of the initiative but had not self-reported were ordered to pay substantially higher civil penalties to settle the charges.
   
• In September 2023, the Commission announced settled charges against a respondent arising out his role in a crypto asset securities offering that raised more than $1.5 million from over 30 investors in May 2021. The order acknowledged the respondent’s cooperation and that he returned to investors the offering proceeds under his control.  Without admitting or denying the findings in the SEC’s order, the respondent consented to a cease-and-desist order and additional proceedings to determine what, if any, disgorgement and prejudgment interest or civil penalties are appropriate. 
   
• In March 2022, the Commission announced settled fraud charges against a London resident for his actions in 2017 and 2018 that helped the now-defunct Dubai-based private equity firm the Abraaj Group misappropriate client cash and mislead investors and potential investors about the firm's performance track record in the offer and sale of its newest fund. The order stated that the Respondent acknowledged the Commission was not imposing a civil penalty based on his agreement to cooperate as set out therein. The order against a different respondent involving facts related to the Abraaj Group similarly acknowledged the Commission was not imposing a civil penalty based on his agreement to cooperate as set out in the order.
   

Cooperation Through the SEC’s Cooperation Program

The SEC’s Cooperation Program has proven valuable in a wide range of cases spanning the full spectrum of its enforcement program from insider trading and market manipulation to FCPA violations and financial fraud.

Cooperation Agreements

The Enforcement Division has entered many agreements under which it recommends to the Commission that a cooperator receive credit for cooperating in investigations or related enforcement actions if the cooperator provides substantial assistance such as full and truthful information and testimony.

Deferred Prosecution Agreements

These are agreements under which the Commission agrees to defer an enforcement action against a cooperator if the individual or company agrees to cooperate fully and truthfully and comply with express prohibitions and undertakings during a period of deferred prosecution. If the cooperator satisfies the terms of the agreement, the Commission forgoes charging the cooperator at the conclusion of the defined period.

The Commission has entered DPAs with:

• A cooperating individual in an insider trading case
• A cooperating corporate director in a case involving false and misleading statements about a tech company’s key product
• A cooperating individual in an FCPA case involving bribery in China
• Three cooperating individuals in a case involving false pricing information about residential mortgage-backed securities
• A cooperating company in an FCPA case involving attempted bribes in Qatar
• A cooperating company in an accounting fraud case involving misclassification of impaired loans at a bank
• A cooperating former hedge fund administrator in a case involving misappropriation by the hedge fund’s manager
• A cooperating non-profit fund for mortgages and construction in a case involving the fund’s failure to update its offering memorandum to reflect changed circumstances, and resulting misstatements in the offering memorandum
• A cooperating company in an FCPA case involving bribes in Uzbekistan

Non-Prosecution Agreements

These agreements are entered into in limited circumstances in which the Commission agrees not to pursue an enforcement action against a cooperator if the individual or company agrees to cooperate fully and truthfully and comply with express undertakings.

The Commission has entered NPAs with:

• Two companies that promptly self-reported bribes paid to Chinese officials by foreign subsidiaries, cooperated extensively with the ensuing SEC investigations, and took swift remedial measures
• An individual who provided early, extraordinary, and unconditional cooperation in an investigation of insider trading in shares of an e-commerce company
• A company that promptly self-reported bribes to Argentine government officials by a foreign subsidiary, provided exceptional cooperation with the SEC’s investigation, and undertook significant remedial measures
• Two companies under Federal Housing Finance Agency conservatorship that agreed to accept responsibility for their conduct and cooperate with the SEC’s litigation over misleading statements concerning the companies’ exposure to subprime mortgages.