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International Enforcement Assistance

May 31, 2017

Enforcement cooperation is among the top priorities of the SEC's international program. Technological advances have facilitated the movement of capital across borders and increased opportunities for investors. This progress has also enhanced the ability of those who prey on investors to transfer assets abroad or base their scams and fraudulent activities overseas. As a consequence, international cooperation among securities regulators is vital to effective resolution of international enforcement investigations.


Topics:

SEC Framework for International Cooperation and Assistance

Mechanisms for Information Sharing in Securities Enforcement Matters

How a Foreign Securities Authority Can Request Assistance

Complaints Regarding Securities Law Violations in the US Marketplace


SEC Framework for International Cooperation and Assistance

The SEC can assist foreign securities authorities in their investigations using a wide array of tools.

Use of Compulsory Powers

Section 21(a)(2) of the Securities Exchange Act of 1934 authorizes the SEC to conduct investigations on behalf of foreign securities authorities and compel the production of documents and testimony from any person or entity, whether or not that person or entity is regulated by the SEC. Section 3(a)(50) of the Securities Exchange Act of 1934 defines a “foreign securities authority” as “any foreign government, or governmental body or regulatory organization empowered by a foreign government to administer or enforce its laws as they relate to securities matters.” Section 21(a)(2) provides that on request from a foreign securities authority, the Commission may provide assistance if the requesting authority states that it is conducting an investigation necessary to determine whether any person has violated, is violating, or is about to violate any laws or rules relating to securities matters that the requesting authority administers or enforces. The Commission may, in its discretion, conduct such investigation as the Commission deems necessary to collect information and evidence pertinent to the request for assistance.

Subject to certain considerations including the ability to provide reciprocal assistance, whether fulfillment of the request would prejudice the public interest, and appropriate assurances of confidentiality, the SEC may provide assistance regardless of whether the conduct in question constitutes a violation of US law.

Access to Information in the SEC’s Files

The SEC can provide access to non-public information in its files to its foreign counterparts. Section 24(c) of the Exchange Act and 17 C.F.R. § 240.24c-1 (Rule 24c-1) thereunder provide that the Commission may, in its discretion and upon a showing that such information is needed, provide such non-public information in its possession to specified foreign persons. The foreign authority requesting such non-public information must provide assurances of confidentiality that the Commission deems appropriate.

Public Information

The SEC website provides access to certain public information regarding the registration status and disciplinary history of SEC-registered entities such as broker-dealers and investment advisers, as well as certain public information about public companies that register their stock and other securities with the SEC. Please refer to the attached resource list to access this information.

Confidentiality of Information

Section 24(d) of the Securities Exchange Act of 1934 statutorily exempts the SEC from disclosing to third parties confidential information obtained from a foreign securities authority in response to a Freedom of Information Act request. Section 24(d) provides that, except in certain circumstances, the Commission shall not be compelled to disclose records obtained from a foreign securities authority if (1) the foreign securities authority has in good faith determined and represented to the Commission that public disclosure of such records would violate the laws applicable to that foreign securities authority, and (2) the Commission obtains such records pursuant to (A) such procedure as the Commission may authorize for use in connection with the administration or enforcement of the securities laws, or (B) a memorandum of understanding.

In addition, Section 24(f)(2) of the Securities Exchange Act of 1934 provides the Commission with authority to protect from disclosure privileged information obtained from a foreign securities authority or foreign law enforcement authority, if the authority has in good faith determined and represented to the Commission that the information is privileged. Section 24(f)(4)(B) of the Securities Exchange Act of 1934 defines a “foreign law enforcement authority” as “any foreign authority that is empowered under foreign law to detect, investigate or prosecute potential violations of law.”

Mechanisms for Information Sharing in Securities Enforcement Matters

The SEC has approached enforcement-related information sharing on a multilateral and bilateral basis.  Multilateral and bilateral MOUs detail the scope and terms of information-sharing among securities regulators.  The SEC also uses other mechanisms to share information, such as requests to foreign criminal authorities through mutual legal assistance treaties administered by the US Department of Justice and formal letters rogatory between US courts and foreign judicial authorities.

IOSCO Multilateral Memorandum of Understanding

In 2002, the International Organization of Securities Commissions (IOSCO) created a Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (MMOU), the first global multilateral information-sharing arrangement among securities regulators. The SEC was among the first signatories to the MMOU.  More than 100 securities and derivatives regulators are now signatories to the MMOU.

Pursuant to the MMOU, signatories agree, among other items, to provide each other with certain critical information, to permit use of that information in civil or administrative proceedings and for onward sharing with self-regulatory organizations and criminal authorities, and to keep such information confidential. In particular, the MMOU provides for the following:

  • Sharing information and documents held in the regulators’ files;
     
  • Obtaining information and documents regarding transactions in bank and brokerage accounts, and the beneficial owners of such accounts;
     
  • Taking or compelling a person's statement or, where permissible, a person's testimony.

The MMOU has significantly enhanced the SEC's enforcement program by increasing and expediting the SEC's ability to obtain information from a growing number of jurisdictions worldwide. Moreover, the MMOU has created incentives for jurisdictions that lack the legal ability to engage in effective information sharing to enact legislation that will enable them to do so. Membership in the MMOU is conditioned upon an objective showing of a jurisdiction’s legal authority to comply with the key provisions. IOSCO has established verification teams to review applications, and the SEC participates in this review.

Bilateral Memoranda of Understanding

Before the establishment of the IOSCO MMOU, the SEC entered into a number of enforcement-related bilateral information-sharing MOUs with foreign securities authorities. In light of the IOSCO MMOU, SEC staff now recommends the negotiation of a bilateral MOU only if a foreign securities authority is empowered to provide assistance beyond that required by the IOSCO MMOU such as the ability to compel testimony or the gathering of Internet service provider and phone records. See the Enhanced Enforcement Memorandum of Understanding between the SEC and the Australian Securities and Investments Commission dated August 25, 2008.

Ad Hoc & Other Arrangements for Enforcement Cooperation

Memoranda of understanding create a framework for enforcement cooperation but these arrangements are not a prerequisite for the SEC to cooperate with foreign authorities regarding enforcement matters. The SEC also has entered into undertakings for the exchange of information where existing law in the foreign jurisdiction prevents information sharing to the extent set forth in the IOSCO MMOU or other established framework.

How a Foreign Securities Authority Can Request Assistance

Foreign securities authorities, with whom the SEC may not frequently interact, may have questions regarding the preferred format and content of requests for enforcement assistance. Such authorities may refer to Appendix C to the IOSCO MMOU (APPENDIX C). Subject to certain considerations as set forth in Section 21(a)(2) of the Securities Exchange Act of 1934 and subject to appropriate assurances of confidentiality, the SEC will review all incoming requests for assistance to determine if assistance may be granted.  Requests should be directed to the Director of the Office of International Affairs.   

Complaints Regarding Securities Law Violations in the US Marketplace

Investors that are located outside of the United States should contact the SEC’s Office of Investor Education and Advocacy with questions, complaints or enforcement tips related to US investments or concerning US brokers, advisers or public companies. In addition, the SEC Center for Complaints and Enforcement Tips provides online forms through which foreign investors may share information with the SEC regarding potential violations of US securities laws.

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