Before You Invest Your Money

This week the Securities and Exchange Commission (SEC) announced a new set of tools at its disposal in its effort to increase enforcement. These measures pertain to whistleblowers and the like and are aimed at coercing the exchange of insider information in an attempt to strengthen the prosecution’s argument. In a sign of the times, the SEC is taking these tools from the Justice Department. Similar tools have been used in criminal investigations and prosecutions. The three main tools are:

1. – Cooperation Agreements

2. – Deferred Prosecution Agreements

3. – Non-Prosecution Agreements

All three amount to a form of protection for insiders who give information to government prosecutors, be it credit for help given in an active case (Cooperation Agreements), a temporary reprieve from prosecution (Deferred Prosecution Agreements), or a waiver of government prosecution in the matter at hand (Non-Prosecution Agreements).

The SEC under Mary Shapiro has enacted many changes in response to the subprime mortgage crisis and the great amount of fraud that has been unearthed in the past year. These three tools are only part of the package of changes that was announced. To see the official announcement regarding the new tools and tactics of the SEC to increase insider cooperation, click here.