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Compliance Training

How Do SEC Cooperation Agreements Help Businesses?


Jul 06, 2016

sec agreements

What Happens When Employees Break Anti-Bribery Laws?

When subsidiaries of the Goodyear Tire & Rubber Company got caught sending more than $3.2 million in bribes to public officials in sub-Saharan Africa, the company immediately reported the misconduct to enforcement authorities and took action to correct the problem.

While authorities ordered a disgorgement settlement of more than $16 million, the tire company paid no penalty at all—reducing the cost of the violation by as much as half.

Goodyear’s case illustrates that even with a strong legal compliance program, it’s not always possible to stop employees from violating ethics policies or breaking the law. But it can help protect a company from devastating penalties.

The key is cooperation. When pursuing enforcement action against an organization, the Securities and Exchange Commission (SEC) employs cooperation agreements and incentives to enlist the company’s help in conducting a successful investigation. By cooperating with the SEC, companies and individuals can often minimize the disastrous consequences of a violation.

Watch our on-demand webinar to learn more about the best practices for conducting an internal investigation.

“Those who are willing and able to help us can thereby help themselves in significant ways,” said Andrew Ceresney, director of the SEC’s enforcement division. “Such credit could range from the ‘extraordinary’ step of declining an enforcement action, to narrowing charges, limiting sanctions, or including mitigating or similar language in charging documents. The Commission has used each of these approaches in its cases over the years.”

What Constitutes Cooperation with the SEC?

The more a company cooperates with authorities—and the more valuable its cooperation is to the investigation—the better the chances are of getting a reduced penalty. The SEC employs four primary criteria for evaluating how much leniency to grant companies for their cooperation. These include:

  • Self-policing. Has the organization previously established effective compliance policies and procedures? Is there an appropriate tone coming down from the top?
  • Self-reporting. After discovery of a violation, did the company thoroughly investigate its nature, extent, origins and consequences? Did the organization promptly and openly report the misconduct to the public as well as to regulatory and self-regulatory bodies?
  • Remediation. Did the company dismiss or discipline those culpable? Has it improved its internal controls and procedures to prevent recurrence? Were those damaged appropriately compensated?
  • Cooperation with authorities. Did the company provide law enforcement authorizes—including SEC staff—with all relevant information?

The Importance of a Strong Compliance Program

Self-policing is where a strong compliance program comes in. By employing effective controls and offering robust compliance training for all employees, a company can demonstrate a sincere effort to prevent misconduct.

When wrongdoing does occur, the next critical factor is whether (and how quickly) the organization reports the violation to the proper authorities. When deciding whether and when to self-report, it’s important to consider the likelihood that the SEC might discover the misconduct from another source.

But it’s not enough to simply report the problem. In today’s compliance climate, it’s considered a common best practice for any company to launch its own internal investigation. Furthermore, the company is expected to share its findings with enforcement authorities.

Key Takeaways

As long as cooperation agreements remain a helpful tool in fighting corruption, the SEC will continue using them to successfully investigate cases of misconduct. For businesses, they can be valuable compliance tools in the event a violation does occur. 

To learn more about Workplace Answers wide selection of compliance training courses, including anti-corruption, code of conduct and antitrust, fill out the form on the right to schedule a demo.

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