Earlier today, Robert Khuzami, the Securities and Exchange Commission's Director of Enforcement, announced the appointment of five experienced SEC enforcement lawyers to head specialized units on particular areas of securities law. In addition, he announced a revision to the SEC's Enforcement Manual that sets forth guidelines intended to encourage individuals to report potential securities violations and to cooperate with SEC investigations.

The action today was a follow-up to Director Khuzami's announcement on August 5, 2009, that the Enforcement Division had formed specialized units to focus on (1) market abuse, (2) asset management, (3) complex derivatives and new financial products, (4) the Foreign Corrupt Practices Act (FCPA), and (5) municipal securities and public pensions. Click here to read the Ballard Spahr alert on that announcement.

The SEC's Philadelphia Regional Office figures prominently in today’s appointments. Daniel M. Hawke, the Philadelphia office's Director, will head the market abuse unit, which will focus on insider trading and market manipulation cases. Elaine Greenberg, the office's Associate Regional Director, will head the SEC's municipal securities and public pensions unit. The other appointments are Kenneth R. Lench, previously an Assistant Director in Washington, D.C., who will lead the structured and new products unit; Cheryl J. Scarboro, who served as an Associate Director in Washington and will head the FCPA unit; and Bruce Karpati, who served as an Assistant Regional Director in the SEC’s New York Regional Office, and Robert B. Kaplan, who served as an Assistant Director in Washington, D.C., who will jointly lead the asset management unit.

Khuzami also announced a revision to the SEC's Enforcement Manual that sets forth guidelines intended to encourage individuals to report potential securities violations to the SEC and to cooperate with SEC investigations. The SEC long has encouraged cooperation by corporations that substantially aid the SEC in its investigations, including by voluntarily disclosing information that otherwise would be privileged. The guidelines announced today extend some of these principles to investigations aided by individuals, including through the use of deferred prosecution agreements, non-prosecution agreements, and written cooperation agreements in which the SEC staff agrees to recommend credit for cooperation to the commission in exchange for substantial assistance in investigations. The SEC also has streamlined the process of seeking immunity for criminal liability from the U.S. Department of Justice.

In addition, the SEC, for the first time, articulated how it will evaluate cooperation. Specifically, the SEC has identified four considerations:

  • The assistance provided by the cooperating individual

  • The importance of the underlying matter in which the individual cooperated

  • The societal interest in ensuring the individual is held accountable for his or her misconduct

  • The appropriateness of cooperation credit based upon the risk profile of the cooperating individual

For more information on SEC enforcement, cooperation with the government, or internal investigations, please contact John C. Grugan at 215.864.8226 or gruganj@ballardspahr.com, Justin P. Klein at 215.864.8606 or kleinj@ballardspahr.com, M. Norman Goldberger at 215.864.8850 or goldbergerm@ballardspahr.com, or Henry E. Hockeimer, Jr., at 215.864.8204 or hockeimerh@ballardspahr.com.

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