A “deferred prosecution agreement” (or DPA) is not a new concept to government prosecutors or to SEC Chairman Mary Jo White, but it is new to the SEC. Under a DPA, the government agrees to withhold prosecution in exchange for enforcement assistance — providing information, implementing internal compliance policies, or other cooperation with SEC investigations.
This tool has been around for a long time (Mary Jo White used it back in her days as a federal prosecutor) but the SEC did not use it until 2011 when it agreed to a DPA with the steel pipe products company Tenaris S.A. In agreeing to the Tenaris DPA, the SEC announced “its first-ever use of the approach to facilitate and reward cooperation in SEC investigations.” The SEC promised to refrain from civil prosecution of anti-bribery charges against Tenaris in exchange for the company’s strengthening and enforcing stricter internal compliance policies.
Now, the Commission announced that it has, for the first time, agreed to a DPA with an individual, Scott Herckis of Heppelwhite Fund LP. Heppelwhite, a Connecticut-based hedge fund, was charged in 2012 with misleading investors and misappropriating fund assets. Herckis was the fund’s administrator from 2010 to 2012. The Commission credits Herckis’ “voluntary and significant cooperation” in its decision to file an enforcement action against Hepplewhite. Last month, a federal judge in New York ordered the distribution of $6 million of the assets of Heppelwhite’s founder, Berton Hochfeld, to defrauded investors.
Under the DPA, Herckis still faces penalties for his …
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In March, an affiliate of SAC Capital agreed to a record high settlement of $616 million for charges of insider trading. As it turned out, the SEC was only getting started with the company and its owner, Steve Cohen. In July, both Cohen and SAC Capital were themselves indicted on insider trading.
Based on reports, SAC Capital agreed earlier this week to settle its charges for $1.2 billion, shattering the record again. In addition, the company agreed to plead guilty to each count in the indictment and close its investment advisory business. The indictment accused the company, among other things, of fostering a culture of insider trading, citing “institutional failure.”
As if setting a new record-high settlement wasn’t enough, the settlement terms give no shelter to Cohen, personally. The settlement states outright that it provides “no immunity from prosecution for any individual and does not restrict the government from charging any individual for any criminal offense.” By refusing to grant immunity to Cohen in this deal, the SEC confirmed that it will continue its civil investigation of the billionaire hedge fund manager and is even considering criminal charges in the future.
The settlement still needs to be approved by the federal court in New York. The hearing is scheduled for Friday. For more, Dealbook has a good analysis of the settlement.…
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The SEC voted unanimously to propose rules regulating the offering and selling of securities through “crowdfunding”. Crowdfunding – a method of raising money through small sums contributed by many individuals – has become an internet mainstay. But so far, crowdfunding websites (such as Kickstarter or Indiegogo) constructed their platforms so as to avoid falling under SEC regulation. In particular, the traditional crowdfunding method does not offer financial returns on an investment or a share in a company’s profits.
The proposed rules (read them in their entirety) would allow companies to raise up to $1 million through crowdfunding platforms within a 12-month period. Other features of the proposed rules include:
- Investors will be subject to income-based limits on the total amount of securities they can purchase through crowdfunding within a 12-month period. No investor will be able to invest more than $100,000 in crowdfunding-based securities within a 12-month period.
- Certain companies will be ineligible to raise funds through crowdfunding, including: companies that are already SEC-reporting companies, non-U.S. companies, companies with no specific business plan, and certain investment companies.
- Companies will be required to file certain information with the SEC.
- Companies are required to disclose certain information to the crowdfunding platform and prospective investors, such as financial statements, related-party transactions, the company’s business plan, and description of the offering.
- Crowdfunding platforms will have to become registered with the SEC, either as broker-dealers or funding portals.
The rules were proposed as directed by the Jumpstart Our Business Startups Act (JOBS Act), …
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