In any criminal case, witnesses are essential to getting a conviction. While the Department of Justice regularly offers witnesses immunity from prosecution in exchange for their testimony, the Securities and Exchange Commission has limited protections for witnesses in financial fraud cases…until now.
According to an article published by CFO.com, the SEC recently released guidelines outlining new cooperation tools borrowed from the DOJ’s playbook. These tools – referred to as cooperation agreements, deferred prosecution agreements, and non-prosecution agreements – are designed to convince businesses and individuals to assist the SEC with fraud investigations.
What do these tools do for the whistleblower? In exchange for their cooperation, the SEC promises to offer reduced fines and penalties or immunity from prosecution. The goal is that these agreements will improve the quality of information that the SEC receives about fraud, even if it means reducing penalty payments.
This is not the only move the SEC has made to encourage whistleblowers to come forward. SEC Chairman Mary Schapiro recently asked for permission to offer cash payouts to whistleblowers in fraud cases.
SEC cooperation tools may do a better job convincing whistleblowers to step forward than the current protections included in the Sarbanes-Oxley Act. The CFO.com article states SOX whistleblower protections place the burden of proof too high. And, even if protections are granted, all they do is prevent the employee from being terminated.
The article also notes that it may be difficult to ascertain the success of the new program because there aren’t policies in place to follow up on witnesses once a case is closed.
