42nd Annual Rocky Mountain Securities Conference: Defense Panel Skeptical of Cooperation Agreements

Last Friday’s Rocky Mountain Securities Conference featured a defense counsel panel that commented on the recent changes in the SEC’s structure and how it has affected their practice.  The panel consisted of Daniel F. Shea (Hogan & Lovells), Randall Fons (Morrison & Forester), David A. Zisser (Davis Graham & Stubbs), and George B. Curtis (Gibson Dunn & Crutcher).

The panel noted skepticism about the effectiveness of the SEC’s changes to Cooperation Agreements.  These agreements give credit to persons or companies that provide substantial assistance to the Commission’s investigation.  The ambiguity around what the credit actually gives a cooperating entity underlies the panel’s fears.  Unless the credit gives complete immunity, including criminal immunity, to the individual there is little incentive to take advantage of the cooperation program.  The panel also stated giving immunity is not new, and what will really change the effectiveness of the program is the SEC staff’s mentality about utilizing immunity.  Further, the cooperation initiative may not be attractive to mid-level employees with information because there is a small chance the Commission would name them in an enforcement action.  Therefore, in the panel’s opinion, these people gain little (or nothing) by taking advantage of the cooperation program while risking their career and reputation.   

The chance for conflict further complicates these issues when an employee seeking advice about whether to cooperate with the SEC seeks counsel from the company’s attorneys.  One panelist suggested that companies think about providing separate counsel for certain employees or classes of employees in these types of conflicted situations.