In 2010, the Securities and Exchange Commission (SEC) introduced a suite of measures aimed at bolstering its enforcement capabilities, including the adoption of Deferred Prosecution Agreements (DPAs) and Non-Prosecution Agreements (NPAs). These tools, previously common in criminal cases handled by the Department of Justice (DOJ), were heralded by the SEC as "game changers" for its Division of Enforcement. The idea was to encourage greater cooperation from companies and individuals under investigation, potentially expediting resolutions without the need for protracted litigation.
However, nearly 15 years later, the SEC's use of NPAs and DPAs—particularly in Foreign Corrupt Practices Act (FCPA) cases—has been limited. Between 2011 and 2016, the SEC used a DPA twice and an NPA three times to resolve issuer FCPA enforcement actions. The last known use of these agreements was in 2016, leading to speculation about whether the SEC has moved away from these resolution vehicles.
Historical Use of NPAs and DPAs by the SEC in FCPA Cases
- First DPA – Tenaris (2011): The SEC's first use of a DPA in an FCPA enforcement action involved Tenaris, which was accused of misconduct in Uzbekistan. As part of the agreement, Tenaris agreed to pay approximately $5.4 million in disgorgement and prejudgment interest.
- First NPA – Ralph Lauren (2013): The SEC first used an NPA to resolve an FCPA case with Ralph Lauren, which involved alleged bribery in Argentina. The company agreed to pay $700,000 in disgorgement and prejudgment interest.
- PBSJ Corp. (2015): The SEC utilized a DPA in this case to resolve FCPA violations related to conduct in Qatar and Morocco. The company paid approximately $3.4 million in disgorgement, prejudgment interest, and a civil penalty.
- Nortek and Akamai Technologies (2016): In an unusual move, the SEC announced two DPAs on the same day for separate companies—Nortek and Akamai Technologies—both of which were tied to conduct in China. Nortek paid $322,000, while Akamai paid $672,000 in disgorgement and prejudgment interest.
Is the SEC Moving Away from NPAs and DPAs?
Since mid-2016, the SEC has not used NPAs or DPAs to resolve any FCPA enforcement actions, leading to speculation that the agency may be pivoting away from these tools. There could be several reasons for this shift:
- Regulatory Shifts: The SEC may have determined that other resolution mechanisms, such as administrative orders and settlements, are more effective in addressing corporate misconduct.
- Effectiveness of NPAs/DPAs: The infrequent use of NPAs and DPAs may suggest that these tools did not provide the "game-changing" results initially expected. There could be concerns about the accountability and deterrent effects of such agreements, as they allow companies to avoid formal charges while cooperating with investigations.
- Changing Enforcement Priorities: Over the past decade, the SEC's enforcement priorities have evolved. The agency has focused heavily on other areas, such as insider trading, cybersecurity disclosures, and environmental, social, and governance (ESG) violations. This shift may have deprioritized the use of NPAs and DPAs in FCPA cases.
Conclusion
While the SEC initially embraced NPAs and DPAs as a way to strengthen its enforcement regime, particularly in FCPA cases, their usage has declined significantly since 2016. The absence of these agreements in recent years raises the question: Is the SEC finished with NPAs and DPAs in FCPA cases? While it's not clear whether the SEC has officially moved away from these tools, their decline suggests that the agency is relying on other enforcement strategies. For now, companies facing SEC investigations should not necessarily expect the opportunity to resolve cases through these agreements, and a more traditional enforcement path may lie ahead.
For businesses navigating potential FCPA enforcement, it is crucial to remain proactive in compliance, cooperate fully during investigations, and stay informed about the SEC's evolving enforcement strategies.
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