On 12 November 2013, the SEC announced its first ever deferred prosecution agreement with an individual, former hedge fund administrator Scott Herckis. Mr. Herckis voluntarily cooperated with authorities leading to an emergency enforcement action against hedge fund founder and manager Berton M. Hochfeld for misappropriating assets and overstating the fund’s performance, which halted the fraud and led to a $6 million distribution to harmed investors. Scott W. Friestad, an associate director of the SEC’s Division of Enforcement said that the SEC is “committed to rewarding proactive cooperation that helps us protect investors, however the most useful cooperators often aren’t innocent bystanders. To balance these competing considerations, the DPA holds Herckis accountable for his misconduct but gives him significant credit for reporting the fraud and providing full cooperation without any assurances of leniency.”
The absence of DPAs for individuals under the new UK regime which will come into force early next year has been considered a notable omission. Given the influence that the U.S. experience of DPAs has had on the development of the UK regime, and the recent announcements of a review into creating incentives for whistleblowers (akin to those available in the U.S. – see paragraph 6.44 of the Serious Organised Crime Strategy Paper, October 2013), pressure is likely to build for DPAs for individuals in the UK as well.