On December 20, 2010, the SEC announced that it entered into its first non-prosecution agreement and that the SEC was charging a former executive vice president of a company with financial fraud and insider trading.
Non-prosecution agreements are part of the SEC’s new cooperation initiative, which provides incentives to companies and individuals that fully and truthfully cooperate with SEC investigations and enforcements.
According to the SEC’s complaint, the executive fraudulently manipulated the discount amount that the company provided to its largest wholesale customer. In addition, the executive concealed this misconduct, signed false documents and realized personal gains from insider trading. Upon the company’s discovery of the executive’s actions, the company issued restated financial results.
Under the terms of the non-prosecution agreement, the SEC will not charge the company with any violations under the federal securities laws for the executive’s misconduct. In exchange for the SEC’s non-prosecution, the company agreed to cooperate fully and truthfully with the SEC in the charges brought against the former executive.
In the announcement, the SEC noted that the non-prosecution agreement reflects the relatively isolated nature of the unlawful conduct, the company’s self-reporting of the misconduct to the SEC, its cooperation in the investigation and the company’s remedial actions.