Non-Prosecution Agreements With the SEC.

Last Updated on: 4th August 2026, 01:33 am

An SEC non-prosecution agreement (NPA) is a written agreement between the target of an SEC enforcement action and the Commission. The Commission must authorize an NPA before it can be issued. The Commission then decides whether an NPA is warranted, given the facts and circumstances of the particular investigation at hand. When the SEC closes its investigation without initiating an enforcement action and without entering into an NPA, this simply means the agency has decided not to proceed with enforcement because of insufficient evidence or other reasons.

Deferred-Prosecution Agreements

A deferred-prosecution agreement (DPA) is similar to an NPA but defers SEC enforcement while the target complies with specified terms and conditions. Instead of prosecuting the charges immediately, the SEC postpones enforcement during a specified compliance period (i.e., in exchange for compliance with an agreement with certain terms and conditions). Companies and individuals can both become subjects of SEC investigations.

SEC Investigations

The SEC has two different investigative methods. In many cases, the SEC staff investigates informal inquiries before seeking authority to proceed. Once this authority is granted, the SEC staff issues a “formal order of investigation.” This order allows the SEC staff to pursue the case with the ability to issue subpoenas for testimony and records and documents, and use other mechanisms authorized by the Securities Exchange Act of 1934.

Wells Notices

Before initiating enforcement action, the SEC staff will usually issue a “Wells notice.” This letter describes the charges the agency staff is recommending, explains why these charges are warranted, and invites the target to make any factual or legal arguments in a written “Wells submission.”

Administrative and Civil Litigation

The SEC enforces its civil securities laws either through hearings before administrative law judges or by filing civil litigation in federal district court.

When Will the SEC Offer a Non-Prosecution Agreement?

The SEC’s Enforcement Manual describes non-prosecution agreements as tools that the staff can use to obtain cooperation when necessary. According to the manual, the staff will use NPAs in limited circumstances when “particular circumstances make an NPA or DPA appropriate.” Generally, the SEC reserves NPAs for “exceptional” circumstances.

Cooperation Factors for Organizations

The SEC’s cooperation standards for organizations were established in the landmark Exchange Act Release 44969 (the Seaboard Report). The SEC describes several factors it will consider when deciding whether to grant cooperation credit:

• “Voluntarily provided information that is unknown to the Commission”
• “Cooperation in facilitating investigations conducted by the SEC, including, but not limited to, facilitating the SEC’s access to relevant information and permitting the SEC staff to interview relevant employees and other individuals”
• “The degree to which the company’s policies, procedures, and culture are at fault, and the steps the company has taken (if any) to remediate these policies, procedures, and culture”
• “The timeliness and extent to which the company’s internal investigation was cooperative and the extent to which the company shared its internal investigation results with the SEC staff”
• “The extent to which the company self-reported the offenses at issue”
• “The extent to which the company took steps to remediate the misconduct in question”
• “The extent to which the company identified all individuals involved in the misconduct”
• “The promptness and completeness of any self-reporting”
• “The cooperation of the company’s senior management and the extent to which the company assisted the SEC staff in its investigation of the alleged misconduct”
• “The degree to which the company’s compliance programs are sufficient to prevent future violations”
• “The company’s track record of compliance with the applicable securities laws”

While companies can become subjects of SEC investigations as well, the SEC also enforces its laws against individuals. While the SEC’s organizational cooperation policy appears very broad, the SEC’s policy for individuals is structured around a nonexclusive set of factors. According to 17 C.F.R. § 202.12, “the SEC staff may, on a case-by-case basis, consider granting cooperation credit for a variety of factors, including, but not limited to the following:”

• “Voluntarily provided information that is unknown to the Commission”
• “Cooperation in facilitating investigations conducted by the Commission, including, but not limited to, facilitating access to relevant information and permitting the Commission staff to interview relevant employees and other individuals”
• “The timeliness and completeness of any information provided to the Commission”
• “The degree to which the individual was involved in the conduct at issue”
• “The efforts the individual took to remediate the misconduct or assist in mitigating the harm of the misconduct”
• “Whether the individual promptly identified and assisted in the Commission’s investigation of other individuals involved in the misconduct”

While these factors overlap, the SEC’s organizational cooperation policy is far more broad and allows companies and individuals to both seek non-prosecution agreements in certain circumstances.

Organizational Cooperation Credit

Voluntary self-reporting and prompt remediation can both support an organization’s request for cooperation credit. Voluntary self-reporting should be made as soon as possible, even if the organization has only partially completed its internal investigation. Prompt remediation is also crucial, as the SEC will look for evidence that the company is taking steps to prevent future violations. In all cases, the SEC will evaluate whether a company’s cooperation “substantially assists its investigation.” While this standard may seem straightforward, in practice, the SEC will want to see that companies not only comply with its requests but take steps to gather and provide additional relevant information as well.

Individual Cooperation Credit

The SEC’s cooperation policy for individuals is more restrictive, with a structured, nonexclusive set of factors that can lead to cooperation credit. While voluntary self-reporting, prompt remediation, and disclosures that assist in the investigation of other individuals are among them, the SEC’s enforcement staff generally will not grant cooperation credit to individuals who have “failed to report the misconduct in question to the Commission prior to receiving a subpoena or other investigation demand.”

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What Terms and Risks Does an SEC NPA Include?

As discussed, the Enforcement Division staff may be able to establish a non-prosecution agreement in the target’s case. If so, the staff will negotiate the terms of the NPA with the target, which must be approved by the Commission before it can be offered to the target. No SEC rule establishes a fixed deadline for negotiating an NPA; and, although the staff can impose its own deadline for acceptance, the deadline will be flexible based on the target’s needs and circumstances. While most often the target will seek to negotiate an NPA in order to mitigate its potential exposure and resolve the SEC investigation as quickly as possible, this may not be possible due to the target’s need to seek legal advice, make key decisions, or prepare internal compliance documentation.

Terms of SEC Non-Prosecution Agreements

Along with admitting or agreeing not to contest relevant facts, an NPA ordinarily includes a provision requiring the target to “completely and truthfully cooperate” with the SEC’s investigation and continuing compliance efforts on an ongoing basis. An NPA may also require disgorgement, which may surprise some targets given the agency’s decision not to pursue a securities enforcement action. As a result of its 2013 agreement with the SEC, Ralph Lauren was required to pay $593,000 in disgorgement. An NPA may also toll specified statutes of limitation (i.e., the SEC agrees not to prosecute an offense that has been tolling, but agrees not to pursue civil litigation as long as the target continues to comply with the NPA’s terms) or have other provisions that, while providing benefits, may also contain risks. For example, a typical NPA will include terms similar to the following, with each sentence serving as an example of a provision that provides protection, but that may also establish additional risk as well:

• “The Company, and the Company’s executives, will promptly produce all documents, records, data, and other information that are in the Company’s possession, custody, or control that may be relevant to the Commission’s pending investigation.”
• “The Company agrees to fully and truthfully cooperate in the investigation. This includes (i) the Company providing all relevant information and documents in its possession, custody, or control, including internal reports and data produced by external consultants in accordance with the terms of this Agreement; (ii) the Company and its employees and other representatives meeting with SEC staff as needed on a timely basis; (iii) the Company’s provision of necessary information to confirm the completeness of its self-disclosure; and (iv) the Company’s employees and agents cooperating in the investigation to the extent required by the Agreement;”
• “The Company, and the Company’s executives and employees, will testify truthly and completely in the Commission’s investigation.”
• “The Company agrees not to disclose the existence or content of this Agreement or the Commission’s non-prosecution of the Company, without the Commission’s prior written approval.”
• “Any breach of the Company’s obligations under this Agreement, whether intentional or unintentional, shall be a material breach.”

While these are just examples, each of the following terms serves to protect the Company or its employees, but may also impose limitations that could leave the Company open to liability for an inadvertent or unintended breach:

• The Company will refrain from taking a “position of immunity” or other protections that the SEC staff will not consider sufficient to assure complete and truthful testimony;
• The Company, including its executives and employees, will continue to cooperate in any other investigations related to this matter, in accordance with the terms of the Company’s defense representation agreement;
• The Company, to the extent it can do so without violation of any applicable law or contract, will cooperate with any other authorities that open investigations into the Company’s conduct;
• The Company will promptly comply with any demands by any other authorities that may be related to the Company’s conduct;
• The Company’s executives, including its former executive officer, former corporate counsel, and former outside counsel, will promptly testify truthfully and completely in response to any request for testimony related to the Company’s conduct.

Material Breach

The term “material breach” is included in each of the example agreements because the target agreed to the SEC’s term that any breach, “whether intentional or unintentional,” shall be considered a material breach. A material breach of an NPA’s terms can entitle the SEC to commence any enforcement action it is choosing not to pursue under the NPA’s terms. Importantly, an NPA does not limit the SEC’s ability to use evidence already gathered during its investigation to the fullest extent possible. However, whether the SEC can use any evidence gathered from the target’s compliance with the NPA’s terms to pursue enforcement depends upon the specific language used to describe the target’s obligations under the agreement.

Does an SEC Non-Prosecution Agreement Protect Against Other Cases?

SEC and Department of Justice Investigations

In all cases, SEC enforcement matters can potentially lead to civil prosecution and penalties in federal district court. However, the SEC also shares jurisdiction with other federal authorities, such as the Department of Justice (DOJ). While the SEC investigates and prosecutes civil offenses, the DOJ investigates and prosecutes criminal offenses. In some cases, the same alleged conduct can expose companies and individuals to civil prosecution by the SEC and criminal prosecution by the DOJ.

Consequences of an SEC Investigation

As discussed above, civil prosecution by the SEC can lead to various consequences for companies and individuals. Some of these consequences may also apply regardless of whether the SEC pursues civil prosecution in federal district court or resolves the matter administratively. In addition to civil penalties and fines, the SEC’s enforcement of the securities laws can carry licensing, debarment, insurance, and other consequences. The degree of impact of these consequences depends on the nature of the charges, the penalties that are imposed, and the industry in which the target works.

SEC Non-Prosecution Agreement and the Department of Justice

Because an NPA is an agreement with the Commission, an NPA does not bind the DOJ. This means that if you are facing an investigation from the DOJ in addition to the SEC, successfully negotiating an NPA with the SEC will not mean you are safe from criminal prosecution in federal district court. It may still be possible to negotiate an NPA with the DOJ, but this may not necessarily lead to the same result as your NPA with the SEC.

SEC Non-Prosecution Agreement and FINRA, State Regulators, and Banks

SEC Non-Prosecution Agreement and Private Enforcement

Finally, while an NPA does not release claims belonging to private plaintiffs, the SEC can still take action if this leads to further harm. While the SEC may agree to not pursue civil litigation for violations of the securities laws, the SEC will reserve the right to seek disgorgement or restitution in some cases. As a result of its 2013 non-prosecution agreement with the SEC, Ralph Lauren was required to pay $593,000 in disgorgement to the SEC. This money was intended to cover the losses they suffered because of the company’s conduct. Even in the case where an NPA releases all of the SEC’s claims, the SEC will want to ensure that the public continues to have recourse for violations of the securities laws, which is why an NPA will not be deemed an absolute discharge of the company’s or individual’s liabilities.

Judicial Review of SEC Non-Prosecution Agreements

When the DOJ offers non-prosecution agreements, these agreements receive automatic judicial approval or supervision. However, the government offers NPAs for its criminal investigations, and the SEC offers NPAs only for its civil investigations. As a result of this difference, an SEC NPA is not subject to judicial approval or supervision and, as a result, it is not a conviction or judicial injunction. A court may refuse to acknowledge or enforce an SEC NPA, even if the terms of the NPA require the court to do so. This may be because the court does not find it just to enforce the provisions of the NPA or because the NPA is deemed unreasonable or unfair.

Public Disclosure and the Freedom of Information Act

While an NPA is not a public document, an NPA is not a secret. The SEC makes non-prosecution agreements public in many cases, and it will routinely make the terms of the agreement available in response to requests under the Freedom of Information Act (FOIA). However, the records developed by the SEC in its investigation are subject to statutory FOIA exemptions. Thus, even when the SEC agrees to make an NPA available, it may deny a FOIA request for its enforcement records if it determines that these records should remain non-public due to privacy or other concerns.

Speak With a Federal Defense Lawyer

If you are dealing with any part of what this article describes, the next step is a conversation with a lawyer who handles these cases. Spodek Law Group is a second generation criminal defense firm practicing since 1976, representing clients nationwide from offices in New York, Brooklyn, Queens and Los Angeles. Call 212-300-5196 to speak with our team.