CLE program examines securities enforcement after the McNulty memo

What can we expect from the Securities and Exchange Commission enforcement program in the months to come? How should corporations respond to indications that they have violated the federal securities law? And what does the future hold for such regulation and enforcement?

These were some of the questions addressed during a recent continuing legal education program titled “Securities Enforcement after the McNulty Memo: The Future of Corporate Cooperation.” The panel of experts speaking to the issues included Associate Deputy Attorney General Ronald J. Tenpas; Walter G. Ricciardi, deputy director, Division of Enforcement, SEC; Stanley Keller, a partner with Edwards Angell Palmer & Dodge LLP; and Jan Handzlik, partner in the Los Angeles office of Howrey LLP. Kenneth B. Winer, partner with Foley and Lardner LLP, served as moderator.

The McNulty Memorandum is the latest Justice Department iteration of policy on the factors prosecutors should take into consideration when they are confident that the facts can be proven, said Tenpas. Eric Holder wrote the first memorandum, with Larry Thompson revising the explanation and factors in the early 2000s.

Tenpas continued by outlining the nine factors taken into consideration in such cases, among them scope of harm, pervasiveness of fraud and cooperation of the corporation. But it is not accurate to say that cooperation is the end all, be all, continued Tenpas. Keller posed the question, “Isn’t the problem that waiver [of attorney/client privilege] comes up early in the investigation?”

A discussion ensued about the changes that have been made in guidance via the McNulty Memo. Handzlik stated that McNulty “must be congratulated" for steps that have been taken to address concerns raised about the sense of cooperation and privilege waiver. But “as I read McNulty,” he continued, “the carrot is still there,” referring to companies that don’t waive being punished for not doing so.

Tenpas stated that it was impossible to imagine every scenario under which corporations might be facing prosecution and thus not every situation could be addressed in the guidance memo.

Ricciardi began describing SEC enforcement, first with the caveat that the views expressed were his own, by likening it to enforcement by the Department of Justice. Internal investigations are important, and it shows “good corporate citizenship to self report,” said the SEC deputy director. Further, Ricciardi said that the SEC would “work with prosecutors to get information without waiver.”

The program was sponsored by the ABA Section of Business Law, Center for Professional Responsibility, and Center for CLE. The ABA Center for CLE has posted selected materials from the program, including the report [PDF] of the ABA Task Force on Attorney-Client Privilege, and the SEC’s news release [PDF] on its statement concerning financial penalties. The entire program is available through the ABA Webstore.

Back to top