SEC Now Awarding Cooperation Credit to Individuals

The Securities and Exchange Commission announced last week that it was awarding “cooperation credit” to an individual for his “substantial assistance” in the Commission’s investigation of his wrongdoing.  Following on a similar announcement earlier last month, this is only the second time the Commission has credited an individual under its Cooperation Initiative.

The credit was announced as part of a settlement agreement with John Cinderey, a former vice-president at San Francisco-based United Commercial Bank.  Like other executives at Commercial Bank, Cinderey was charged with violations of Section 13 of the Exchange Act for misleading auditors during the financial crisis of 2008.  Cinderey, however, was able to settle the SEC’s claims against him without admitting or denying the allegations and without paying any fine (though he was given credit for a $40,000 civil penalty paid in another parallel case brought by the FDIC).

As the SEC made clear in its release, the terms of Cinderey’s settlement “reflect credit given to [him] by the Commission for his substantial assistance in the investigation and the fact that he has entered into an cooperation agreement to assist in an ongoing related enforcement action.”

Though the SEC did not specifically define what sort of cooperation Cinderey provided, the Commission’s “Policy Statement Concerning Cooperation by Individuals in its Investigations” notes that the SEC can reward cooperation credit for concrete acts such as whistleblowing, offering to cooperate before charges are filed, being the first person to offer cooperation and encouraging others to cooperate.

The amount of credit given criteria given by the Commission, on the other hand, depends on more transitory criteria things such as “whether the subject matter of the Investigation is a Commission Priority,” whether the underlying violations are particularly “dangerous”  to investors, and whether the cooperating individual has accepted “responsibility for his or her  misconduct.”