Deferred prosecution agreements (DPAs) encourage individuals and companies to provide the SEC with forthcoming information about misconduct and assist with a subsequent investigation. In return, the SEC refrains from prosecuting cooperators for their own violations if they comply with certain undertakings. – SEC
DPA’s are also used by the DOJ.
For a company or an individual who may have unwittingly been involved in financial crime, DPA is often the best option. There are two main types of DPA’s, with and without admission of violation.
Obviously, not admitting to violation is the best option. This option can only be provided if the violator’s intended results were not a violation in themselves. This doesn’t mean it’s the end of the violator’s troubles. The violator may face professional punishments if s/he is licensed or certified. In rare cases, the violator will be barred from the profession.
Admitting to the violation only strengthens the case against the violator’s disbarment. On top of that, the violator may face disbarment from the industry regardless of the function. Admission could be career suicide.
It used to be that corporations wanted to avoid admission because it meant suicide for the corporation. But last year, the regulators showed their willingness to work with corporations on leniency, if that’s what it can be called. A number of corporations entered into agreements to admit to wrong doing and pay hefty violations but DPA’s were executed in such a way so that corporations may have taken a hit to their assets, but the shareholders’ equity would not be affected.
About the Author: Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses.