Deferred Prosecution Agreement (DPA) has become a common term in the legal world, especially in cases involving corporate misconduct. The Securities and Exchange Commission (SEC) frequently uses DPAs as a tool to settle enforcement actions against companies that have violated securities laws. In this article, we will explore the concept of DPA, how it works, and its implications for companies that enter into such agreements with the SEC.

What is a Deferred Prosecution Agreement?

A Deferred Prosecution Agreement (DPA) is an agreement between a prosecutor and a defendant, in which the prosecutor agrees to defer prosecution of criminal charges against the defendant for a defined period. In exchange, the defendant agrees to fulfill certain obligations, such as paying fines, cooperating with investigations, and implementing specific compliance measures.

DPAs are commonly used in cases involving corporate misconduct, where the defendant is a company rather than an individual. The SEC frequently uses DPAs to resolve enforcement actions against companies that have violated securities laws. The SEC may also require the company to admit to the wrongdoing, which can be used as evidence in future litigation against the company.

How does a DPA Work?

A DPA typically involves the following steps:

1. Investigation: The SEC investigates a company for violating securities laws.

2. Negotiation: The SEC and the company negotiate the terms of the DPA, including the obligations the company must fulfill.

3. Approval: The DPA is submitted to a judge for approval. If the judge approves the agreement, prosecution of the criminal charges is deferred for a set period.

4. Fulfillment of Obligations: During the deferral period, the company must fulfill the obligations outlined in the DPA. These may include paying fines, cooperating with investigations, and implementing specific compliance measures.

5. Dismissal: If the company successfully fulfills its obligations, the charges against it are dismissed at the end of the deferral period. If the company fails to comply with the terms of the DPA, prosecution can resume.

Implications of Entering into a DPA with the SEC

Entering into a DPA with the SEC can have significant implications for a company. On the one hand, it can provide the company with an opportunity to avoid criminal prosecution, which can result in substantial fines, reputational damage, and other sanctions. On the other hand, the company must admit to the wrongdoing, which can lead to civil litigation and other legal consequences.

Additionally, the company must fulfill the obligations outlined in the DPA, which can be costly and time-consuming. Failure to comply with the terms of the DPA can result in criminal prosecution and other legal consequences for the company.

Conclusion

In summary, DPAs are becoming an increasingly common tool used by regulators to resolve enforcement actions against companies that have violated securities laws. While DPAs can provide companies with an opportunity to avoid criminal prosecution, they also come with significant obligations that must be fulfilled over a defined period. Companies must carefully consider the potential implications of entering into a DPA with the SEC before doing so.