Enforcement Investigations The Process

Once opened, an investigation involves fact-gathering by Enforcement staff through customary discovery methods such as data and document requests, interrogatories, interviews, and depositions. The time to complete an investigation depends on many factors, including the complexity of the conduct involved and the nature of the alleged violations. During this process, staff is in frequent contact with the subject being investigated, and will meet or otherwise converse with company representatives to discuss relevant facts, data, and legal theories. We note that subjects of an investigation are always free to contact Enforcement staff to provide additional information or explanations of their conduct.

At any time during the course of its investigation, staff may determine to close the investigation without taking any further action. This happens when staff determines that no violation occurred, the evidence is insufficient to warrant further investigation, or no further action is otherwise called for based on a totality of the circumstances. In such a case, staff notifies the subject that the investigation is closed.

If staff reaches the conclusion that a violation occurred that warrants sanctions, staff shares with the subject of the investigation its views, including both the relevant facts and legal theories. This may be done either orally or in writing. Staff also provides the subject with an opportunity to respond and to furnish any additional information it may deem to be helpful. If this process alters the complexion of the investigation, staff reconsiders its views. In some situations, such reconsideration has resulted in staff closing an investigation without recommending sanctions, or revising its view of the appropriate sanction. If staff continues to believe that sanctions of some sort are warranted, the matter will follow one of two courses: either the subject of the investigation and Enforcement staff agree on a settlement, or the subject contests Enforcement’s conclusions.

Staff attempts to reach a settlement with the subject of an investigation before recommending an enforcement proceeding. Settlement is our preferred resolution to investigations that result in a recommendation of remedial action. From the subject’s point of view, settlement can often result in penalty payments significantly lower than those that would result from contesting staff’s conclusions, and avoids litigation risk as well as the time and costs of a hearing. From the Commission’s point of view, the public interest is often better served through settlements because we are able to ensure that compliance problems are remedied faster and that disgorged profits may be returned to customers faster, and we are able to reallocate to other enforcement matters the resources that would have been spent in lengthy litigation.

If the subject seeks to persuade staff that sanctions are still not appropriate, staff provides it with an opportunity to present its case. Otherwise, staff and the subject proceed to settlement negotiations, which may involve several meetings. If staff and the subject are able to agree in principle on the terms of the settlement, staff drafts a proposed stipulation and consent agreement and sends it to the subject for review. Further negotiations over specific terms of the agreement may occur at this point. Once staff and the subject agree on the terms, an executed stipulation and consent agreement is submitted to the Commission for its consideration. Upon approval, the Stipulation and Consent Agreement and the order approving the settlement are generally released publicly.