Enforcement Investigations Self Reports

Self Reports

One of the highlights of the Commission’s post-EPAct 2005 enforcement program has been the now common practice of companies submitting self-reports of possible violations. In many cases, self-reported violations have resulted in the matters being closed without any enforcement sanctions being imposed. In the cases where a self-report did result in enforcement action, the penalties reflected mitigation credit for the self-reporting. The penalties imposed in the cases initiated by self-reported violations were substantially less than they would have been absent self-reporting by the violator. The Commission examines the following factors in determining the credit to be given for self-reporting:

• How did the company uncover the misconduct? Was it through a self-evaluation, internal audit, or internal compliance program? Did the company act immediately when it learned of the misconduct?



• Did the company notify the Commission promptly? Did senior management actively participate and encourage employees to provide information to identify the misconduct?



• Did the company take immediate steps to stop the misconduct? Did it implement or create an adequate response to the misconduct?



• Did the company arrange for individuals with full knowledge of the matter to meet with Commission enforcement staff?



• Did the company present its findings to the Commission and provide all relevant evidence regarding the misconduct, including full disclosure of the scope of the wrongdoing; the identity of all employees involved, including senior executives; the steps taken by the company upon learning of the misconduct; communications among involved employees; documents evidencing the misconduct; and measures taken to remedy the misconduct?

A good self-report should:

• Be in writing;



• Contain a discussion of all relevant factors from the foregoing list;



• Provide any documents relevant to the matter being reported;



• Provide sufficient information for staff to understand the circumstances of how and why the violation occurred;



• Identify the key personnel involved in the violation; and



• Detail the steps taken to cure the violation and to prevent any recurrence.

Not only is the comprehensiveness of a self-report important, but also the promptness in providing it to Enforcement staff. Companies that discover a violation are encouraged to contact Enforcement staff before submitting a full report of the incident or activity in question. This notification provides considerable benefit to the company.

NOTE: Early notification is one aspect of mitigation credit, and Enforcement staff can provide guidance as to the matters the company should explore and present in its written report. This may result in a more complete self-report and thus in both greater mitigation credit and a more rapid conclusion of staff’s inquiry.