The SEC's International Enforcement Programme: Gathering Evidence outside the US
| Date | 01 January 1999 |
| Published date | 01 January 1999 |
| Pages | 234-239 |
| DOI | https://doi.org/10.1108/eb025887 |
| Author | Thomas C. Newkirk |
| Subject Matter | Accounting & finance |
Journal of Financial Crime — Vol. 6 No. 3 — Analysis
The SEC's International Enforcement Programme:
Gathering Evidence outside the US
Thomas C. Newkirk
As surely as night follows day, the internationalisa-
tion of securities fraud has followed the interna-
tionalisation of the world's securities markets. As a
result, the US Securities and Exchange Commis-
sion has had to develop new investigative and
enforcement tools. If a boiler room operator in
another country defrauds investors in the US by
means of the Internet, the telephone or the mails,
the SEC's ability to investigate the activities in the
foreign country depends on its ability to obtain
information and documents from persons it is able
to assert jurisdiction over in the US, or to obtain
assistance of
its
foreign counterparts.
This paper discusses the SEC's means and
methods for obtaining investigative assistance from
foreign authorities.
INFORMATION-SHARING
ARRANGEMENTS
The SEC obtains access to foreign evidence
through two primary avenues. The first vehicle is
government to government treaties for Inter-
national Mutual Legal Assistance. The second
avenue is the formal and informal relationships the
SEC has built with foreign regulators for enforce-
ment cooperation and information-gathering.
Through these two means, the SEC seeks to
reduce the ability of securities fraudsters to use
international borders to escape detection and pros-
ecution.
Treaties
The USA has entered into treaties with many
countries for the provision of mutual assistance in
criminal matters. As of 15th August, 1997, there
were 19 Treaties on Mutual Legal Assistance in
Criminal Matters (MLAT) in force.1 MLATs with
more than a dozen other countries have been
signed but have not yet entered into force because
they have not been ratified by the United States
Senate or the appropriate foreign legislative body,
or both. Generally, these treaties provide for assis-
tance only in cases involving 'dual criminality', ie
where the conduct under investigation would be a
crime in both the country requesting assistance
and the country from which assistance is
requested.
While only the US Department of Justice is
authorised to prosecute securities law violations as
crimes, the SEC has been able to utilise these
'criminal' treaties because the US federal securities
laws are both civil and criminal in nature.2 The
SEC frequently investigates criminal violations of
the securities laws and refers the results to the US
Department of Justice for criminal prosecution.
Frequently, such an investigation will lead to 'par-
allel proceedings', a civil enforcement action by the
SEC and a criminal enforcement action brought by
the Department of Justice.
The SEC has worked to ensure that these agree-
ments specifically cover securities law offences and
has utilised the agreements in its investigations to
obtain information and documents to assist it in
determining whether the US federal securities laws
have been violated. Where permitted under the
MLAT in question, the Commission has also used
information and documents obtained under the
treaties as evidence in actions it filed in US federal
courts against persons accused of violating federal
securities laws.
The MLAT between the USA and Switzerland
is the one with which the SEC has had the greatest
experience. It has provided a useful mechanism for
the SEC, working with the US Justice Depart-
ment, for obtaining documentary evidence located
in Switzerland, including detailed bank account
information, and testimony from witnesses in
Switzerland. The Commission has used such
evidence not only in the course of its investigation
but also in the course of its civil enforcement
actions. In addition, the Swiss authorities have,
where appropriate, been willing to freeze profits
traceable to illegal action, thus depriving the sus-
pected wrongdoers of the ability to dissipate or
hide the proceeds.
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