Too Close for Comfort: United States v. Stringer and United States v. Scrushy Impose a Stricter Standard on SEC/DOJ Parallel Proceedings

Abstract

The Securities and Exchange Commission (the SEC or the Commission) and the Department of Justice (DOJ) have increasingly come to rely on parallel civil and criminal proceedings, which involve concurrent investigations of the same conduct by different government agencies, as an efficient means of law enforcement. The Securities Act of 1933 and the Securities Exchange Act of 1934, which explicitly permit the Commission to share any information it obtains through investigation and civil discovery with DOJ, make it possible for DOJ and the SEC to coordinate their efforts when they investigate the same conduct. Because the SEC may avail itself of civil discovery tools, parallel proceedings enable federal prosecutors to acquire evidence they might not be able to obtain through criminal investigation and discovery under the Federal Rules of Criminal Procedure. The SEC's civil enforcement also benefits from parallel proceedings. Business organizations and individuals often cooperate with the SEC in order to avoid harsh civil penalties and/or referral to DOJ for criminal prosecution.