CLIENT ALERT: SDNY Announces New Corporate Enforcement and Voluntary Self-Disclosure Program for Financial Crimes

KEY TAKEAWAYS

• On February 24, 2026, U.S. Attorney Jay Clayton announced that the United States Attorney’s Office for the Southern District of New York has launched a new Corporate Enforcement and Voluntary Self-Disclosure Program for Financial Crimes (the “Program”).
• The Program applies broadly to fraud and financial misconduct affecting market integrity, including securities, commodities, and digital asset fraud; false statements to auditors or federal financial regulators; and willful violations of the Securities Act of 1933, Securities Exchange Act of 1934, Commodity Exchange Act, Investment Advisers Act of 1940, and Investment Company Act of 1940. “Fraud” is defined expansively to encompass false statements, forgery, embezzlement, misappropriation, insider trading, spoofing, and market manipulation.
• The Program offers companies a clear path to declination of criminal prosecution, including fines, forfeiture, or appointment of an independent monitor, if they voluntarily self-report qualifying financial misconduct, fully cooperate with the authorities, remediate harm, and provide restitution.
• The Program may reshape the risk calculus for corporations and their executives. By removing traditional aggravating factors—such as senior management involvement or the pervasiveness of misconduct—as bars to eligibility, the Program narrows the range of discretionary considerations that historically made declinations uncertain. In doing so, the Southern District appears to be signaling that companies’ ability to avoid prosecution will depend instead on more objective criteria of timing, full cooperation, remediation, and restitution.  For companies evaluating whether to self-report, this shift may provide clearer guideposts than prior practice.
• At the same time, the Program increases the risks of failing to timely report. It establishes a presumption that companies that do not self-disclose will face a guilty plea, DPA, or NPA with monetary penalties, rather than a declination. While the Southern District has long rewarded voluntary self-disclosure, the Program indicates that tardiness may now be a decisive factor in a company’s ability to obtain a declination in the Southern District.

 

PROGRAM ELIGIBILITY CRITERIA

1. No Disqualifying Conduct: Traditional aggravating factors such as involvement of senior management, prior criminal history, or pervasiveness of the misconduct will not bar eligibility. This is a significant departure from prior DOJ practice. However, the misconduct must have no nexus to terrorism, sanctions evasion, foreign corruption, trafficking, drug cartels, slavery, forced labor, or physical violence, including the knowing or reckless financing of, or laundering of funds in support of, these activities.
2. Timely and Voluntary Self-Disclosure: The company must promptly disclose the misconduct before receiving a grand jury subpoena or document request from any law enforcement agency or regulator, and before learning of any government investigation. A company will not be disqualified even if a whistleblower has already reported the conduct, the press has covered the misconduct (but not a government investigation), or the company has already reported to another agency.
3. Content of Disclosure: The disclosure must be “substantive and specific,” including all known facts about the misconduct, the individuals involved, and affected parties. Delay, especially where strategic or self-serving, may disqualify a company even if it has not completed its internal investigation.
4. Full Cooperation: The company must provide timely, truthful, and continuing cooperation, including: identifying all culpable individuals and witnesses; producing all relevant documents including (translated) foreign-language materials; sharing non-privileged internal investigation results with attribution to specific individuals; highlighting materials probative of individual culpability; making employees available for interviews, grand jury, and trial testimony; preserving all records including ephemeral messaging; and consenting to disclosures to other federal authorities.
5. Remediation: The company must commit to remediate the harm, including improving its compliance programs and taking disciplinary action against involved personnel, before receiving a conditional declination (a decision by a prosecutor not to formally prosecute a criminal case provided that the accused meets certain conditions) and must reasonably complete remediation before the final declination.
6. Restitution: The company must make full restitution to all injured parties. Payments made through regulatory resolutions with the SEC, CFTC, or other regulators will be credited against the restitution obligation.
7. Ongoing Obligations: A company that receives a conditional declination must also report all credible evidence of criminal conduct relating to violations of U.S. laws—not limited to the original misconduct—for three years. Future self-reports under this obligation remain eligible for additional declinations.

CONSEQUENCES OF NOT SELF-REPORTING

The Program emphasizes that where a company learns of illegal activity but does not self-report, that decision will “weigh heavily against any future declination request.” For non-reporting companies, there will be a presumption that the appropriate resolution is a guilty plea, DPA, or NPA with a monetary penalty, and a “strong presumption against the issuance of a declination.”

Implications for Those Interested in Participating in the Program

The Program offers some of the strongest incentives to date for corporate self-reporting in federal criminal enforcement proceedings. With no criminal fines, no independent monitors, conditional declinations issued within weeks of the self-reporting, and the removal of traditional aggravating factors as automatic bars to eligibility, the framework is among the most favorable ever adopted.

At the same time, the consequences of failing to self-report are equally significant. The Program establishes an explicit presumption against declinations for companies that do not voluntarily disclose misconduct, a notable escalation in the risks of inaction. Importantly, a declination under the Program provides no protection for individuals, and culpable employees and executives may still face prosecution based on information the company provides, as the cooperation requirements are specifically designed to surface evidence of individual wrongdoing.

The Program may also create a “race to disclose,” with employees highly incentivized to be the first to report misconduct (particularly given the SDNY’s existing Whistleblower Pilot Program which offers non-prosecution agreements to such individuals) and companies rushing to beat employee reports to secure their voluntary self-disclosure credit.

Finally, the cooperation requirements encompass all communications platforms, including ephemeral messaging applications, stressing the need for companies to review and, where necessary, strengthen their data retention and preservation policies.

CONCLUSION

SDNY’s new Corporate Enforcement and Voluntary Self-Disclosure Program represents a dramatic shift in the landscape of federal corporate criminal enforcement.  Companies that discover potential financial misconduct should promptly engage experienced counsel to evaluate whether self-disclosure under the Program is appropriate, conduct a thorough internal investigation, and develop a strategy that balances the significant benefits of participating in the program with the risks of non-reporting.

Sher Tremonte LLP is closely monitoring developments as the Program is implemented and will provide further updates as additional guidance becomes available. If you have questions about the Program or its implications for your organization, please contact us. Written by Brian Kidd, Taylor Fontan, Courtney Gans, and Raphael Friedman.