6 Thus, the Commission is expressly authorized, inter alia, to investigate possible violations of the federal securities laws, 13/ to issue subpoenas in furtherance of its investigations, 14/ and to seek injunctions in the appropriate district courts of the United States to prevent future violations of those laws. 15/ 13/ See Section 19(b) and 20(a) of the Securities Act, 15 U.S.C. 77s(b) and 77t(a); Section 21(a) of the Securities Exchange Act, 15 U.S.C. 78u(a); Section 18(a) of the Public Utility Holding Company Act of 1935, 15 U.S.C. 79r(a); Section 321(a) of the Trust Indenture Act of 1939, 15 U.S.C. 77uuu(a); Section 42(a) of the Investment Company Act of 1940, 15 U.S.C. 80a-41(a); Section 209(a) of the Investment Advisers Act of 1940, 15 U.S.C. 80b-9(a). 14/ See Section 19(b) of the Securities Act; Section 21(b) of the Securities Exchange Act, 15 U.S.C. 78u(b); Section 18(c) of the Public Utility Holding Company Act, 15 U.S.C. 79r(c); Section 321(a) of the Trust Indenture Act; Section 42(b) of the Investment Company Act, 15 U.S.C. 80a-41(b); Section 209(b) of the Investment Advisers Act, 15 U.S.C. 80b-9(b). In addition, the Commission is authorized to seek enforcement of its subpoenas in the appropriate district court. See Section 22(b) of the Securities Act, 15 U.S.C. 77v (b); Section 21(c) of the Securities Exchange Act, 15 U.S.C. 78u(c); Section 18 (d) of the Public Utility Holding Company Act, 15 U.S.C. 79r(d); Section 321(a) of the Trust Indenture Act, 15 U.S.C. 77uuu(a); Section 42(c) of the Investment Company Act, 15 U.S.C. 80a-41(c); and Section 209(c) of the Investment Advisers Act, 15 U.S.C. 80b-9(c). 15/ See Section 20(b) of the Securities Act, 15 U.S.C. 77t(b); Sections 21(d) and (e) of the Securities Exchange Act, 15 U.S.C. 78u(d) and u(e); Section 18(f) of the Public Utility Holding Company Act, 15 U.S.C. 79r(f); Section 321(a) of the Trust Indenture Act; Section 42(e) of the Investment Company Act, 15 U.S.C. 80a-41(e); Section 209(e) of the Investment Advisers Act, 15 U.S.C. 80b-9(e). In the latter connection, the Commission may seek other forms of -7 In addition, Congress recognized that the criminal prosecution of federal securities law violations was a critical aspect of the comprehensive legislative scheme to protect the investing public, in order to provide "a sufficient guarantee that the rules and regulations of the [Commission) as well as the statutory provisions, will be observed ✶ ✶ ✶." 16/ Therefore, it provided that certain conduct violative of various provisions of the federal securities laws should also be subject to criminal penalties. 17/ And, to aid in achieving those objectives, Congress authorized the Commission, in connection with each of the statutes which it administers, to refer information indicating violations of these statutes, as well as others, 18/ to the Attorney General, 19/ who, in his discretion, may institute appropriate criminal proceedings. Typical of these provisions, contained in each of the statutes administered by the Commission, is Section 20 (b) of the Securities Act, which provides in pertinent part: "The Commission may transmit such evidence as may be available concerning such acts or practices (which constitute or which will constitute a violation of this title) to the Attorney General who may, in his 16/ See S. Rep. No. 792, 73d Cong., 2d Sess. 6 (1934). 17/ Section 24 of the Securities Act, 15 U.S.C. 77x; Section 32 of the Securities Exchange Act, 15 U.S.C. 78ff; Section 29 of the Public Utility Holding Company Act, 15 U.S.C. 79z-3; Section 325 of the Trust Indenture Act, 15 U.S.C. 77yyy; Section 49 of the Investment Company Act, 15 U.S.C. 80a-48; Section 217 of the Investment Advisers Act, 15 U.S.c. 80b-17. 18/ These may include, for example, charges of mail fraud (18 U.S.C. 1341), wire fraud, (18 U.S.C. 1343), violations of the federal false statement statute (18 U.S.C. 1001), and perjury and subornation of perjury (18 U.S.C. 1621-1622), as well as aiding and abetting (18 U.S.C. 2) and conspiracy (18 U.S.C. 371). 19/ We use the terms Attorney General, Department of Justice, and United States Attorney interchangeably in this memorandum. See 28 U.S.c. 503, 516(a), and 519. discretion, institute the necessary criminal proceed ings under this title." 20/ The Commission, like Congress, recognizes the important role that criminal prosecutions play in the accomplishment of the enforcement objective of the federal securities laws. Accordingly, it is the Commission's policy, discussed infra, to encourage its staff to bring to the attention of United States Attorneys, at the earliest possible stage of an investigation, activities in which the staff believes a United States Attorney may have an interest. This is done in order to facilitate a preliminary determination by the United States Attorney with respect to whether he may have an interest in pursuing further the particular matter and thereby to expedite the process by which such a case may be brought before the Grand Jury. In the event the United States Attorney is, or would be, interested in pursuing the matter, these preliminary communications serve a number of other purposes designed to promote Congress' ultimate objective of protecting public investors, an objective only recently reaffirmed by Congress. 21/ For example, these communications may help to avoid possible statute of limitations problems. The older the violative conduct is, the less time the United States Attorney may have in which to become familiar with the often complex facts of securities fraud cases, prepare the case, 20/ See also similar provisions in Section 21(d) of the Securities Exchange 21/ See H.R. Rep. No. 95-640, 95th Cong., 1st Sess. 10 (Sept. 28, 1977): "Traditionally, there has been a close working relationship and present it to the grand jury in order to obtain an indictment within applicable time limitations. Besides, an unreasonable delay in bringing criminal charges ultimately may contribute to denying a defendant his sixth amendment right to a speedy criminal trial and, therefore, the policy of encouraging early exchanges of information is beneficial, not only for the purposes of administrative efficiency, but also to protect the rights of potential criminal defendants. In addition, the longer it takes to bring a criminal action, the greater may be the possibility of an objection being raised to the prosecution's use of information developed during the course of the Commission's investigation. Thus, coordination of the timing of civil and criminal proceedings based on similar evidence is often critical. 22/ Preliminary communications between the Commission's staff and the offices of the United States Attorney may assume a variety of forms which the Attorney General of the United States and the Commission have long approved. 23/ To promote their common interests in the "law enforcement business," 24/ the staff of the United States Attorney's Office and the Commission's staff are encouraged to inquire about or discuss, on a regular basis, matters of mutual interest. 25/ In this connection, preliminary 22/ See testimony of John R. Wing, Assistant United States Attorney, for the Southern District of New York and Chief of that Office's Fraud Unit, pp. 1289-1292. 23/ See testimony of Stanley Sporkin, Director of the Commission's Division of Enforcement, p. 677. These preliminary communications are part of "the informal procedure[s]" and "the working relationship which has grown up between the SEC regional offices and the offices of United States Attorneys," which the court below "decline [d] to invalidate" (A. 68-69). See pp. 4-5, n.11, supra. 24/ Testimony of Stanley Sporkin, p. 750. 25/ Id., at 751-752; see also testimony of John R. Wing, pp. 1285–1286. - 10 communications may involve the use of materials such as pleadings in a civil action brought by the Commission, as well as filings with the Commission, or providing the United States Attorney with a basic outline of the relevant facts and materials adduced during a pending Commission investigation. In cases where the particular United States Attorney indicates his interest in the matter and the investigation is being conducted informally (that is, the Commission has not authorized the issuance of process or the compulsion of testimony), 26/ the Commission's staff need not obtain, and does not seek, Commission authorization before turning over both public and nonpublic investigative materials. 27/ Where, however, a formal investigation is in progress, and the United States Attorney, after preliminary communications, indicates his interest in pursuing the matter further, the Commission itself approves the referral of investigatory materials to the United States Attorney for possible criminal prosecution. A criminal reference may assume two principal forms (discussed immediately below) but, in either event, it is authorized by the Commission. See 17 CFR 202.5(b); and Section 171.08 of the Commission's Manual of Administrative Regulations. 26/ See Section 21 of the Securities Exchange Act, 15 U.S.C. 78u; and 17 CFR 202.5(a). 27/ See 17 CFR 202.5(a) and Sections 171.06 and 171.07 of the Commission's Manual of Administrative Regulations. Procedures for "Cooperation With Federal, State and Foreign Government Authorities and With Self Regulatory Organizations" are set forth in Section 171 of the Commission's Manual of Administrative Regulations, and the authority to act with respect to the matters discussed therein is delegated from the Commission to Division Directors and Regional Administrators and, in the discretion of those officials, to designated members of their staffs. Section 171.02. It should be borne in mind, of course, that these specific procedures |