Securities and Exchange Commission Historical Society

The Imperial SEC? - Foreign Policy and the Internationalization of the Securities Markets, 1934-1990

International Enforcement Issues

Consequences of the MOU

A regulatory agency negotiating an agreement which combined a foreign state's cooperation, along with that of private banks, was an entirely new model. Edward Greene, one of the principal negotiators of the MOU, commented, "The innovative way forward was that the [Swiss] bank supervisory said that what they would do is to reach out and say that clients that had bank accounts would be required to consent to providing certain information within defined parameters, if there was a request from the SEC. So you didn't undermine bank secrecy, you predicated cooperation upon consent."(81)

The MOU created a fast and efficient disclosure process but, according to some critics, it also made an end-run around traditional principals of international law. The MOU represented a break with the understanding in international law that cooperation between sovereign nations required dual criminality.

Although the SEC had a long history of working with foreign governments, the Swiss MOU represented the first time in which the SEC took the lead in negotiating directly with a foreign country a longstanding agreement of mutual cooperation. As Michael Mann noted, the SEC's new found power to negotiate directly with foreign governments resulted in the Department of Justice being "very jealous," as "[i]t really wanted to control [such] relationships."(82)

The SEC had significant bargaining power because large Swiss banks wanted to participate in the U.S. securities markets and avoid the adverse publicity of refusing to cooperate with U.S. officials or U.S. courts.(83) Although those SEC officials negotiating the MOU did not know it at the time, MOUs would become one of the SEC's main tools in creating a regime of international cooperation in enforcing securities laws.

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08 April 2009

Anne Flannery

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