Executive Summary
- What’s new: The SDNY has implemented a revised voluntary self-disclosure program offering early, conditional declinations of prosecution for companies that self-report misconduct in good faith before any government investigation is known.
- Why it matters: The program provides clarity of expected outcome to a company shortly following voluntary self-disclosure, incentivizing early disclosure for companies disclosing evidence of fraud, including securities fraud.
- What to do next: Companies should promptly investigate potential misconduct and closely study the SDNY program to determine whether self-reporting under the new program is in the company’s best interest, as the program also imposes significant obligations on a reporting company, including obligations to cooperate, remediate and pay restitution.
__________
On February 24, 2026, the U.S. Attorney’s Office in the SDNY announced a new corporate self-disclosure program specific to the district, providing companies with a path to declination of prosecution. SDNY U.S. Attorney Jay Clayton had revealed development of the program in a talk earlier in the month (see our February 6, 2026, client alert), and now the office has provided details of the program.
The now effective program breaks new ground in a couple of ways:
- The outcome of self-reporting misconduct for a company will be clearer at an earlier stage because prosecutors will issue letters of conditional declination close in time to the self-reporting rather than at the conclusion of a long investigation.
- A voluntary self-disclosure based on a good faith belief that there is no government investigation into the conduct will lead to a declination, even if the information is already known to the government.
Early Relief and More Predictability
The program promises to provide clarity of expected outcome to a company shortly following the voluntary self-disclosure rather than at the conclusion of a full investigation, which can often run for years. After an initial assessment of eligibility, the program says the SDNY will provide a company that qualifies with a letter stating that the company will receive a declination as long as the company abides by the terms of the letter. Self-reporting companies “can expect such a conditional declination letter within two to three weeks of making a self-report.” U.S. Attorney Clayton stated on February 5, 2026, that companies will be free to publicly announce this early conditional declination to tell the market: “This is a good company.”
Company Credit for a Good Faith Belief Regarding Government Investigation
Under the program, a voluntary self-disclosure can result in a conditional declination even if the information is not new to the government, as long as “the disclosure [is] made before the company learns of the existence of a government investigation.” This is a change from existing government policies that require companies to demonstrate that the information being reported was not already known (or about to be known) by the government. In practice, companies often do not know whether the government is aware of or investigating potential misconduct. This change should therefore decrease the risk that a company’s self-report will draw attention to the company without a corresponding benefit.
Additional Program Details
Now that the SDNY has released the details of the program, companies and counsel will want to study it closely before taking action. The released guidance provides information on the following relevant questions:
- What crimes are included? The program focuses on financial fraud, including securities fraud offenses. Certain crimes are excluded from the program, including those that require the SDNY to seek approval from the Department of Justice in Washington, D.C., such as Foreign Corrupt Practices Act cases.
- What factors might disqualify a company? As with existing policies, certain aggravating factors such as terrorism or sex trafficking are disqualifying aggravating factors.
- How does the program treat serious/pervasive offenses or involvement by senior management? The SDNY will “not treat the seriousness of the offense, the pervasiveness of the misconduct within the company, the severity of harm caused by the misconduct, past criminal adjudications, or the involvement of senior leaders as an aggravating or disqualifying circumstance.”
- What else will companies be required to do? As with existing programs, the new SDNY program requires continued cooperation, remediation and an agreement to provide full restitution to victims. The program also imposes a three-year obligation to report newly discovered criminal conduct.
Takeaways
When a company becomes aware of potentially negative facts from a whistleblower or otherwise, the company should promptly investigate to determine whether self-reporting under the SDNY program is in the company’s best interest.
For companies considering whether to self-report conduct prior to a full investigation, the SDNY program presents significant incentives for early disclosure. Companies should be mindful that the new incentives might drive peer firms to report their own misconduct early, in turn prompting prosecutors to pursue a broader investigation into potential misconduct across a sector.
The new program also imposes significant obligations on self-reporting companies. Companies should fully understand the scope of these obligations, as well as the risks, in weighing whether to self-report.
This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws.