SEC investigated the Amish Helping Fund (AHF), a fund that helps fund mortgage and construction loans for young Amish families. AHF's offering memorandum was stale and was not "updated for 15 years and thus contained material misrepresentations about the fund and the securities being offered."
The SEC did not pursue enforcement. Instead, it entered into a Deferred Prosecution Agreement (DPA) because AHF'S responded quickly and appropriately to the investigation. According to the SEC, AHF immediately took steps to remedy the situation:
AHF updated and corrected its offering memorandum and provided existing investors with a corrected copy of it.
AHF offered all existing investors the right of rescission.
AHF retained an independent certified public accountant to perform ongoing audits.
AHF registered its securities offerings with the Ohio Division of Securities and consented to a cease-and-desist order with the agency.
Robert Khuzami, Director of the SEC’s Division of Enforcement, said:
Cooperation provides real and substantial benefits for companies that respond appropriately to the discovery of wrongdoing in their ranks...Here, the SEC acknowledged and rewarded AHF’s cooperation because, among other things, it acted swiftly and completely in correcting the misleading statements provided to investors, agreeing to annual audits of the fund holding the securities, and implementing significant remedial measures to prevent future violations of the securities laws.
The takeaway here: act quickly to remediate and cooperate.