Strings Attached: SDNY Offers Swift “Conditional Declinations” for Self-Reports but Demands Significant Cooperation

On February 24, 2026, Jay Clayton, U.S. Attorney for the Southern District of New York announced a new Corporate Enforcement and Voluntary Self-Disclosure and Cooperation Program (the Program). The Program is designed to increase predictability and transparency for business organizations considering voluntary self-disclosure of corporate misconduct.

Most notably, the Program provides for the issuance of a conditional declination letter shortly after a qualifying self-report, signaling the U.S. Attorney’s Office for the Southern District of New York (SDNY)’s intent to resolve the matter quickly and without criminal charges if the company satisfies specified ongoing obligations.

The announcement underscores the SDNY’s commitment to rewarding prompt self-reporting, cooperation, and meaningful remediation — and reflects broader U.S. Department of Justice (DOJ) efforts to provide clearer incentives for corporate disclosure. However, to receive the benefit of the Program, a self-reporting company is required at an early stage to acknowledge potentially unlawful conduct and to undertake substantial future commitments.

Key Features of the Program

Early Conditional Declination Letters

Under the Program, business organizations that voluntarily self-report qualifying misconduct to SDNY may receive a conditional declination letter soon after disclosure. The letter will state that SDNY intends to resolve the matter without criminal charges provided the company:

• continues to fully cooperate
• reports any additional criminal conduct for a period of three years
• fully remediates the misconduct
• makes restitution to victims

In conjunction with the announcement, SDNY confirmed that it had already issued a conditional declination letter under the Program within one month of a company’s self-report — demonstrating SDNY’s intention to move swiftly in appropriate cases.

Notably, however, the Program does not prescribe a specific timeframe within which SDNY must act on a self-report. Although the policy emphasizes prompt decision-making and highlights the one-month example, it does not require SDNY to reach a determination within a defined period, aside from suggesting within two to three weeks, a qualifying company will receive a decision. 

No Criminal Penalties or Monitor

If a company satisfies the Program’s conditions, SDNY will:

• decline prosecution
• not seek criminal fines or forfeiture beyond restitution
• not impose an independent compliance monitor

This represents a significant potential benefit to companies relative to traditional criminal resolutions.

Relationship to DOJ’s Corporate Enforcement Policy

The Program builds on May 2025 revisions to DOJ’s Corporate Enforcement and Voluntary Self-Disclosure Policy (CEP), which governs declinations by DOJ’s Criminal Division. Under the CEP, DOJ will decline to prosecute companies that voluntarily self-disclose, fully cooperate, remediate, and lack aggravating circumstances. Even where aggravating factors exist or DOJ was previously aware of the misconduct, companies may still receive substantial benefits under the CEP, including (a) a nonprosecution agreement for a period of less than three years, (b) no imposition of a compliance monitor, and (c) up to a 75% reduction off the low end of the U.S. Sentencing Guidelines fine range.

The SDNY Program differs from DOJ’s CEP in two important respects. First, the Program applies only to specified categories of fraud and financial misconduct, including corporate fraud; fraud involving securities, commodities, or digital assets; fraud on auditors or financial regulators; and other willful violations of federal securities and investment laws that undermine market integrity or harm market participants. Misconduct outside these categories — such as violations of the U.S. Foreign Corrupt Practices Act (FCPA) — will likely continue to be governed by the DOJ CEP or other applicable policies. The covered categories are broad and may overlap with other crime types, creating potential jurisdictional and policy intersections.

Second, the Program defines a narrower set of disqualifying aggravating factors than DOJ’s CEP. A company is ineligible for participation if the misconduct involves specified aggravating circumstances, including any nexus to terrorism, sanctions evasion, foreign corruption, trafficking or smuggling, international drug cartels, slavery or forced labor, or physical violence — along with related financing or money laundering in support of such crimes.

This approach differs from the DOJ CEP, which treats as aggravating factors the seriousness or pervasiveness of the offense, significant harm, criminal history, or involvement of senior leadership. Under the SDNY Program, however, these considerations do not automatically disqualify a company unless they fall within one of the enumerated categories described above.

Even where a company is ineligible for a declination under the Program, other declination frameworks under the Justice Manual — such as the Criminal Division’s CEP, which has long applied to FCPA and other Criminal Division matters — may remain available.

The Program also raises broader structural questions. In late 2025, Deputy Attorney General Todd Blanche announced that DOJ would move toward a single, DOJ-wide corporate enforcement policy. It remains to be seen whether that consolidation will come to pass or whether DOJ will continue to maintain subject-matter and component-based policies — like the SDNY Program — that are similar in principle but differ in scope, eligibility requirements, and benefits. For now, companies must navigate a landscape that includes overlapping frameworks with potentially differing standards and incentives.

Eligibility Requirements

To qualify for a declination under the Program, a company must take the following steps:

1. Disclose Early

The company must voluntarily self-report:

• before receiving a grand jury subpoena or document request
• before learning of a government investigation

Unlike prior self-disclosure programs, a self-reporting company is still eligible under the Program even where the company has knowledge of a whistleblower submission regarding the conduct having been made to the company or to a government agency; there is public media reporting regarding the illegal conduct (other than reporting of a government investigation); and/or the company has made a prior self-report to another government agency.

2. Fully Cooperate

Full cooperation includes:

• identifying all responsible individuals
• producing relevant documents and preserving records
• avoiding obstructive conduct
• facilitating expeditious resolution
• reporting any additional criminal conduct for a period of three years

In December 2025 remarks, U.S. Attorney Clayton emphasized that cooperation must be timely and meaningful, cautioning that investigations stretching for years undermine the Program’s purpose.

3. Remediate and Provide Restitution

Companies must:

• implement appropriate compliance remediation
• discipline culpable employees
• make restitution to victims as defined under federal law

While the Program does not define “victim” in all contexts, in cases involving marketwide harm (e.g., market manipulation), restitution may be accomplished through established mechanisms such as SEC or CFTC distribution funds or claims processes.

Consequences of Failing to Self-Report

The Program makes clear that companies that do not voluntarily self-report, fail to cooperate, fail to adequately remediate, or otherwise do not qualify will be subject to SDNY’s prosecutorial discretion.

For companies that do not attempt to self-report violations of federal law, the policy establishes a strong presumption against declination and indicates that appropriate resolutions may include a guilty plea; a deferred prosecution agreement with monetary penalties; or a nonprosecution agreement accompanied by a statement of facts and monetary penalty.

Practical Implications

The Program, together with the revised DOJ CEP, reflects a coordinated effort to increase predictability around corporate self-disclosure decisions. By offering early, written assurances in qualifying cases, SDNY seeks to reduce uncertainty for companies weighing whether to disclose potential misconduct.

At the same time, the “conditional declination” contemplated by the Program differs in important respects from a traditional declination letter. The sample declination letter released by SDNY includes conditions similar to those found in nonprosecution agreements, deferred prosecution agreements, and plea agreements, including apparent acknowledgment of wrongdoing and obligations to provide full, continuing cooperation; remediate misconduct; report additional criminal conduct for three years; and pay victim compensation. Each of these conditions carries meaningful compliance risk.

First, companies have faced scrutiny for alleged breaches of reporting and cooperation obligations under NPAs and DPAs. The conditional declination framework therefore may function in practice more like a hybrid of a declination and a nonprosecution agreement — albeit without criminal charges or fines beyond restitution. Some of these conditions can prove hard to follow in practice despite a company’s efforts, such as an obligation to “preserv[e] all records and communications across all platforms, including non-email and ephemeral messaging applications for all relevant records custodians,” and as with all other obligations that a company must agree to undertake as part of a conditional declination agreement, SDNY in its sole discretion will determine whether a breach occurred. The model conditional declination letter makes this plain: A breach decision “shall not be subject to judicial review.”

Second, companies receiving a declination under the Program must agree to report any “credible evidence or allegations” of additional criminal conduct for three years — including, but not limited to, the types of criminal conduct included in the Program (i.e., fraud and market manipulation). However, the Program does not provide assurance that such newly reported conduct will itself qualify for a declination under the Program or any other DOJ policy. Nor does it guarantee that SDNY will decline prosecution with respect to that additional conduct. At the same time, a failure to report qualifying criminal conduct during that three-year period could jeopardize the original declination. This reporting obligation therefore operates as a significant ongoing commitment.

In addition, the duration of a company’s cooperation obligations under a conditional declination is not clearly bounded. The sample letter provides that the company must continue to provide “timely, truthful, continuing, and complete cooperation” throughout the duration of SDNY’s investigation into the illegal activity. Depending on the scope and evolution of the investigation, that period could extend well beyond three years.

Third, restitution obligations may also present practical complexity. The Program requires full restitution to victims as defined under federal law, and in cases involving marketwide harm, that could involve large or evolving pools of potential claimants. It may be challenging for a company at the time of early self-report to commit in writing to restitution obligations that could be substantial, contested, or subject to ongoing refinement through regulatory or court-administered processes.

Accordingly, while the Program offers the prospect of a quicker indication of whether SDNY intends to decline prosecution, that speed may come with substantial and potentially open-ended obligations. Like other voluntary self-disclosure policies, this policy is also limited to the issuing authority — SDNY — and will not bind other parts of DOJ, state Attorneys General, or foreign law enforcement authorities that have overlapping jurisdiction over the same fact pattern.

Voluntary self-disclosure determinations will therefore continue to require careful, fact-specific analysis of risks and benefits, particularly where a company wishes to be cooperative with the government and disclose potentially unlawful conduct but retain the ability to make appropriate arguments that the conduct in question is not illegal. The Program represents a meaningful additional tool and provides new arguments for counsel advocating declination, but it does not eliminate the strategic complexity inherent in the self-disclosure calculus.

For boards of directors, management, and legal and compliance departments, the Program reinforces the importance of robust compliance systems capable of identifying and escalating issues promptly while underscoring that early engagement with enforcement authorities remains a consequential decision requiring careful consideration.

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The announcement of the Program and SDNY’s memorandum are available on the U.S. Attorney’s Office website and here. The Model Conditional Declination Letter is available here.