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SEC Administrative Law Judge Gets It Right When Talking About The Books And Records And Internal Controls Provisions

great job

These pages have frequently highlighted legislative history relevant to the Foreign Corrupt Practices Act’s books and records and internal controls provisions (see here among numerous other posts) as well as prior SEC guidance on these provisions including most notably a 1981 speech by Harold Williams (Chairman of the SEC).

Demonstrating once again that this “old” legal authority and guidance remains relevant in the FCPA’s modern era, in this recent administrative order, James Grimes (an SEC Administrative Law Judge) accurately stated:

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60% Of SEC FCPA Enforcement Actions In Recent Years Do Not Involve Charges Or Findings That An Issuer Violated The Anti-Bribery Provisions

Statistical Analysis

Between 2011 and 2018, the SEC brought 90 corporate Foreign Corrupt Practices Act enforcement actions.

However, only 36 of those actions (40%) involved charges or findings that a company violated the FCPA’s anti-bribery provisions. In other words, the majority of SEC corporate FCPA enforcement actions in recent years “merely” involve books and records and/or internal controls charges or findings.

Strangely, as further highlighted below, several SEC enforcement actions that did not involve civil charges or findings of anti-bribery violations, did involve the DOJ (an agency that enforces the FCPA criminally) bringing criminal anti-bribery charges.

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Civil Enforcement of Canada’s Foreign Corruption Law?

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A guest post by Graeme Hamilton and Omar Madhany (both with Borden Ladner Gervais LLP in Toronto).

Perhaps the starkest difference between the Foreign Corrupt Practices Act and Canada’s foreign corruption law—the Corruption of Foreign Public Officials Act (CFPOA)—is the fact that the CFPOA may only be enforced criminally.  As a result, enforcement authorities in Canada are held to the higher criminal standard of proof beyond a reasonable doubt when negotiating with a company to resolve a CFPOA investigation or contemplating whether to bring CFPOA charges.

The lack of a civil enforcement mechanism for the CFPOA is often cited as one of the main reasons for the disparity between the volume of foreign corruption enforcement activity in the U.S. and Canada.  A recent settlement announced by the Ontario Securities Commission (OSC) with Katanga Mining Ltd. (Katanga), however, may signal the beginning of a shift in this landscape by establishing a role for Canada’s securities regulators in tackling foreign corruption from a civil context.

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No Shut Down For FCPA Enforcement

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The last week of December has traditionally been an active week for Foreign Corrupt Practices Act enforcement. However, with the partial government shutdown there was an open question what would happen with the end of 2018.

Yesterday, the SEC answered that question by announcing two enforcement actions: (i) a $2.5 million action against Brazil-based Centrais Elétricas Brasileiras S.A. (Eletrobras); and (ii) a $16 million action against Polycom.

This post highlights the Electrobras enforcement action and another post will highlight the Polycom enforcement action

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Further To The SEC’s Inconsistent Approach To Enforcing The FCPA’s Books And Records And Internal Controls Provisions

inconistent

As highlighted in previous posts on this subject (herehere and here), a basic rule of law principle is consistency.

In other words, the same legal violation ought to be sanctioned in the same way. When the same legal violation is sanctioned in materially different ways, trust and confidence in law enforcement is diminished.

However, there sure does seem to be a lack of consistency between how the SEC resolves Foreign Corrupt Practices Act books and records and internal controls violations.

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