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Size Matters, But To What Extent?

Big vs. small

Business organizations large and small are subject to the anti-bribery provisions of the Foreign Corrupt Practices Act.

Although the books and records and internal controls provisions only apply to issuers, issuers are not always large companies. These provisions make no explicit distinctions regarding the size of an issuer, but in the FCPA Guidance the DOJ and SEC sensibly acknowledge that a factor the enforcement agencies consider when evaluating an organization’s compliance program is the size of the organization. Specifically the Guidance states: ” small- and medium-size enterprises likely will have different compliance programs from large multi-national corporations, a fact DOJ and SEC take into account when evaluating companies’ compliance programs.”

Similarly, the DOJ’s November 2017 FCPA Corporate Enforcement Policy states: “implementation of an effective compliance and ethics program, the criteria for which will be periodically updated and which may vary based on the size and resources of the organization …”.

Despite this sensible FCPA enforcement agency guidance, does size actually matter?

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A Refreshing Judicial Reminder That Failure To Act Consistent With “Best Practices” Is NOT A Legal Violation

Judicial Decision

Several prior posts (see here, here, here, here, here, here and here) have highlighted the general issue that a troubling amount of Foreign Corrupt Practices Act enforcement (particularly by the SEC and its internal controls theories) amounts to little more than ipse dixit ((Latin for he himself said it – an unsupported statement that rests solely on the authority of the individual who makes it – in other words because the SEC says so).

The FCPA’s internal controls provisions require issuers to have “internal accounting controls sufficient to provide reasonable assurances” that certain limited financial objectives are met. The FCPA then provides the following definition of “reasonably assurances” and “reasonable detail” – “such level of detail and degree of assurance as would satisfy prudent officials in the conduct of their own affairs.”

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Issues To Consider From The Kinross Gold Enforcement Action

Issues

This previous post went in-depth into the recent SEC Foreign Corrupt Practices Act enforcement action against Kinross Gold Corp.

Set forth below are additional issues to consider.

Just the Second

The 2016 enforcement action against Nordion was believed to be the first ever FCPA enforcement action against a Canadian company (see here and here for prior posts). The Kinross enforcement action is believed to be just the second.

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Friday Roundup

Roundup

A home run, quotable, monitors, up north, scrutiny alerts and updates, irksome, and for the reading stack. It’s all here in the Friday roundup.

Home Run

The latest issue of the always informative FCPA Update from Debevoise & Plimpton (released by the way on the opening day of the Major League Baseball season) hits a home run.

The lead article by Paul Berger (former Associate Director of the SEC’s Enforcement Division) concerns the recent Elbit Imaging enforcement action (see here for the prior post) and states in pertinent part:

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Canada-Based Kinross Gold Corp. Resolves Approximate $1 Million SEC Action Because Its Acquired Indirect African Subsidiaries Had Deficient Internal Controls

Kinross

Silly you for believing certain commentator hype that the Trump SEC would stop enforcing the Foreign Corrupt Practices Act or for thinking that the general lull in SEC corporate enforcement during the fourth quarter of 2017 meant anything.

In the second SEC corporate FCPA enforcement action in the last 2.5 weeks (see here for the prior Elbit Imaging action), the SEC announced yesterday that Canada-based Kinross Gold Corporation (a company with shares traded on the New York Stock Exchange) resolved an enforcement action “arising from the company’s repeated failure to implement adequate accounting controls of two African subsidiaries.” Without admitting or denying the SEC’s finding in this administrative order, Kinross agreed to, among other things, pay a $950,000 civil penalty.

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