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The “Control Person” Theory Of Liability “Trend” That Never Occurred

controlperson

This recent law review article titled “Laxity at the Gates: The SEC’s Neglect to Enforce Control Person Liability” does not mention the Foreign Corrupt Practices Act, but it did get me thinking about control person liability in connection with SEC FCPA enforcement actions.

As highlighted in this post, in the aftermath of a 2009 SEC individual FCPA enforcement action based on “control person” liability some predicted the start of a new trend. However, this “trend” never occurred.

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FCPA Flash – A Conversation With Neil Smith (Former Senior Counsel In The SEC’s Enforcement Division) About SEC FCPA Enforcement

FCPA Flash

The FCPA Flash podcast provides in an audio format the same fresh, candid, and informed commentary about the Foreign Corrupt Practices Act and related topics as readers have come to expect from written posts on FCPA Professor.

This FCPA Flash episode is a conversation with Neil Smith. On July 14th, Smith left the SEC where he served as senior counsel in the Enforcement Division for more than six years and where he was also a member of the SEC’s FCPA Unit. In the podcast, Smith (currently a partner in the Boston office of K&L Gates) discusses SEC remedies in FCPA enforcement actions, the SEC’s theory of enforcement around the FCPA’s internal controls provisions, the impact of the Supreme Court’s recent Kokesh decision on SEC FCPA enforcement, and changes to the FCPA and FCPA enforcement that he would like to see.

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What Others Are Saying About Kokesh

Soapbox

Previous posts here, here and here concerned the Supreme Court’s recent benchslap of the SEC in Kokesh v. SEC. As previously noted, the Court unanimously held that disgorgement “in the securities-enforcement context is a ‘penalty’ within the meaning of [28 U.S.C.] 2462 and so disgorgement actions must be commenced within five years of the date the claim accrues.”

The case should impact SEC FCPA enforcement against issuers, but that first requires issuers not to roll over and play dead when faced with SEC scrutiny by agreeing to waive or toll statute of limitations.

This post highlights what others are saying about Kokesh.

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Kokesh Footnote Seems To Be Inviting A Future Disgorgement Case

invite

The Supreme Court’s decision earlier this week in Kokesh v. SEC was yet another Supreme Court benchslap of the SEC. As highlighted in this prior post, the Supreme Court unanimously rejected the SEC’s position and held that disgorgement “in the securities-enforcement context is a ‘penalty’ within the meaning of [28 U.S.C.] 2462 and so disgorgement actions must be commenced within five years of the date the claim accrues.”

As previously highlighted in numerous prior posts regarding Kokesh, the non-FCPA case is FCPA relevant in that since the SEC first sought a disgorgement remedy in an FCPA enforcement action in 2004, disgorgement has become the dominant remedy sought by the SEC in corporate FCPA enforcement actions.

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Supreme Court Benchslaps SEC Yet Again – Rules That Disgorgement Is A Penalty Subject To A Five Year Limitations Period

supremecourt

FCPA Professor has been closely following Kokesh v SEC, a non-FCPA case that is FCPA relevant because the issue before the Supreme Court is whether SEC disgorgement is subject to a five-year statute of limitations. (See prior posts here and here regarding the case, here for a summary of the oral argument in the case, and here for an FCPA Flash podcast episode devoted to the case and issue).

What makes Kokesh FCPA relevant is that since the SEC first sought a disgorgement remedy in an FCPA enforcement action in 2004, disgorgement has become the dominant remedy sought by the SEC in corporate FCPA enforcement actions.

Yesterday in this unanimous decision authored by Justice Sotomayor, the Supreme Court rejected the SEC’s position and held that disgorgement “in the securities-enforcement context is a ‘penalty’ within the meaning of [28 U.S.C.] 2462 and so disgorgement actions must be commenced within five years of the date the claim accrues.”

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