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Fifth Circuit Concludes That An SEC FCPA Enforcement Approach Is Unconstitutional

Judicial Decision

SEC administrative settlements in the FCPA context were rare prior to 2010 largely because the SEC could not impose monetary penalties in such proceedings absent certain exceptions.

However, in the Dodd-Frank Wall Street Reform Act of 2010 Congress granted the SEC authority to impose civil monetary penalties in administrative proceedings in which the SEC staff seeks a cease-and-desist order. Specifically, Section 929P(a) of Dodd-Frank eliminated prior limitations and expanded the SEC’s ability to obtain monetary penalties in administrative proceedings from any person who violates the federal securities laws.

Since 2010, the vast majority of issuer FCPA enforcement actions have been administrative proceedings and in many of these actions the SEC has imposed a monetary penalty. For instance, the SEC’s enforcement action against Goldman Sachs involved an administrative order in which the SEC imposed a $400 million penalty (see here). The SEC’s enforcement action against MTS involved an administrative order in which the SEC imposed a $100 million penalty (see here). The SEC’s enforcement action against Credit Suisse involved an administrative order in which the SEC imposed a $65 million penalty (see here).

Recently, the Fifth Circuit held in Jarkesy v. SEC that the SEC’s practice of imposing civil monetary penalties in administrative proceedings was unconstitutional because Congress delegated its legislative power to the SEC without providing an intelligible principle by which the SEC could exercise the delegated power. Although Jarkesy was not a Foreign Corrupt Practices Act enforcement action, the decision (for the reasons mentioned above) is most certainly FCPA relevant.

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The Largest Civil Monetary Penalties In Corporate FCPA Enforcement Actions

penalty

Disgorgement and prejudgment interest comprise the bulk of SEC recovery in corporate FCPA enforcement actions (typically 90% or so of overall recovery in most years).

However, in approximately 40% of corporate FCPA enforcement actions since 2010 the SEC has assessed a civil monetary penalty.

It is often a mystery (or at least not reasonably transparent) why most corporate FCPA enforcement actions by the SEC do not include a civil penalty, but some do.

In addition, it is often a mystery (or at least not reasonably transparent) how the civil penalties are actually calculated.

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The Largest Civil Monetary Penalties In Corporate FCPA Enforcement Actions

assetrecovery

This recent post highlighted the 2002 Foreign Corrupt Practices Act enforcement action against Syncor International.  It was noted that the $500,000 civil monetary penalty Syncor paid to resolve the action was – at the time – the largest penalty ever obtained by the SEC in an FCPA matter.

Fast forward to the present and such a figure would not even crack the Top 50 civil monetary penalties assessed in an FCPA enforcement action.

Disgorgement and prejudgment interest comprise the bulk of SEC recovery in corporate FCPA enforcement actions (typically 90% or so of overall recovery in most years). However, in approximately 40% of corporate FCPA enforcement actions since 2010 the SEC has assessed a civil monetary penalty and set forth below are the Top 25 civil monetary penalties in FCPA actions.

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