SEC Commissioner Peirce On The SEC’s “Limited Mission”
This site is a big fan of SEC Commissioner Hester Peirce and has occasionally highlighted her informed and candid commentary on various aspects of SEC enforcement.
In this recent speech, Peirce rightly noted that the SEC has a “limited mission.” She stated that the “mission is serving the investors who entrust their money to other people by facilitating the provision of disclosure necessary for investment decisions” and ensuring “that investors have the information they need to channel funds to the companies that can put that money to the best use by delivering the products and services people demand.”
Peirce then offered various steps as a “path toward more level, predictable terrain” for public companies.
One step “would be for the SEC to refrain from using enforcement actions to override managerial decision-making.” She stated:
Issues To Consider From The Moog Enforcement Action
This previous post highlighted the $1.7 million Foreign Corrupt Practices Act enforcement actions against Moog Inc. concerning subsidiary conduct in India.
This post highlights additional issues to consider.
No Prior Disclosure
It is rarely a surprise when a publicly-traded company (an issuer under FCPA speak) resolves an FCPA enforcement action because most issuers disclose FCPA scrutiny in an SEC filing.
A Look Back At World-Wide Coin
This recent post highlighted how a court rejected the SEC’s broad internal controls theory in SEC v. SolarWinds.
The decision in SolarWinds was a rare instance of a court substantively interpreting the internal controls provisions of the Foreign Corrupt Practice Act.
Prior to SolarWinds, a leading case concerning the scope of the internal controls provisions (as well as the books and records provisions) was SEC v. World-Wide Coin Investments, Ltd., 567 F. Supp. 724 (N.D. Ga. 1983) (a decision frequently cited in SolarWinds).
Pity R.R. Donnelley & Sons?
Imagine a company coughing up millions of dollars of shareholder money to settle an SEC enforcement action based, in part, on an enforcement theory that a federal court a mere 30 days later concluded was incorrect.
As highlighted in this prior post, on June 18, 2024 the SEC announced that R.R. Donnelley & Sons Company (RRD), a global provider of business communication and marketing services, agreed to pay over $2.1 million to settle disclosure and internal control failure charges relating to cybersecurity incidents and alerts in late 2021.
Court Rejects SEC’s Broad Internal Controls Enforcement Theory
The Foreign Corrupt Practices Act has always been a law much broader than its name suggests.
Sure, the FCPA contains anti-bribery provisions which concern foreign bribery.
Sure, the FCPA’s books and records and internal controls provisions can be implicated in foreign bribery schemes.
However, the fact remains that most FCPA enforcement actions (that is enforcement actions that charge or find violations of the FCPA’s books and records and internal controls provisions) have nothing to do with foreign bribery. For lack of a better term, these enforcement actions have longed been called non-FCPA, FCPA enforcement actions on this site.
This 2023 post highlighted the SEC’s enforcement action against Austin, Texas-based software company SolarWinds Corporation and its chief information security officer, Timothy Brown, for fraud and internal control failures relating to allegedly known cybersecurity risks and vulnerabilities.