That Was Then, This Is Now
To best understand (and place in context) current SEC FCPA enforcement positions and policies, it is useful to understand past SEC FCPA enforcement positions and policies.
The year was 1981, the event was the American Institute of Certified Public Accountants, and the speaker was Harold Williams, the Chairman of the SEC. The speech did not contain the standard disclaimer (i.e. I am just an individual and not speaking on behalf of the SEC), rather Williams specifically stated that his remarks “constitute a statement of the Commission’s policy.”
Williams focused his remarks (here) “solely to one major auditing development of recent years: the accounting provisions of the Foreign Corrupt Practices Act of 1977″ and stated that “the anxieties created by the Foreign Corrupt Practices Act – among men and women of utmost good faith – have been, in my experience without equal.”
Williams tried to damper these anxieties and spoke about the scope of the provisions including when an enforcement action would be warranted.
Duped By Certain China Subsidiary Employees, 3M Resolves A $6.5 Million Enforcement Action
The SEC announced today that 3M resolved a $6.5 million Foreign Corrupt Practices Act enforcement.
The basics are as follows.
Approximately 6-10 years ago, a former Marketing Manager of a 3M China-based subsidiary “secretly” provided “tourism activities” for Chinese health care officials.
The Marketing Manager “would create a travel itinerary that included various legitimate business, training and marketing activities for submission to 3M-China’s compliance personnel for approval,” however there were “alternate itineraries” that “consisted of various tourism activities at or near the location of the educational events.”
There is no suggestion that anyone at 3M headquarters knew of or approved of the conduct. Indeed, subsidiary employees, among other things, “falsified internal compliance documents that affirmatively denied and/or omitted mention of the Tourism Activities that were planned as part of the overseas trip.”
That Was Then
To best understand (and place in context) current SEC FCPA enforcement positions and policies, it is useful to understand past SEC FCPA enforcement positions and policies.
The year was 1981, the event was the American Institute of Certified Public Accountants, and the speaker was Harold Williams, the Chairman of the SEC.
Williams focused his remarks (here) “solely to one major auditing development of recent years: the accounting provisions of the Foreign Corrupt Practices Act of 1977.”
Williams began has remarks as follows.
A Further Reminder That The FCPA Has Always Been A Law Much Broader Than Its Name Suggests
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 and these provisions are among the most generic legal provisions one can possibly find.
The latest example is this recent SEC enforcement action against Cantaloupe Inc. (a manufacturer and distributor of cashless payment devices which operated under the name USA Technologies Inc. prior to April 2021).
If The SEC Were An Issuer …
The FCPA’s books and records and internal control provisions require issuers (generally FCPA speak for publicly-traded companies) to: (i) “make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer;” and (ii) devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that (among other things) transactions are executed in accordance with management’s general or specific authorization, transactions are recorded as necessary to maintain accountability of assets, and access to assets is permitted only in accordance with management’s general or specific authorization.
The SEC enforces these provisions against issuers – often in expansive ways.
The SEC, of course, is not an issuer, but every so often it is interesting to spend a few moments in “hypothetical land.” (See this prior post). What if the SEC were an issuer?