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In The Words Of Hester Peirce

Peirce

This site is a big fan of SEC Commissioner Hester Peirce and this post highlights two recent statements she issued.

Neither of the statements are Foreign Corrupt Practices Act specific, but both are FCPA relevant.

Earlier this week, the SEC announced “settled charges against The Brink’s Company (“Brinks”) for requiring employees to sign restrictive confidentiality agreements prohibiting the disclosure of any financial or business information to third parties, without an exemption for potential SEC whistleblowers, from at least 2015 through 2019.”

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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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It Has Been Over 1.5 Years Since The SEC Has Brought An Individual FCPA Enforcement Action

waiting

One reason to take FCPA enforcement agency rhetoric with a grain of salt is because it is warranted.

For instance, the FCPA enforcement agencies often talk about the importance of x and how they are committed to x, but in reality rarely do x.

Case in point is SEC individual FCPA enforcement actions.

For many years, SEC enforcement officials have talked about the importance of individual FCPA enforcement actions and set forth below are representative quotes from over the years.

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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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Largest SEC Only FCPA Enforcement Actions

SEC

So-called “issuers” under the Foreign Corrupt Practices Act (that is companies with shares traded on a U.S. exchange or otherwise with reporting obligations to the Securities and Exchange Commission) are subject to both Securities and Exchange Commission and Department of Justice FCPA enforcement.

However, many FCPA enforcement actions against issuers are SEC only and lack a DOJ component. Although FCPA enforcement agencies rarely have to “prove” an FCPA case against issuers (rather issuers typically resolve an enforcement action through a resolution vehicle not subjected to any meaningful judicial scrutiny), theoretically the DOJ in a criminal action has a much higher burden of proof (beyond a reasonable doubt) compared to the SEC in a civil action (preponderance of the evidence).

Regardless of the reasons for SEC enforcement actions against issuers that lack a DOJ component, set forth below are the 20 largest SEC only FCPA enforcement actions.

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