A Summary Of The SEC’s Trial Court Woes In FCPA Enforcement Actions
As highlighted in this post, in the FCPA’s nearly 50 year history the SEC has never prevailed in an FCPA enforcement action when put to its ultimate burden of proof.
A brief explanation about what is meant by ultimate burden of proof. When an SEC complaint survives a motion to dismiss or even a summary judgment motion (as happened in the FCPA enforcement action against former Magyar Telekom executives Elek Straub, Andras Balogh and Tamas Morvai, see here and here) this does not represent the SEC prevailing on its ultimate burden of proof.
However, when a court grants a defendants motion to dismiss or summary judgment motion, this represents an SEC failure when put to its ultimate burden of proof.
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:
SEC FCPA Unit Chief – There Are “Plenty Of Situations” Where Not Disclosing “Would Be The Right Choice”
This recent article contains a few interesting quotes from SEC FCPA Unit Chief Charles Cain.
The article states: “The SEC’s enforcement division offers benefits to companies that self-report potential misconduct – usually in the form of reduced penalties and more lenient settlement conditions. Still, companies have no obligation to disclose potential violations, said Charles Cain, who leads the agency’s FCPA unit. “From my perspective, a company never has to come in and there are plenty of situations where learning about something, correcting it and moving on would be the right choice,” Cain told lawyers at a 4 November conference outside Washington, DC.”
Cain’s statement is spot-on (and consistent with voluntary disclosure observations often shared on this website) but hearing it from the head of the SEC’s FCPA Unit Chief is notable.
Does The SEC Even Need An FCPA Unit?
When you run a daily website such as this for 14 years there is sometimes a cycle of coverage.
For instance, over the years November posts typically include the fact that the FCPA “tips” are a minor component of the SEC’s whistleblower program (upcoming) as well as this post questioning – based on the SEC’s own data – whether the SEC even needs a specific FCPA unit.
In fiscal year 2010, the Securities and Exchange Commission created a specialized FCPA Unit (one of only five in its enforcement division “dedicated to particular highly specialized and complex areas of securities law“).
Given that the SEC’s FCPA Unit is only one of five specialized units within the enforcement division, one might think that the FCPA Unit has a heavy workload.
SEC Commissioners Blast SEC For “Monday Morning Quarterbacking”
“Monday morning quarterbacking” refers to criticizing the actions or decisions of others after the fact, using hindsight to assess situations and specify alternative solutions.
Recently, SEC Commissioners Hester Peirce and Mark Uyeda blasted the SEC for “Monday morning quarterbacking” for a recent enforcement action.
First, some background.
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.