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.
On SEC Enforcement …
This recent FCPA Blog post titled “Supreme Court Challenges Shake Foundation of FCPA Enforcement at the SEC” asserts:
“Complaints about the way the SEC brings and resolves nearly all of its enforcement actions, including FCPA violations, have finally come to the surface. First, with a unanimous Supreme Court decision in April that gives defendants an easier path to challenge the constitutionality of the SEC’s in-house court. And second, with a case the Supreme Court put on its docket in May that questions whether the SEC’s in-house court should exist at all.
Because the SEC adjudicates nearly nine out of ten enforcement actions in-house, major changes to the powers of its in-house court could radically reshape the enforcement landscape.”
Quick background: The SEC can enforce the federal securities laws (including the FCPA) either through its in-house court presided over by an administrative law judge or through a civil enforcement action in federal court.”
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?
Thus Far From The SEC
Thus far in 2023, the SEC has brought four FCPA enforcement actions.
All of the enforcement actions have been against foreign issuers.
All of the enforcement actions have been resolved through an administrative order (meaning there was no judicial scrutiny whatsoever).
All of the enforcement actions have lacked related enforcement actions against individuals.
Is The SEC Finished With NPAs And DPAs?
In early 2010, the SEC (see here) announced a series of measures “to further strengthen its enforcement program by encouraging greater cooperation from individuals and companies in the agency’s investigations and enforcement actions.”
The SEC’s then Director of Enforcement called the measures “a potential game-changer for the Division of Enforcement.”
Among the measures the SEC adopted was use of deferred prosecution agreements and non-prosecution agreements – resolution vehicles the SEC described as “tools [that] have been regularly and successfully used by the Justice Department in its criminal investigations and prosecutions” (which of course was and still remains a debatable point).
However, since this “game-changing” moment over 13 years ago, the SEC has only used a DPA twice to resolve an issuer FCPA enforcement action and an NPA three times. Moreover, the SEC’s last use of an NPA or DPA to resolve an issuer FCPA enforcement was in mid-2016. All of which begs the question: is the SEC finished using NPAs and DPAs to resolve issuer FCPA enforcement actions?