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Do Your Hiring Practices Live Up To The SEC’s New Expectations?


As highlighted several times on FCPA Professor, there are two distinct questions that can be asked in connection with many instances of Foreign Corrupt Practices Act scrutiny and enforcement.

The first is whether, given the DOJ’s and/or SEC’s enforcement theories, the conduct at issue can expose a company to FCPA scrutiny and an FCPA enforcement action?

The second is whether Congress in passing the FCPA intended to capture the alleged conduct at issue and whether a court would find the alleged conduct in violation of the FCPA?

In a legal system based on the rule of law, the second question of course is more important, but as a practical matter risk averse business organizations care more about the first question.

Previous posts (here and here) highlighted critical questions concerning last week’s SEC enforcement action against BNY Mellon based on the company’s alleged internship hiring practices – an enforcement action that is expected to be the first of similar actions expected in coming months.

Now that the dust has settled, and until a business organization stands up to the SEC (small chance that will happen as the SEC has never been put to its burden of proof in a corporate FCPA enforcement action in history), issuers would be wise to ask whether its hiring practices live up to the SEC’s new expectations.

Those expectations, articulated by the SEC in the BNY Mellon action, are phrased below in the form of questions.

  • Does the company’s anti-corruption policy “explicitly address the hiring of government officials’ relatives”?
  • Does the company require “that every application for a full-time hire or an internship be routed through a centralized HR application process”?
  • Does the company’s Code of Conduct “require that every year each employee certify that he or she is not responsible for hiring through a non-centralized channel”?
  • Does the company’s application process require “that each applicant indicate whether he/she is a close personal associate of a government official or has recently been a government official?”

Even if your company is not an issuer subject to SEC jurisdiction, all business organizations should ask the above questions given that the SEC also charged BNY Mellon with FCPA anti-bribery violations – provisions which apply to all forms of business organization.

In short, the compliance message from the BNY Mellon enforcement action is that FCPA compliance is not just a legal function, not just a finance, accounting and auditing function, but now also a human resources function.

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