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If The Government Can Do That, Why Can’t It Do This?

A foreign official in Country A. A state-owned enterprise in Country B. A third-party agent in Country C.

Foreign Corrupt Practices Act enforcement actions are full of vague references to problematic actors. However, other business organizations, including those doing business in the same country or same industry, are generally left clueless as to the identity of the problematic actors.

Perhaps FCPA compliance and risk mitigation could be enhanced if the government specifically identified problematic actors so that other business organizations could react accordingly.

Recently, the SEC announced [1] an update to “its list of unregistered entities that use misleading information to solicit primarily non-U.S. investors, adding 11 soliciting entities, four impersonators of genuine firms, and nine bogus regulators.” As stated in the release:

“The SEC’s list of soliciting entities that have been the subject of investor complaints, known as the Public Alert: Unregistered Soliciting Entities (PAUSE) list, enables investors to better inform themselves and avoid being a victim of fraud. The latest additions are firms that SEC staff found were providing inaccurate information about their affiliation, location, or registration. […}

In addition to alerting investors to firms falsely claiming to be registered, the PAUSE list flags those impersonating registered securities firms and bogus “regulators” who falsely claim to be government agencies or affiliates.  Inclusion on the PAUSE list does not mean the SEC has found violations of U.S. federal securities laws or made a judgment about the merits of any securities being offered.”

In the release Jennifer Diamantis (Chief of the SEC’s Office of Market Intelligence) stated: “By making this information readily available through the PAUSE list, investors are better able to evaluate solicitations to buy and sell securities and avoid being a victim of fraud.”


If the government can do that, why can’t the government publish an FCPA-like PAUSE list?

After all, the SEC has long maintained [3] that one of the reasons its enforces the FCPA is for investor protection. For instance, in the FCPA Guidance [4] the government states: “The FCPA was designed to prevent corrupt practices, protect investors, and provide a fair playing field for those honest companies trying to win business based on quality and price rather than bribes.” (See also here [5] “Bribery and corruption undermine and distort the marketplace and ultimately harm investors. Combatting corruption therefore remains an important government mission, including at the SEC’s Enforcement Division.”).

Similar to the PAUSE list, inclusion on an FCPA-like PAUSE list would not mean that the SEC has found such entities actually engaged in any improper conduct, only that it has information warranting a public warning about engaging with such entities.

As highlighted in this prior post [6], in previous eras of FCPA enforcement the government routinely identified with specificity the problematic actors.

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