Recently, the SEC noted the passing of Roderick Hills (Chairman of the Securities and Exchange Commission from 1975 to 1977). It was during this time period in which Congress was engaged in its multi-year investigation and deliberation of the so-called foreign corporate payments problem.
As told in “The Story of the Foreign Corrupt Practices Act,” Hills was a prominent voice during this process and he testified at several Congressional hearings.
While the SEC (compared to the DOJ and other government departments) played the most prominent and trusted role during Congress’s consideration of the foreign corporate payments problem, the SEC’s role was also the most curious as the Commission was a reluctant actor in Congress’s quest for a new and direct legislative remedy to the problem.
It is clear from the legislative record that the SEC wanted no part in policing the morality of American business or in determining what was an improper foreign corporate payment. Rather, the SEC – true to its then mission – was focused on ensuring disclosure of material foreign corporate payments to investors by companies subject to its jurisdiction. In other words, the SEC wanted no part in enforcing the FCPA’s anti-bribery provisions.
Fast forward to the present when the SEC has a specific FCPA Unit and views enforcement of the FCPA’s anti-bribery provisions as central to its mission of investor protection.
Below are excerpts from Congressional testimony given by Hills relevant to the above issue.
“We don’t have the skill to say should we, can we, enforce the laws of the rest of the world? I’m sure the West Digest that reports these decisions would be full of cases trying to decide whether a given payment is or is not legal. The legal profession has enough business without going to all the countries of the world to try to establish whether a given transaction is right or wrong. We are concerned with the materiality of these practices.”
Prohibiting Bribes to Foreign Officials: Hearing Before the S. Comm. on Banking, Hous., and Urban Affairs, 94th Cong. 19 (1976)
“[Congress] has asked for our views as to the adequacy and effectiveness of the present laws and regulations and any recommendations we may have for improving them. As [Congress] knows, a primary purpose of the Federal securities law and the Commission’s regulations is to protect investors by requiring issuers of securities to make full and fair disclosure of material facts. In my opinion, these statutes provide the Commission adequate authority to require appropriate disclosure about the matters I have been discussing in order to protect stockholders.”
Abuses of Corporate Power: Hearings Before the Subcomm. on Priorities and Econ. in Gov’t of the Joint Econ. Comm., 94th Cong. 13 (1976)
“The Commission does not oppose direct prohibitions against these payments, but we have previously stated that, as a matter of principle, we would prefer not to be involved even in the civil enforcement of such prohibitions. As a matter of long experience, it is our collective judgment that disclosure is a sufficient deterrent to the improper activities with which we are concerned.”
“[A]s a matter of longstanding tradition and practice, the [SEC] has been a disclosure agency. Causing questionable conduct to be revealed to the public has a deterrent effect. Consistent with our past tradition, we would rather not get into the business, however, we think get involved in prohibiting particular payments. It is a different thing entirely to try to prohibit something, to try to make a decision as to whether it is legal or illegal, or proper or improper. Under present law, if it is material, we cause its disclosure, and we need not get into the finer points of whether it is or is not legal.”
Foreign Payments Disclosure: Hearings Before the Subcomm. on Consumer Prot. and Fin. of the H. Comm. on Interstate and Foreign Commerce, 94th Cong. 2 (1976)
“[The SEC] would prefer not to be involved in civil enforcement of such [anti-bribery] prohibitions since they embody separate and distinct policies from those underlying the federal securities laws. The securities laws are designed primarily to insure disclosure to investors of all of the relevant facts concerning corporations which seek to raise their capital from the public at large. The [anti-bribery provisions], on the other hand, would impose substantive regulation on a particular aspect of corporate behavior. The Commission recognizes the congressional interest in enacting these prohibitions, but the enforcement of such provisions does not easily fit within the Commission’s mandate.”
Foreign Corrupt Practices and Domestic and Foreign Investment Disclosure: Hearing Before the S. Comm on Banking, Hous., and Urban Affairs, 95th Cong. 98–99 (1977)
The following statement by Senator Proxmire to Hills best captures the SEC’s reluctant role in seeking a new and direct legislative remedy to the foreign corporate payments problem:
“[Y]ou were responsible for about the only action we have taken with respect to foreign bribery and your agreements, your work, with various corporations to persuade them to cleanse their operation have been a fine example of how an agency can work to get this job done even without legislation. Because of that, you see, we would like to have you involved at least on the investigative disclosure basis. And perhaps we can work something out that would protect you from not pushing you into something you think you wouldn’t want to do.”
Foreign Corrupt Practices and Domestic and Foreign Investment Disclosure: Hearing Before the S. Comm on Banking, Hous., and Urban Affairs, 95th Cong. 98–99 (1977)
