A mixture of various things worthy of highlighting.
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Recently, former high-ranking SEC officials William McLucas and Matthew Martens took to the pages of the Wall Street Journal with this piece titled “How to Rein in the SEC.”
The authors stated as follows concerning the SEC’s recent preference of resolving enforcement actions internally through its own administrative process.
“The timing of the agency’s decision in late 2013 to move toward more in-house proceedings couldn’t have been worse. In the months surrounding the SEC’s shift, it suffered several high-profile defeats in federal court. In October 2013, the SEC lost the trial on its insider-trading charges against Mark Cuban, the owner of the Dallas Mavericks NBA franchise. A few months later, the SEC lost an accounting-fraud trial against the chief financial officer of a publicly traded company in Kansas. A number of other SEC actions against supposed inside traders were dismissed by federal courts or rejected by juries. (Disclosure: The authors participated on various sides of some of these matters.)
It was against this backdrop that the SEC publicly vowed to bring more cases as administrative proceedings. The agency contends that it was simply making use of new tools provided by the Dodd-Frank law, which authorized the SEC to charge virtually any offense in an administrative forum and to impose extraordinarily harsh financial penalties without the benefit of a jury. But the Dodd-Frank power to move more cases in-house was conferred in 2010 and lay largely unused until the agency’s 2013 announcement of its new plans to make greater use of that authority.
One need not be a conspiracy theorist to wonder whether at least part of the SEC’s rationale was to avoid the federal courts. In government as in comedy, timing is everything. And here the SEC’s timing raises serious questions about the agency’s move toward the in-house forum.”
Three cheers for this observation.
In my 2014 article “A Foreign Corrupt Practices Act Narrative,” I likewise observed as follows.
“The SEC’s response to [recent] judicial scrutiny [of SEC enforcement theories] has been, as strange as it may sound, to bypass the judicial system altogether when resolving many of its enforcement actions including in the FCPA context.”
As reported today by the Wall Street Journal:
“A federal judge ruled Monday that the Securities and Exchange Commission’s use of an in-house judge to preside over an insider-trading case was “likely unconstitutional,” a potential blow to the agency’s controversial use of its internal tribunal. The decision possibly creates a serious headache for the SEC, which is increasingly using its five administrative-law judges to hear its cases, rather than sending them to federal court, legal experts said. Although the ruling was preliminary, and won’t necessarily be duplicated in other federal courts, it could have ramifications for other SEC cases and potentially other federal agencies.”
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AlixPartners recently released this “Combating Corporate Corruption” survey. Among the results that caught my eye.
“As much as 64% of our respondents said they believe there are places in the world where it’s impossible to do business without encountering corruption. When asked to identify such places, 62% cited Russia; 53%, Africa; and 46%, China. Still, a number of companies opted to do business in high-risk regions; specifically, 66% said they have not avoided doing business in a region because of the risk of corruption. Although battling corruption remains a priority, our findings suggest that many companies see an uneven playing field.
Among survey participants who are with organizations that have dedicated compliance programs, such programs are tailored to a variety of legal requirements (figure 3). For example, 73% said the program specifically addresses the US Foreign Corrupt Practices Act; 55%, the UK Bribery Act; and 44%, the US Office of Foreign Assets Control.”
[…]
“We asked respondents to take stock of their most-successful anticorruption programs and to cite what they see as the top factors in reducing corruption risk in their organizations. The most-important practices they identified were proper anticorruption training for employees (44%), compliance policies that specifically address corruption (42%), and internal audits (usually done on an annual basis) (39%) (figure 4). Only 21% cited expanding the scope of their audits for foreign subsidiaries, and just 11% mentioned the increased use of incentives.”
I am all for creative marketing teasers, but the below statement from the survey report is not true. (See here).
“Anticorruption enforcement remained active in 2014, with a sharp rise in enforcement actions taken by both the US Department of Justice and the US Securities and Exchange Commission against corporate defendants.”
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Comparing enforcement of the FCPA with enforcement of FCPA-like laws around the world is not a valid comparison for the reasons highlighted in this article “Ten Seldom Discussed FCPA Facts That You Need to Know.”
There are other limitations as well. As noted in the most recent version of Trace International’s Global Enforcement Report:
“The TRACE Compendium and the GER 2014 cannot provide a precise and objective measurement of global anti-corruption enforcement. Instead, they are meant to provide general information on trends in international anti-corruption efforts on a broad scale.”
Despite the many limitations, the GER does as good of job as any tracking global enforcement of FCPA-like laws.
Moreover, given my own focus on FCPA enforcement statistics and concern of the various creative counting methods used by others (see here for example), I particularly like the Introduction of the GER in which Trace articulates a similar “core” approach that I use in keeping my enforcement statistics. The GER states:
“When a company and its employees or representatives face multiple enforcement actions involving substantially the same conduct, only one enforcement action is counted in the GER 2014. If a company does not face an enforcement action but its employees or representatives do, the enforcement action is counted as one enforcement action.”