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SEC Co-Director Of Enforcement Peikin On International Cooperation


Recently Steven Peikin (Co-Director of the SEC’s Enforcement Division) delivered this speech in which he talked about international cooperation and how it is “critical to the SEC’s civil law enforcement success” including the Foreign Corrupt Practices Act space.

In addition, Peikin stated that “vigorous enforcement of the FCPA remains a high priority for the SEC.”

Peikin began his speech:

“I would like to talk to you about how international cooperation assists the SEC’s Division of Enforcement in its investor and market integrity protection missions. I start with what I think is an obvious proposition: Collaboration with international regulators and law enforcement is critical to the SEC’s civil law enforcement success. In today’s global, interconnected marketplace, fraudulent schemes and other misconduct often have cross-border elements, and the need for cooperation between the SEC’s Division of Enforcement and international law enforcement and regulatory counterparts has never been greater. Our investigations often involve witnesses and evidence in different countries, transactions that cross international boundaries, and the resulting application of multiple different legal systems.

For many years, the SEC Enforcement Division has cooperated extensively with international partners, and these relationships and cooperative arrangements have given us the ability to leverage the information and resources of our counterparts to accomplish our enforcement goals. Some statistics help to drive this point home. In this past fiscal year alone, almost a third of the SEC’s 817 enforcement actions involved an international component. The SEC’s Office of International Affairs (OIA), which assists us in obtaining international assistance, handled more than 1,200 requests for administrative assistance made to foreign regulators, many of which were made under the International Organization of Securities Commissions (IOSCO) Multilateral Memorandum of Understanding. These statistics are not an anomaly, but rather represent a consistent upward trend over the past several fiscal years.

I will focus my remarks on a few areas within the SEC’s civil law enforcement jurisdiction where we see the most transnational activity and, accordingly, the need for international cooperation.”

Sandwiched between discussion of cryptoassets and initial coin offerings and microcap manipulation schemes, Peikin talked about the FCPA. He stated:

“The FCPA is subject to a dual enforcement regime – the Department of Justice (DOJ) pursues criminal enforcement of the statute, and the SEC has civil enforcement authority. In the three decades since Congress enacted the FCPA, the extent of corporate bribery has become more clear and its ramifications in a transnational economy more stark.”

Time out right there.

The FCPA is now in its 40th year. What does it say about the success of the FCPA in achieving its objectives when 40 years later, high-ranking FCPA enforcement officials says that “the extent of corporate bribery has become more clear and its ramifications in a transnational economy more stark?”

See here for a video addressing the question of whether the FCPA has been successful in achieving its objectives.

Peikin continued:

“While bribery of government officials may offer the prospect of short term gains for some companies, I believe it is pernicious and bad for business. It is anti-competitive, leading to distorted prices and disadvantaging honest businesses that do not pay bribes. Bribery has destructive effects within a business as well, undermining employee confidence in a company’s management and fostering a permissive atmosphere for other kinds of corporate misconduct, such as employee self-dealing, embezzlement, financial fraud, and anti-competitive behavior. Companies that pay bribes to win business ultimately undermine their own long-term interests and the best interests of their investors. For these and other reasons, the U.S. enacted the FCPA in 1977, making it illegal, both civilly and criminally, for U.S. companies and individuals acting on their behalf to pay bribes to foreign officials.”

In the above paragraph, Peikin used the “b” word (that is bribery) five times. However, as highlighted in this post, it all depends what the “b” word means.

  • Is “golf in the morning and beer-drinking in the evening” (see here) really “pernicious and bad for business”?
  • Do tickets to sporting events (see here for example) really have “destructive effects within a business”?
  • Does making charitable donations (see here for example) “ultimately undermine [a company’s] long-term interests and the best interests of their investors”?

Peikin continued:

“Vigorous enforcement of the FCPA remains a high priority for the SEC. As Jay Clayton, Chairman of the SEC, noted during his confirmation hearing before the U.S. Senate, bribery and corruption have no place in society. They often go hand-in-hand with many other societal ills, including instability, inequality, and poverty, and have anti-competitive effects, including putting honest businesses at a disadvantage. Combatting corruption therefore remains an important government mission.

But, as I’ve previously expressed, in my view, in an increasingly international enforcement environment, the U.S. authorities cannot – and should not – go it alone in fighting corruption. As global markets become more interconnected and complex, no one country or agency can effectively fight bribery and corruption by itself. Anti-corruption enforcement is a team effort. The Enforcement Division’s fight against corruption is much more effective when our international colleagues join us in a shared commitment to eradicating corruption and bribery.

Fortunately, I have observed that the level of cooperation and coordination among regulators and law enforcement worldwide is on a sharply upward trajectory, particularly in matters involving corruption. In the past two fiscal years alone, the SEC has publicly acknowledged assistance from more than 25 different jurisdictions in FCPA matters. And, one need look no further than several substantial cases we resolved globally, including the settlements that (i) we, the DOJ, and Dutch regulators entered into with VimpelCom, a telecommunications provider based in the Netherlands, (ii) the SEC, DOJ and Brazilian authorities entered into with aircraft manufacturer Embraer and oil-and-gas company Petrobras, (iii) the SEC, DOJ, and Brazilian and Swiss authorities entered into with petrochemical manufacturer Braskem, and (iv) the collaboration between the SEC, DOJ, and Dutch and Swedish law enforcement authorities with regard to telecommunications provider Teliasonera.

These resolutions – as well as others in the FCPA space – would not have been possible but for the invaluable assistance from foreign authorities and regulators, such as helping us to obtain witness statements and on-the-record testimony, compelling document production, providing bank records, and other sharing of information. We rely on our international partners to help us develop our cases, and with coordinated resolutions we are each able to magnify the deterrent effect of the cases the Commission brings while also offsetting the financial sanctions as appropriate. These sorts of global resolutions send strong messages of deterrence to companies and individuals, as they know they will face potential sanctions from the U.S., as well as other places they do significant business. Global settlements also allow us to resolve cases efficiently and provide closure to companies and individuals on all exposures they face. I fully expect the trend of the Enforcement Division working closely with foreign law enforcement and regulators in anti-bribery actions to continue its upward trajectory in the coming years.”

Peikin concluded:

“As we look forward to what the future of international cooperation may bring, no discussion would be complete if I did not reference some of the challenges we face. Despite the upward trajectory in international cooperation on enforcement matters, information reasonably necessary for our shared goals of investor protection and the protection of market integrity does not always flow freely to the U.S. regulators from foreign jurisdictions.

Barriers to information may come in various forms, including data protection, privacy, confidentiality, bank secrecy, state secrecy, or national security laws. These laws, many of which have rational objectives unrelated to our capital markets, can restrict access to critical information that enables us to be effective in our enforcement mission. The implications for SEC enforcement are stark. As I mentioned earlier, over a third of the cases brought by the SEC last fiscal year involved an international component. Those cases were able to be brought in large part due to international assistance we received. Had the assistance we received been limited in some material respect, we might not have been able to prosecute those cases and, hence, bad actors in our respective securities markets might have been able to continue their wrongdoing.

Among other things, we need to address the impact of the European Union’s new General Data Protection Regulation (GDPR) on international cooperation. The implementation of the GDPR in Europe has the potential to curtail certain aspects of the cooperative regime that exists between the SEC and European securities regulators and law enforcement on securities-related matters. We are working with our European counterparts and IOSCO to overcome these challenges and develop frameworks that allow us to continue to receive valuable overseas evidence while respecting the EU data protection regime. We must come up with solutions while recognizing that we do not operate in a one-size-fits-all world and that there are, for good reason, significant differences across various markets, as well as regulatory regimes.

Another challenge that we and our international counterparts face simply boils down to human ingenuity and its application to wrongdoing. Simply put, the increasing sophistication of bad actors never seems to lag.”

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