When you run a daily website such as this for 13 years there is sometimes a cycle of coverage.
For instance, over the years November posts typically include the fact that the FCPA “tips” are a minor component of the SEC’s whistleblower program (that was yesterday’s post) as well as this post questioning – based on the SEC’s own data – whether the SEC even needs a specific FCPA unit.
In fiscal year 2010, the Securities and Exchange Commission created a specialized FCPA Unit (one of only five in its enforcement division “dedicated to particular highly specialized and complex areas of securities law“).
The below post highlights how, based on the SEC’s own enforcement statistics, FCPA enforcement actions comprise a minuscule percentage of its overall enforcement actions as well as other quantitative and qualitative factors relevant to the question posed.
Given that the SEC’s FCPA Unit is only one of five specialized units within the enforcement division, one might think that the FCPA Unit has a heavy workload.
As highlighted in the below graphic from the SEC’s recent FY2023 Annual Report, FCPA enforcement actions constituted just 1% of the SEC’s overall enforcement actions over its past fiscal year.
The small percentage of FCPA enforcement actions as a total of overall SEC enforcement actions in FY2023 was not an aberration.
In FY2022, FCPA enforcement actions comprised just 1% of the SEC’s overall enforcement actions; in FY2021, FCPA enforcement actions comprised just 1% of the SEC’s overall enforcement actions; in FY2020 FCPA enforcement actions comprised just 2% of the SEC’s overall enforcement actions; in FY2019 FCPA enforcement actions comprised just 3% of the SEC’s overall enforcement actions; in FY2018 FCPA enforcement action comprised just 3% of the SEC’s overall enforcement actions; and in FY2017 FCPA enforcement actions comprised just 4% of the SEC’s overall enforcement actions.
In short, based on the SEC’s own data, FCPA enforcement actions comprise a minuscule percentage of its overall enforcement actions.
What happens in those enforcement actions is also relevant in addressing the question of whether the SEC really even needs a specific FCPA unit.
In any given year, approximately 50% of corporate SEC FCPA enforcement actions are the result of corporate voluntary disclosures. (See here).
Even if an SEC corporate FCPA enforcement action is not the result of a voluntary disclosure, nearly every company the subject of SEC scrutiny cooperates with the SEC. For instance, in the Gartner enforcement action, the SEC stated:
“[The company’s] cooperation included providing regular updates and sharing facts identified in the course of its own internal investigation, making foreign-based employees available for interviews in the United States, and encouraging cooperation by former employees.”
Likewise, in the Phillips enforcement action, the SEC stated:
“Philips undertook an internal investigation and regularly shared with Commission staff the facts developed in its inquiry, including facts previously unknown to the staff, and identified and voluntarily provided translations of key non-privileged documents.”
Likewise, in the Rio Tinto enforcement action, the SEC stated:
“Rio Tinto cooperated in the Commission’s investigation by identifying and timely producing key documents identified in the course of its own internal investigation, providing the facts developed in its internal investigation, and making current or former employees available to the Commission staff.”
Likewise, in the Flutter International enforcement action, the SEC stated:
“The Company’s and Flutter’s cooperation included sharing facts developed in the course of its own internal investigation and forensic accounting reviews, providing translated copies of various documents and relevant witness statements, and encouraging parties outside of the Commission’s subpoena power to provide relevant evidence and information.”
Because issuers nearly always cooperate, never once in FCPA history has the SEC (including its FCPA Unit formed in 2010) been put to its burden of proof in an issuer enforcement action and when the SEC has been put to its ultimate burden of proof in individual FCPA enforcement actions, it has never prevailed. (See here).
Is the SEC’s FCPA Unit bringing individual FCPA enforcement actions?
As highlighted in this recent post, the current gap in individual SEC FCPA enforcement actions is literally over three years!
According to the SEC, “the FCPA Unit has approximately three dozen attorneys and forensic accountants …”.
Given the above dynamics, does the SEC really need three dozen people to (in many instances) process corporate voluntary disclosures and/or otherwise resolve matters against cooperating companies in the general absence of judicial scrutiny? Could these SEC personnel be better allocated to cases that comprise a much larger slice of the SEC overall enforcement pie?
These are serious questions.
And in posing the questions, recognize that the SEC never wanted any part in enforcing the FCPA’s anti-bribery provisions. To learn more about this, see the article “The Story of the Foreign Corrupt Practices.” (See also here including links embedded therein).