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Does The SEC Even Need A Specific FCPA Unit?

questions to ask

When you run a daily website such as this for 12 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 (despite predications to the contrary) 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 unit (one of only five in its enforcement division “dedicated to particular highly specialized and complex areas of securities law“) devoted to enforcing the FCPA.

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.

Not exactly.

As highlighted in the below graphic from the SEC’s recent FY2021 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 FY2021 was not an aberration.

As highlighted in this prior post, 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 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 Deutsche Bank enforcement action, the SEC stated:

“Deutsche Bank’s cooperation included: responding promptly to the Commission’s requests for information and documents; identifying issues and facts that would likely be of interest to the Commission’s staff; providing regular updates of factual findings developed during the course of its own internal investigation; making employees and now-former employees located outside the United States available for interviews; and identifying key documents and providing factual chronologies to the Commission’s staff.”

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). Relevant to individual enforcement actions, as highlighted in this recent post, the current gap in individual SEC FCPA enforcement actions is approximately 13 months – the longest in 8 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).

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