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 question arises however: does the SEC really even need a specific FCPA unit?
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 FY2020 annual report, FCPA enforcement action constituted just 2% of the SEC’s overall enforcement actions over the past year.
As the chart below illustrates, the majority of the SEC’s 405 standalone cases in Fiscal Year 2020 concerned securities offerings (32%), investment advisory and investment company issues (21%), and issuer reporting/accounting and auditing (15%) matters. The SEC also continued to bring actions relating to broker-dealers (10%), insider trading (8%), and market manipulation (5%), as well as other areas such as Public Finance (3%) and FCPA (2%).
The small percentage of FCPA enforcement actions as a total of overall SEC enforcement actions in FY2020 was not an aberration. As highlighted in the below graphic from the SEC’s FY 2019 annual report, FCPA enforcement actions constituted just 3% of the SEC’s overall enforcement actions in FY2019.
FY2019 was not an aberration either. As highlighted in the below graphic from the SEC’s recent FY 2018 annual report, FCPA enforcement actions also constituted just 3% of SEC’s overall enforcement actions in FY 2018 and FY 2017.
As the below graphic from the SEC’s FY 2017 annual report also demonstrates, the same was true in FY 2016.
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). What happens in a voluntary disclosure? By way of example, in the Dunn & Bradstreet enforcement action, the SEC stated:
“D&B’s cooperation included voluntarily producing documents from overseas, summarizing the findings of its internal investigation, translating numerous key documents, providing timely factual summaries of witness interviews done in the course of its internal investigation, making employees available to the Commission staff, and providing for employees or former employees to travel to the United States for interviews.”
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 Sanofi enforcement action, the SEC stated:
“During the course of the investigation, [Sanofi] provided regular briefings regarding the facts developed in its internal investigation in Kazakhstan, Levant, and the Gulf, and with respect to other countries. [Sanofi] timely conveyed the facts it learned in the course of its investigation, including facts that the Commission would not have been able to readily and independently discover, produced and highlighted particularly relevant documents, promptly responded to additional requests by the Commission staff, and provided translations of documents as needed.”
Because companies cooperate, never once has the SEC’s FCPA Unit’s corporate enforcement theories been subjected to judicial scrutiny and when the SEC has been put to its ultimate burden of proof in individual FCPA enforcement actions, it has never prevailed. (See here).
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 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).