An industry sweep is a concept that entered the FCPA vocabulary over a decade ago.
As explained in this prior post by an FCPA practitioner:
“Industry sweeps are often led by the Securities and Exchange Commission (“SEC”), which has broad subpoena power as a regulatory agency, arguably broader oversight authority than prosecutors. They are different from internal investigations or traditional government investigations, and present different challenges to companies. Because the catalyst may be wrongdoing in a single company, agencies may have no evidence or suspicion of specific violations in the companies subject to an industry sweep. A sweep may thus begin with possible cause, not probable cause. In sweeps, agencies broadly solicit information from companies about their past FCPA issues or present practices. And they may explicitly encourage companies to volunteer incriminating information about competitors. This practice not only fuels the “salesman’s defense” (that “everybody does it”), but can also generate anecdotal or speculative information that simply leads to additional rounds of inquiries.
Inevitably, industry sweeps become organic and evolve, with government investigators using information from one company as the basis for additional requests to others. Pooling information about unreliable third parties, suspect government instrumentalities, and information about employees who have worked for multiple companies can prolong an investigation or cause its scope to expand or turn in new directions.”
According to this Bloomberg report, the SEC is currently sweeping various tech companies asking about relationships with distributors or other business partners outside of the U.S.
Bloomberg reports:
“The US Securities and Exchange Commission is asking publicly traded tech companies about their relationships with distributors and other business partners outside the US in a push to root out possible corruption, according to people familiar with the matter.
The SEC started sending letters to the firms earlier this year under its mandate to enforce the Foreign Corrupt Practices Act …
[…]
The agency’s FCPA unit is asking whether the companies did business with a list of dozens of intermediaries — some of which have been implicated in other investigations — across various regions, including Asia, Latin America and Africa, said one of the people. All of the people familiar asked not to be named discussing a confidential matter.
The companies that have received the inquiries about their contractors couldn’t immediately be identified. They haven’t been accused of wrongdoing and the inquiry, which is in its early stages, could result in no action.
[…]
The inquiries came from staff at the SEC’s Fort Worth office …
[…]
The letters are part of an enforcement sweep, which typically involves sending questions to multiple companies in a particular industry. The SEC, which shares a mandate with the Justice Department to enforce the FCPA, is focusing across the tech supply chain on companies that sell equipment and/or services to governments, said one of the people.”
As stated in the prior guest post on industry sweeps:
“What threshold of evidence is appropriate to target a particular company in an industry sweep? What prevents sweeps from becoming fishing expeditions that are costly to the companies and unconstrained in the agencies? What are the disclosure considerations for a company in a sweep investigation focused on Asia if issues arise in Latin America? Can a company decline to participate or cooperate, and, if so, what are the risks or trade-offs for doing so? Answers to questions such as these — which often raise policy issues, not legal ones — could affect corporate attitudes about disclosure generally, and possibly result in challenges to the agencies.”
