In this, the Foreign Corrupt Practices Act’s 40th year, it is prudent to take a step back and ponder the question of whether the FCPA has been successful in achieving its objectives. This of course begs the question: what is the definition of success? (See here a 25 minute video which explores this issue, see also posts here, here, and here).
Recently, Stephanie Avakian (Co-Director of the SEC’s Enforcement Division) delivered this speech. While the speech does not specifically mention the FCPA, Avakian nevertheless ponders the meaning of success when it comes to SEC enforcement (and after all, the SEC does have a specialized FCPA Unit – one of only five such specialized units).
“[W]hat does it mean for a civil law enforcement program like ours to be “successful”? Is it simply a numbers exercise? Or something more? We have spent a lot of time thinking about this, particularly at a time when resources are limited and we face many challenges. This exercise takes on even more meaning at this time of year; in the coming weeks, as has happened in past years, I expect to see many commentators analyze the SEC’s enforcement performance over the past fiscal year and draw conclusions about the effectiveness of SEC enforcement based on their slicing and dicing of the various numbers.
Let me be emphatic about this. Steve [Peikin also Co-Director of Enforcement] and I fundamentally reject the premise these analyses embrace – that numbers – standing alone – can adequately measure the success or impact of an enforcement program. Statistics such as the number of actions the SEC brought in a fiscal year and the dollar amount of judgments and orders obtained in that year are interesting so far as they go, but they only tell us so much. Put simply, statistics do not provide a full and meaningful picture of the quality, nature, and effectiveness of the Division’s efforts.
So, if numbers do not tell the story, what does? Asked another way, how should one measure the SEC’s success as the primary civil enforcer of the federal securities laws? Since being appointed Co-Directors, we have asked ourselves that question many times, and we have maintained that the best way to assess the SEC Enforcement Division’s effectiveness is by looking at the nature and quality of the SEC’s actions. Are we bringing meaningful cases that send clear and important messages to market participants and investors? Are we making an impact?
While statistics provide some information, they do not present a real, full picture of the nature or effectiveness of an enforcement program. Any assessment that suggests our effectiveness should be measured solely based on the number of cases we bring over any particular period of time is misguided. We are committed to quality: to have as broad an impact on the landscape we police as possible; to bring cases that send messages of general and specific deterrence; and to seek and obtain remedies tailored to the conduct at issue and the message we want to send. For every enforcement action brought by the Commission, the market should be able to understand why the Commission brought an enforcement action, understand the Commission’s view of the conduct at issue, and understand why the Commission’s action was in the interest of investors.”
As indicated above, Avakian rightly prioritized quality over quality (an issue frequently discussed on these pages as well as this article “Measuring the Impact of NPAs and DPAs on FCPA Enforcement concluding that alternative resolution vehicles – while resulting in higher quantity of FCPA enforcement — result in lower quality of FCPA enforcement).
- Yet what is the quality of FCPA enforcement actions (see here and here among others) that focus on the acts of single actors within a large multinational business organization?
- What is the quality of FCPA enforcement actions (see here and here among others) that focus on conduct approximately 10 years (and in many cases more) prior to the enforcement action?
- What is the quality of FCPA enforcement actions (see here and here among others) in which the SEC invokes a legal standard that does not even exist in the FCPA?
In her speech, Avakian also stated:
“We have also continued to focus on individual accountability by pursuing charges against individuals for misconduct in the securities markets, including registered individuals, executives at all levels of the corporate hierarchy, including CEOs, CFOs and other high-ranking executives, and gatekeepers.”
That is nice-sounding rhetoric and we’ve heard it before from SEC enforcement officials.
Yet, facts are facts.
In 2017, the SEC resolved seven enforcement actions against issuers (who can only act through human being conduct). Yet, just one corporate enforcement action resulted in related individual charges. Thus far in 2018, the SEC has resolved nine enforcement actions against issuers. Not one has resulted in related individual charges.
Thus, if you are scoring at home, 15 of the last 16 (approximately 95%) issuer enforcement actions have lacked related individual charges.
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