Revisions bring DOJ and SEC guidance in line with FCPA statutory language.
In June, the US Department of Justice (DOJ) and Securities and Exchange Commission (SEC) quietly revised its manual, A Resource Guide to the U.S. Foreign Corrupt Practices Act (the Resource Guide), for the first time. Originally published in November 2012, the Resource Guide provides consolidated guidance on the DOJ’s and SEC’s enforcement policies and their interpretation of the Foreign Corrupt Practices Act (FCPA).
Although the changes are more technical than substantive in nature, they do offer some further clarity for the chapters that discuss accounting provisions and criminal penalties. A summary of the revisions are below, and the complete, revised Resource Guide can be found here.
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Changes to Chapter 3, “The FCPA: Accounting Provisions,” include the following:
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In reference to an issuer’s responsibility for the books and records of affiliated entities, the revised Resource Guide now refers only to “joint ventures” under the issuer’s control. The prior version made reference to issuers’ liability for the books and records of their “joint venture partners” (p. 43).
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Under the FCPA, issuers are required to use their influence to cause minority-owned affiliates to devise and maintain a system of internal accounting controls consistent with the issuers’ obligations, which contrasts with the vicarious liability that issuers face for accounting provision violations committed by majority-owned subsidiaries. The revised Resource Guide now better tracks the statute itself to make clear that issuers should use “good faith efforts” to cause their minority-owned subsidiaries or affiliates to implement adequate accounting systems. The prior version required issuers to use “best efforts” (p. 43), which exceeded the requirements of the FCPA’s statutory language.
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The revised Resource Guide now defines a “minority-owned subsidiary or affiliate” of an issuer as a company where the parent owns “50% or less of [the] subsidiary or affiliate.” The prior version of the Resource Guide defined such a company as one where the parent “owns less than 50% of a subsidiary or affiliate” (p. 43).
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These latter two changes modify the Resource Guide’s language to align with the 1988 amendments to the FCPA.
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Changers to Chapter 6, “FCPA Penalties, Sanctions, and Remedies,” include the following:
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The revised Resource Guide notes that individuals are subject to a maximum fine of $250,000, an increase from the maximum of $100,000 discussed in the prior version. Although the FCPA imposes a statutory maximum of $100,000, individuals may be fined up to $250,000 under the Alternative Fines Act, 18 U.S.C. §3571 (p. 68).
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The revised Resource Guide notes that, when calculating pecuniary gain under the Alternative Fines Act, a fine of up to twice “the benefit that the defendant obtained” may be imposed. The prior version stated that the maximum penalty under the Alternative Fines Act was twice the benefit “the defendant sought to obtain” (p. 68).[1]
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As with the prior version, the revised Resource Guide remains “non-binding, informal, and summary in nature” and is offered to provide information to individuals and businesses seeking to comply with the law. Accordingly, although these technical fixes may help align the Resource Guide more closely with the FCPA’s statutory language, the Resource Guide merely offers the DOJ’s and SEC’s interpretation of the law and their respective mandates for enforcement. Until such time as the courts have an opportunity to weigh in, the FCPA—and the obligations imposed on those that seek to comply—will remain open to interpretation. However, the revisions to the Resource Guide, together with the DOJ’s recently announced internal counsel position, seem to support the DOJ’s broader commitment to greater transparency in FCPA enforcement.
[1]. Emphasis added.
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