SEC Director Emphasizes Self-Reporting of FCPA Violations

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Close up of Court, representing Expanded Whistleblower Program

The SEC Director of the Division of Enforcement, Andrew Ceresney, sent companies a message in the keynote address of the ACI’s 32nd FCPA Conference: If they do not self-report violations, they will not be eligible for a deferred prosecution agreement (DPA) or non-prosecution agreement (NPA).

The speech dovetails with a proposed policy at the Justice Department to incentivize self-reporting of FCPA violations by companies. According to a media report, the policy changes under consideration are still under consideration because of concerns that they may be too lenient on wrongdoers.

The SEC Director explicitly warned companies that if the SEC learns of violations on its own, such as from a whistleblower, the opportunity to earn additional cooperation credit could be lost. Ceresney said, “[I]n the FCPA context, companies are gambling if they fail to self-report FCPA misconduct to us.” The SEC whistleblower program provides financial incentives to individuals who provide information about suspected violations of federal securities laws.

He also said that self-reporting alone would not be sufficient to earn a DPA or NPA, since the SEC takes into account a number of factors in determining how much cooperation credit to give companies.

Ceresney also emphasized the Commission’s efforts to prosecute the individuals responsible for bribing foreign officials. In spite of the difficulties of prosecuting individuals who are many times located in foreign countries with little connection to the United States, the SEC continues to assess cases for individual liability and bring cases where they are warranted.

Individual liability was brought to the forefront this year by the Justice Department’s Yates memo, which announced that U.S. Attorneys should assess all cases for possible charges against individuals and warned corporations that they would not receive cooperation credit without providing information about every individual responsible. The FCPA is jointly enforced by the SEC and the DOJ.

The next year is expected to be another active one for enforcement of FCPA violations. In spite of the recent media report that the case against WalMart may not be as large as expected, there are a number of investigations against large companies that could be settled over the next year or two.