Watts Water Technologies, Inc. (“Watts”), a Delaware-based manufacturer and retailer of water valve products, agreed to a cease-and-desist order with the SEC in connection with payments made by employees of a former Chinese subsidiary of Watts who had entered into commission-sharing agreements with employees of Chinese state-owned entities that were customers of the subsidiary. The SEC alleged that Watts, the parent company, violated the FCPA’s books and records and internal controls provisions by virtue of the conduct. The SEC’s factual allegations are instructive with respect to the types of acts – or failures to act – that the agency deems sufficient to trigger books and records and internal controls liability of a parent corporation for the actions of employees of a foreign subsidiary. The SEC alleged that when Watts acquired the Chinese subsidiary, Watts did not take requisite steps to address the risks inherent in having a Chinese subsidiary that dealt almost exclusively with stateowned enterprises. The SEC further alleged that Watts had an FCPA policy but did not properly train employees of the subsidiary until three years after promulgating the policy. In addition, the Vice President for sales at the Chinese subsidiary refused to have translated into English a written policy of the subsidiary that sanctioned sharing employee sales commissions with employees of Chinese state-owned enterprises. Watts has been assessed a civil penalty of $200,000 and will pay disgorgement of $2.7 million. See Order Instituting Cease-and-Desist Proceedings, Exchange Act Release No. 65,555 (Oct. 13, 2011).