On November 14, 2012, the U.S. Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC) jointly released their long-awaited guidance document, A Resource Guide to the U.S. Foreign Corrupt Practices Act (Guide). The full Guide (130 pages) is available for download here. It provides formal guidance from the two bodies that enforce the criminal (DOJ) and civil (SEC) provisions of the United States’ Foreign Corrupt Practices Act (FCPA) on their interpretation of the FCPA and their approach to enforcing its provisions.
In addition to Canada’s own anti-corruption legislation, the Corruption of Foreign Public Officials Act, the FCPA and its enforcement are of interest to many Canadian companies because of its broad reach. Not only are U.S. companies and SEC issuers subject to the FCPA, but foreign entities who use the U.S. banking system or otherwise carry on business in the U.S. are also within its jurisdiction.
The Guide discusses several key interpretation issues related to the anti-bribery and accounting provisions of the FCPA, including:
- Identifying legitimate gifts between business persons
- Distinguishing between proper and improper travel and entertainment expenses
- Listing factors used in identifying a “foreign official”
- Distinguishing between permitted facilitating payments and prohibited bribes
- Outlining the nature and extent of successor liability in the M&A context
- Properly vetting third party agents and consultants
- Ensuring an adequate level of control over financial record-keeping and reporting
The Guide also contains a discussion of the elements of an effective compliance program. Such a compliance program, in addition to helping a company prevent and detect misconduct, may be taken into consideration by the DOJ and/or SEC in determining if and how to proceed with enforcement actions where FCPA violations have occurred.
As well, the Guide contains examples of several recent instances in which the DOJ and SEC have declined to pursue enforcement actions, describing the circumstances of the FCPA misconduct and citing the factors taken into consideration by the authorities in electing not to pursue enforcement. Though not determinative, voluntary disclosure to the authorities of the misconduct is a common element in each of these instances.
Since foreign corrupt practices cases typically settle without a trial, judges rarely provide public and definitive rulings on the interpretation of the FCPA by prosecutors. Thus, the Guide is useful as a formal description of the approach to FCPA enforcement taken by the DOJ and SEC. Though not indicative of a significant change in the direction of enforcement efforts, the Guide helps to provide practicality and clarity to the business community.