The Securities and Exchange Commission and the Department of Justice have released A Resource Guide to the U.S. Foreign Corrupt Practices Act, a 120-page guide providing a detailed analysis of the U.S. Foreign Corrupt Practices Act, including the accounting provisions, and closely examining the SEC and DOJ approach to FCPA enforcement.
The guide aims to provide helpful information to enterprises of all sizes, ranging from small businesses doing their first transactions abroad to multinational corporations with subsidiaries around the world. The guide addresses a variety of topics including who and what is covered by the FCPA's anti-bribery and accounting provisions; the definition of a "foreign official"; what constitute proper and improper gifts, travel, and entertainment expenses; facilitating payments; how successor liability applies in the mergers and acquisitions context; the hallmarks of an effective corporate compliance program; and the different types of civil and criminal resolutions available in the FCPA context.
In addition to anti-bribery provisions, the FCPA contains accounting provisions applicable to public companies. The FCPA’s accounting provisions operate in tandem with the anti-bribery provisions and prohibit off-the-books accounting, the guide noted. The accounting provisions are designed to “strengthen the accuracy of the corporate books and records and the reliability of the audit process which constitute the foundations of our system of corporate disclosure.”
The accounting provisions consist of two primary components. First, under the “books and records” provision, issuers must make and keep books, records, and accounts that, in reasonable detail, accurately and fairly reflect an issuer’s transactions and dispositions of an issuer’s assets. Second, under the “internal controls” provision, issuers must devise and maintain a system of internal accounting controls sufficient to assure management’s control, authority, and responsibility over the firm’s assets.
On these and other topics, the guide takes a multi-faceted approach toward setting forth the statute's requirements and providing insights into SEC and DOJ enforcement practices. It uses hypothetical examples of enforcement actions and matters that the SEC and DOJ have declined to pursue, and summaries of applicable case law and DOJ opinion releases.
"Investors must have faith that the economic performance of public companies reflects lawful considerations of markets, price, and product rather than a mirage resulting from bribery and corruption," said SEC's Division of Enforcement director Robert Khuzami in a statement. "This guide will protect investors by assisting businesses in preventing such unlawful behavior, thus avoiding FCPA violations in the first place, which is in the interest of law enforcement and business alike."
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