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ENFORCEMENT-SEC and DOJ Release Guide on the FCPA

By Jacquelyn Lumb

The SEC and the Department of Justice recently released a 120-page resource guide outlining their approach to enforcing the Foreign Corrupt Practices Act. Lanny Breuer, the assistant attorney general in DOJ's criminal division, said the report is the most comprehensive effort ever taken to explain the government's approach to enforcing an existing statute. The report addresses a broad range of FCPA-related topics. SEC Enforcement Director Robert Khuzami said the report reflects an ambitious effort to explain how the government interprets and enforces the Act and attempts to clear up some of the myths surrounding the government's enforcement cases.

In addition to the anti-bribery provisions, the FCPA includes accounting provisions which require issuers to maintain accurate books and records and an adequate system of internal controls. The accounting provisions prohibit individuals and businesses from knowingly falsifying books and records or from circumventing or failing to implement a system of internal controls.

The Organization for Economic Cooperation and Development's working group on bribery and the anti-bribery convention, which monitors the implementation of the Anti-Bribery Convention, suggested that the U.S.'s anti-bribery efforts could be improved by consolidating the publicly available information on the FCPA and increasing awareness among smaller companies about the prevention and detection of foreign bribery. The SEC/DOJ guide is, in part, a response to that recommendation.

The guide addresses who is covered by the FCPA, including the definition of a foreign official, and what constitutes proper and improper gifts and entertainment expenses. The guide includes a chapter on successor liability in mergers and acquisitions and includes hypotheticals, examples of enforcement actions and matters that the agencies have chosen not to pursue.

Khuzami said the agencies expect further commentary and proposals in response to the guide. However, they do not foresee regular updates. The guide was an enormous undertaking and the agencies have to consider the use of their resources.

In responses to press inquiries, Khuzami and Breuer advised that the guide does not reflect a policy change. The value of the guide is in the clarity it brings, according to Breuer.

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