It’s not enough to publish the employee Code of Conduct and the anti-bribery policies; you must train your employees in a way so they will remember the information and apply it when necessary.
By ensuring that your company implements and maintains up-to-date anticorruption and export compliance programs, you are insuring yourself against the possibility of a minor inadvertent error leading your company down a slippery, costly, and potentially embarrassing slope.
From Corporate Law Report:
It’s that time of the year again, when the Securities and Exchange Commission announces its priorities at its annual “SEC Speaks Conference.” Here’s a look at key takeaways, from attorneys at Perkins Coie:
A move from rule-making to rule enforcement:
“During their annual turn on the bully pulpit, several of the Commissioners themselves remarked that the congressional rule-making mandates of the Dodd-Frank Act and the JOBS Act have profoundly affected the scope and priorities of the SEC, which has in turn adversely impacted both staff morale and enforcement resources. Emerging into what was characterized as the “post-financial crisis” world, the SEC leadership also noted that the market in many ways has become more complex and less transparent. To face these new challenges, the SEC stands ready to use its traditional statutory toolbox, enhanced by hundreds of newly enacted rules and technological resources, to identify and investigate financial fraud. However, given the overwhelming task at hand, the real question may likely be not when, but whether, the market’s watchdogs can gain sufficient traction to capitalize on their new arsenal in some meaningful fashion.”
Ongoing focus on admissions of wrongdoing:
“Director of Enforcement Andrew Ceresney commented on the increased focus within the SEC of obtaining admissions as part of its settlements. Director Ceresney also noted that the SEC has recently filed a number of settled matters with admissions of wrongdoing, including the SEC’s February 21, 2014 settlement with Credit Suisse. […] Echoing Chairman White’s opening comments, Director Ceresney stated that the SEC will continue to aggressively pursue admissions of wrongdoing in cases with egregious misconduct that either harmed, or had the potential to harm, investors.”
Aggressive FCPA enforcement to continue:
“Kara Brockmeyer, Chief of the SEC’s Foreign Corrupt Practices Act (FCPA) Unit, noted that while enforcement activities seemingly tapered in fiscal year 2013, the FCPA Unit was off to a strong start in 2014, having brought an equal number of cases so far in this fiscal year as it did all last year. She stated that the SEC will continue to bring cases that span “old school” bribery, e.g., Weatherford and Alcoa; travel and entertainment abuses, e.g., Diebold; and even cases involving improper charitable donations, such as the allegations included in the Stryker action. She also noted that companies can expect to see more cases resolved in administrative proceedings, and that the FCPA Unit is considering bringing litigated FCPA cases through administrative proceedings as well.”
Increased reliance on big data:
“Jina Choi, the San Francisco Regional Director, reflected on the SEC’s increasing reliance on technological tools to detect and prosecute fraud in light of the limited resources available to the SEC. Choi cited as examples i2 analyst notebooks and an analytical platform that the agency is developing to marry internal SEC data with external documents. She also highlighted the importance of the SEC’s digital forensic lab, which allows the SEC to preserve, collect and analyze information on electronic devices, even when that information has been deleted or wiped. These tools permit the SEC to monitor and analyze much more activity and data than it otherwise could with manpower alone.”
Evolving litigation strategy:
“Joseph Brenner, the Chief Counsel of Enforcement, observed that the SEC is utilizing statutes and rules that either had never been employed before, or had not been used in a very long time, to refine its enforcement efforts. He indicated that post-Janus, a 2011 U.S. Supreme Court ruling limiting the circumstances in which securities fraud defendants can be held primarily liable for the misstatement of others, the Enforcement Division will likely enhance its use of section 20(b) of the Exchange Act because the statute does not require proof of an underlying primary violation in order to impose liability in certain false statement cases.”
Read the full update: The SEC Speaks In 2014: Enhanced Statutory Regime Combined With Data Analytics Tools Results In Enforcement 2.0 – Travis Exstrom, Jalina Joy Hudson, Regina LaMonica, Jose Lopez, and Pravin Rao of Perkins Coie
The goals of an internal investigation are to understand the nature and scope of the issue(s) and to take necessary remedial action promptly. […] Unfortunately, companies often inadvertently overlook certain issues in this process, which can result in an ineffective investigation and may pose additional litigation risks for the company.
— Attorney Gina Simms of Ober | Kaler on factors companies often overlook when conducting internal investigations.
From the corporate finance team at law firm Morrison & Foerster, a long-read guide to just about everything you need to prepare your company for this year’s proxy season, covering legislative and regulatory developments, say-on-pay, key disclosure considerations, shareholder activism and corporate governance, and much more…
The number of FCPA enforcement actions brought in recent years has declined. […] Nevertheless, those who might be tempted to believe that anti-corruption enforcement is not a priority should review recent actions.
— Attorney Thomas Gorman of Dorsey & Whitney in For FCPA Compliance, Tone At The Top Key, Lack of Policies A Difficulty
Adopt a company policy for managing the mineral supply chain and communicate it to suppliers.
— One of seven tips for complying with the SEC conflicts minerals rule, from Daniel Shortt of WeComply.
We must clearly define acceptable limits of both giving and receiving. Many organizations want to put specific and low limits on what employees can receive, but insist on keeping “squishy” language on what marketing and sales (and executives) can give.
— Executives: The Organization’s Gifts Policy Also Applies to You (Carrie Penman of NAVEX Global)
Maybe we’ve been going about compliance and ethics from the wrong angle:
Looking at compliance from an extrinsic perspective, Stuecke says, basically means that regulators tell organizations what they must do to meet compliance standards, then those organizations do the bare minimum to meet those requirements. […] In this way, organizations look at compliance as insurance. That is, an “effective” compliance program will “pay out” should misconduct occur and individuals within a company are found guilty of circumventing the company’s policies. The company may still be liable, but the damages will be lessened because of this insurance.
But remember, with insurance comes a premium, a tangible cost required to “hold the paper” of the insurance policy. It’s akin to our driving habits: you don’t want to have a car accident, but if you do, you have insurance. Could you be driving with a bit less care and diligence since you know you have that insurance? Possibly. I doubt if you would admit to that, but think about it.
With increased attention to transparency in corporate political spending, disclosure of so-called “dark money” and a new rule for municipal advisors, corporations and other organizations active in government affairs or government procurement will need to work hard to ensure a high level of compliance in 2014.
The SEC has sent the message loud and clear in 2013: ‘The SEC is back and better than ever — and that certainly is the case when it comes to pursuing financial reporting and accounting fraud.’”
Attorneys Randall Fons and Brian Hoffman of Morrison & Foerster in Financial Reporting & Accounting Enforcement Annual Review - 2013»
Government enforcement efforts in 2013 produced major settlements of matters relating to the global financial crisis, high-profile insider trading convictions, near-record amounts of FCPA settlements, and new pledges of robust and aggressive SEC enforcement activity. We expect these trends to continue in 2014.
— Attorneys at Skadden Arps, in Government Enforcement: Aggressive Efforts Continue Around the Globe.
From the Wall Street Journal’s Risk & Compliance Report (sub. required):
This year has so far been quiet on the whistleblower front, but experts say the year is bound to get interesting soon.
Regulators have said to expect big whistleblower awards, crucial cases are pending in the courts and companies are still grappling with how to handle employees who report wrongdoing.
We look at some of predictions from those who follow corporate whistleblower issues closely.
The quest for individual cooperation credit from the U.S. Securities and Exchange Commission is more of an art than a science, involving outcomes based largely on subjective judgments and a process that resists definition and standardization.