A Shot Across the FCPA Bow: SEC Provides Targeting Clues
In a telephone conference call sponsored by the ABA, Lorin Reisner, Deputy Director of Enforcement at the SEC, disclosed that the SEC is relying on data analytics and industry-specific risk analysis to initiate FCPA investigations. Reisner’s disclosure is extremely significant because he specifically explained that investigations initiated as a result of voluntary disclosures by companies constitute a smaller percentage of the SEC’s investigations.
What does this mean? It provides an important clue as to how the SEC is allocating its enforcement resources. Instead of relying on voluntary disclosures, the SEC is using proactive techniques to identify risk areas where industries may be engaged in bribery.
In recent months there was speculation as to the source of information which caused the SEC to launch its inquiry into sovereign wealth funds. It is probable that the SEC initiated the investigation based on its metrics analysis. This inference is supported by the fact that the letters were issued by the SEC without the Justice Department. In contrast, DOJ and the SEC initiated the investigation of medical device and pharmaceutical firms with the issuance of joint letters, which as we now know, was based on information provided by a cooperating company in the industry.
The implications of the SEC’s explanation are significant. Much of the SEC’s enforcement activity has been conducted jointly with the Justice Department. This pattern may change. The SEC may initiate more industry-wide inquiries without the Justice Department. As the net is cast wider, the number of SEC investigations and enforcement actions will certainly rise, and will inevitable lead to more criminal prosecutions through sharing of information with the Justice Department.
This development may be more significant than the SEC’s whistleblower program. But certainly in combination with the SEC’s whistleblower program it is an important reminder of the impact that the SEC can have in FCPA enforcement.