DUTIES TO GOVERNMENTAL REGULATORS AND LAW ENFORCEMENT AGENCIES
Under US law, directors and officers of both publicly traded and privately held companies have responsibilities and face potential liabilities to such federal and state regulatory and law enforcement agencies as the SEC, the FTC, and the U.S. Justice Department. Among other responsibilities, the SEC is responsible for the civil and administrative enforcement of the federal securities laws. The SEC’s Enforcement Division works closely with the U.S. Department of Justice when it pursues criminal prosecutions. Included in the Commission’s enforcement powers is the ability to conduct formal and informal investigations against publicly traded corporations and their D&Os. It can issue subpoenas for documents and witnesses testimony. The commission itself can conduct administrative proceedings and pursue civil litigation. It can issue Cease and Desist Orders, obtain injunctions, seek penalties, and obtain restitution in the form of disgorgement. It can also bar individuals from serving as officers and directors of publicly traded corporations.[1] The FTC is responsible for the enforcement of all U.S. antitrust statutory provisions and deceptive or unfair trade practice violations, and has the authority to seek civil penalties against corporations and individuals for violations of such statutory provisions. The U.S. Justice Department is responsible for the criminal enforcement of U.S. statutory violations.
In addition to the federal securities laws mentioned above, two statues have given federal agencies enhanced enforcement powers over corporate directors and officers. They are the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank), and the Foreign Corrupt Practices Act of 1977 (FCPA). Dodd-Frank includes a whistleblower provision that requires the US government to pay an award, pursuant to regulations established by the SEC to “eligible Whistleblowers,” who voluntarily provide the SEC with new information concerning the violation of the federal securities law that results in a successful enforcement action.[2] This has resulted in significant whistleblower reporting activities.[3]
The FCPA, which is codified under Sec. 30A of the SEA makes it a crime for a person, whether a US citizen, a US corporation, or a non-U.S. person whose securities are registered in the United States, to make any corrupt payment to a foreign official for the purpose of obtaining or retaining business for that person or its principal.[4] The SEC and the U.S. Justice Department are responsible for enforcing the provisions of the FCPA, which are bifurcated and include both an anti-bribery feature and a record keeping and internal controls obligation.[5]
The RCW also imposes criminal fines and penalties under Washington State law against corporate directors and officers for various acts of misfeasance. For example, RCW 21.20.350 makes it unlawful to make any false or misleading statements in a filed document. Violations of the provisions of SAW carry both civil and criminal penalties, as highlighted in 21.20.400 to 21.20.430. Violations of RCW 49.52.050, as described above, also constitute a criminal misdemeanor.
[1] Paul Hastings et al., Securities Law Claims: A Practical Guide 209 -233 (Oxford University Press 2005).
[2] Implementation of the Whistleblower Provisions of Section 21F of the Securities Exchange Act of 1934, SEC [Releases No. 34-64545; File No. S7-33-10] (August 12, 2011).
[3] According to a story in The D&O Diary, posted January 4, 2012, Entitled: “The Top 10 D&O Stories of 2011,” during a 7 week time period running from September 30, 2011 until Mid-November 2011, the SEC received 334 whistleblower reports, of which approximately 30 originated outside of the United States.
[4] Aaron Schildhaus, Anticorruption Compliance and Insurance Coverage: Offsetting the High Costs of Investigations, 42 International Law News 15, (2013).
[5]Robert Tarun, The Foreign Corrupt Practice Act Handbook 1 American Bar Association, (American Bar Association, 2nd ed. 2012).
In addition to the federal securities laws mentioned above, two statues have given federal agencies enhanced enforcement powers over corporate directors and officers. They are the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank), and the Foreign Corrupt Practices Act of 1977 (FCPA). Dodd-Frank includes a whistleblower provision that requires the US government to pay an award, pursuant to regulations established by the SEC to “eligible Whistleblowers,” who voluntarily provide the SEC with new information concerning the violation of the federal securities law that results in a successful enforcement action.[2] This has resulted in significant whistleblower reporting activities.[3]
The FCPA, which is codified under Sec. 30A of the SEA makes it a crime for a person, whether a US citizen, a US corporation, or a non-U.S. person whose securities are registered in the United States, to make any corrupt payment to a foreign official for the purpose of obtaining or retaining business for that person or its principal.[4] The SEC and the U.S. Justice Department are responsible for enforcing the provisions of the FCPA, which are bifurcated and include both an anti-bribery feature and a record keeping and internal controls obligation.[5]
The RCW also imposes criminal fines and penalties under Washington State law against corporate directors and officers for various acts of misfeasance. For example, RCW 21.20.350 makes it unlawful to make any false or misleading statements in a filed document. Violations of the provisions of SAW carry both civil and criminal penalties, as highlighted in 21.20.400 to 21.20.430. Violations of RCW 49.52.050, as described above, also constitute a criminal misdemeanor.
[1] Paul Hastings et al., Securities Law Claims: A Practical Guide 209 -233 (Oxford University Press 2005).
[2] Implementation of the Whistleblower Provisions of Section 21F of the Securities Exchange Act of 1934, SEC [Releases No. 34-64545; File No. S7-33-10] (August 12, 2011).
[3] According to a story in The D&O Diary, posted January 4, 2012, Entitled: “The Top 10 D&O Stories of 2011,” during a 7 week time period running from September 30, 2011 until Mid-November 2011, the SEC received 334 whistleblower reports, of which approximately 30 originated outside of the United States.
[4] Aaron Schildhaus, Anticorruption Compliance and Insurance Coverage: Offsetting the High Costs of Investigations, 42 International Law News 15, (2013).
[5]Robert Tarun, The Foreign Corrupt Practice Act Handbook 1 American Bar Association, (American Bar Association, 2nd ed. 2012).