Employees of majority foreign-owned companies and ADR issuers may be subject to US law, regulator says
The SEC and the US Department of Justice (DoJ) have issued a resource guide to the US Foreign Corrupt Practices Act (FCPA) to answer such questions as whether payment of a foreign official’s taxi ride constitutes a bribe and whether employees of US part-owned companies are subject to the law.
The 120-page document, which also provides examples of both corruption and acceptable behavior from recent history, comes as the SEC and DoJ accelerate a campaign against corporate corruption.
‘Investors must have faith the economic performance of public companies reflects lawful considerations of markets, price and product rather than a mirage resulting from bribery and corruption,’ explains Robert Khuzami, director of the SEC’s Division of Enforcement, in releasing the guide.
‘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 interests of law enforcement and business alike.’
According to the guide, foreign nationals and companies guilty of corrupt acts in the US are subject to prosecution under the FCPA. It also stipulates that, in some cases, even companies that are majority owned by foreign investors, or a foreign government, may be subject to the act, along with companies that have issued ADRs.
‘Any company with a class of securities listed on a national securities exchange in the US, or any company with a class of securi¬ties quoted on the over-the-counter market in the US and required to file periodic reports with the SEC, constitutes an issuer,’ according to the guide. ‘A company thus need not be a US company to be an issuer.’
The guide also seeks to define bribery and explain the difference between bribes and token payments, but refrains from establishing a minimum monetary value for a gift to be considered a bribe, noting that ‘what might be considered a modest payment in the US could be a larger and much more significant amount in a foreign country. Regardless of size, for a gift or other payment to vio¬late the statute, the paying party must have corrupt intent – that is, the intent to improperly influence the government official.’
The guide also says ‘it is difficult to envision any scenario in which the provision of cups of coffee, taxi fares or company promotional items of nominal value would ever evidence corrupt intent, and neither the DoJ nor the SEC has ever pursued an investigation on the basis of such conduct.’
