Types of SEC Whistleblower Cases:  The Foreign Corrupt Practices Act

Some of the most well-known types of SEC whistleblower cases are those that fall under the Foreign Corrupt Practices Act (“FCPA”).  The FCPA was created by the U.S. Congress in 1977.

foreign corrupt practices actGenerally speaking, the FCPA prohibits U.S. companies and their employees and agents from paying bribes to foreign government officials in order to obtain or retain business, or otherwise gain some business advantage, in the foreign country.  It may be difficult for a potential SEC whistleblower to decide whether certain conduct that they have information about is a good candidate for an SEC whistleblower case.  One reason for this is that sometimes violations of the Foreign Corrupt Practices Act are not so obvious.

Substantive Violations Of The FCPA:  Bribery

Many people may not be aware that the Foreign Corrupt Practices Act not only prohibits monetary bribes, but anything of value, such as a gift.  It also does not always have to be paid or given to the foreign government official directly.  For example, if a publicly traded U.S. company, or a U.S. registered securities firm, hires an independent agent to source business for it in another country, and that agent then gives a job to the child of a foreign government official, that could give rise to an SEC whistleblower case against the U.S. company under the FCPA.

The Foreign Corrupt Practices Act’s Accounting Provisions

The FCPA also requires all companies whose securities are listed in the U.S. to satisfy certain accounting provisions.  In short, these accounting provisions require corporations to maintain accurate books and records that truthfully reflect their transactions and operations.  In addition, these corporations must develop and implement systems of internal controls that reasonably assure that their business is conducted and accounted for under their respective management’s direction and approval.

While part of the FCPA, these accounting provisions are standalone provision.  That means that violations of the accounting provisions, even without proof of actual bribery, can form the basis for an SEC whistleblower case.

A Single Violation Can Be The Basis For An SEC Whistleblower Case

There is no minimum number of violations that must occur for the Commission to initiate an SEC whistleblower case based on the FCPA.  SEC whistleblower cases can be brought for as little as one bribe, payment, or gift.

In addition to corporations and corporate issuers of securities, the SEC can bring SEC whistleblower cases against individuals involved with FCPA violations.  Such individuals might include corporate officers, directors, employees, stockholders and third-party agents.

Additional Information

For more information on the Foreign Corrupt Practices Act, click on the links below: