At ACI’s annual FCPA Conference last November, SEC FCPA Unit Chief Kara N. Brockmeyer disclosed that the SEC expects to rely more frequently on administrative proceedings (as opposed to more traditional civil court actions) to resolve FCPA-related enforcement matters.
In Miller & Chevalier’s new FCPA Spring Review 2014, we examined this change in regulatory strategy by the SEC, which was facilitated in part by a 2010 Dodd-Frank amendment to the Securities and Exchange Act of 1934 that enables the SEC to collect civil penalties through administrative proceedings (which previously had been restricted to ordering disgorgement and imposing cease-and-desist orders).
Of note, FCPA cases resolved via administrative proceeding require no judicial approval, as opposed to the settlement of formal civil complaints. This distinction is important because district court judges have complicated several SEC prosecutions in recent years by demanding changes to negotiated settlements (see, e.g., Tyco and IBM) or dismissing charges or otherwise limiting claims (see e.g., Mark Jackson, James Ruehlen, and Herbert Steffen).
In addition, the imposition of a cease-and-desist order under an administrative proceeding requires only that the SEC establish a likelihood that a defendant will violate federal securities law, in contrast with the “reasonable likelihood” required by a court-ordered injunction.
Historically, the FCPA cases the SEC pursued using administrative proceedings either were settled in conjunction with a court-filed civil complaint (which enabled the imposition of a civil fine) or were smaller matters that the DOJ frequently declined to pursue. Since the passage of Dodd-Frank, however, the nature of cases handled via administrative proceeding has changed, as has the size of monetary assessments imposed in connection with these proceedings.
For example, last fall’s administrative action against Stryker Corp., which imposed a civil fine and involved parallel criminal charges filed by the DOJ, is a case that the SEC previously would have had to pursue in court.
Over the last year, the SEC has also begun handling very large settlements, such as Total, Alcoa, and Hewlett-Packard, via administrative proceeding. While these cases imposed no civil penalty (but rather, disgorgement) and therefore technically could have been brought as administrative orders even before Dodd-Frank, because of their size, scope, and the parallel criminal charges involved, the SEC traditionally sought to resolve cases of this magnitude through civil complaints in court (see, e.g., SEC actions against Siemens (2008) and Halliburton/KBR (2009)).
The charts above and below examine FCPA-related administrative proceedings since 2004, highlighting recent trends. Click on the charts to enlarge them.