The SEC and the Foreign Corrupt Practices Act: Fighting Global Corruption is Not Part of the SEC's Mission

Abstract

In recent years, as both the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) have stepped up their enforcement efforts, the Foreign Corrupt Practices Act (FCPA) has been the subject of harsh criticism. Although critics have identified a variety of flaws in both the law and its enforcement, no one has seriously questioned a basic policy choice: why an agency whose mission is to protect investors is charged with civil enforcement of the FCPA‟s anti-bribery provisions. Congress conferred this authority on the SEC in 1977 despite the agency‟s statements that it did not fit within its mission. For over twenty years the SEC brought few actions involving allegations of foreign bribery and supported Congressional efforts to consolidate enforcement in the DOJ. By contrast, the SEC began to enforce the FCPA in the early 2000s with increasing enthusiasm. It has set up a specialized unit and publicized its large settlements, without ever providing an explanation of how enforcing the foreign bribery provision relates to the agency‟s mission “to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.”

I first review the legislative history, the “quiet” years prior to the early 2000s, and the SEC‟s aggressive enforcement since then. Next I review academic literature, first, to see if there is a theory to explain the SEC‟s behavior, and, second, to explore the problems of multi-goal agencies. My central argument is that since combating global corruption is not part of the agency‟s mission, enforcement of the FCPA should be consolidated in the DOJ. Finally, in Dodd-Frank § 1502 (conflict minerals reporting requirement), Congress made the same mistake: it gave the agency a power that it does not want and that diverts scarce resources from its core mission.

Keywords: Securities and Exchange Commission, Foreign Corrupt Practices Act