In the last few weeks, since the DOJ and SEC issued their FCPA Guidance [1], there has been much guidance written on the guidance. This new source covers much ground, and there is certainly a lot to say. Here are my five favorite things:
1. The Guidance compiles previously dispersed information. A common theme heard from many law firms is that the guidance does not say anything new. This is true, but the Guidance does make a different, and major, contribution. It pulls together information that was previously all over the place. Before the Guidance, it was often necessary to look to many different sources for assistance with FCPA compliance matters. FCPAméricas overviewed those sources here [2]. The fact that much of this information is now in one place is highly relevant. For companies, it means that they will not have to hire outside counsel as often to research the more mundane and straightforward areas of the law, like the meaning of “anything of value” or acceptable types of hospitality. It is now much easier (and cheaper) for companies to comply on their own. Yes, a review of primary sources will still be necessary in some cases. But many common questions can now be quickly and easily answered with this document. This should make companies, and their compliance budgets, happy.
2. The Guidance reveals the steps that enforcement takes when analyzing FCPA issues. Sections are presented in a way that shows authorities’ methodological approaches to analyzing issues. For example, Chapter 2 carefully walks through jurisdiction, outlining the categories of persons and entities covered (issuers, domestic concerns, and those subject under theories of territorial jurisdiction). It offers rules of thumb and examples to help understand each category. It then discusses the types of conduct that can trigger FCPA provisions, giving color to the aggressive jurisdictional hooks employed to reach entities that are not issuers or domestic concerns. Only then does it proceed to walk through the other elements of the law. This is the same path that enforcement likely employs when reviewing issues. This clarity is a refreshing alternative to the dense nature of the statute itself.
3. The Guidance gives hypotheticals. Having concrete examples of compliance scenarios puts flesh on the law’s bones. In Chapter 2, we learn that it can be permissible to give a moderately priced crystal vase to the General Manager of a state-controlled electricity commission. In Chapter 5, we are given facts on third party vetting, and then alternative facts that help unpack important nuances of compliance. For example, while it is not inherently impermissible to use a third party recommended by an end-user or to hire a government official to perform legitimate services, we are shown the types of things in these sensitive areas that can create red flags. This is where the FCPA rubber meets the road.
4. The Guidance reaffirms the importance of risk-based compliance. Companies do not have unlimited time and resources to dedicate to FCPA compliance matters. A risk-based approach in areas like third party due diligence is essential to making a program work, as discussed by FCPAméricas here [3]. Chapter 5 of the Guidance reaffirms this notion explicitly: “DOJ and SEC will give meaningful credit to a company that implements in good faith a comprehensive, risk-based compliance program, even if that program does not prevent an infraction in a low risk area because greater attention and resources had been devoted to a higher risk area.” Chief compliance officers can now sleep a bit easier.
5. The Guidance gives examples of declinations. When FCPA enforcement officials announced the Morgan Stanley declination, discussed here [4], it sent a shock wave through the compliance world. GCs and CCOs had something concrete to help justify their work. For this reason, many call Morgan Stanley the most important resolution of 2012. In Chapter 7, the Guidance gives us six more examples of declinations. If you read nothing else in this document, read pages 77-79.
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