Chapter 17 - § 17.6 • FOREIGN CORRUPT PRACTICES ACT

• Jurisdiction: Colorado

§ 17.6 • FOREIGN CORRUPT PRACTICES ACT

The Foreign Corrupt Practices Act of 1977 (FCPA) amended the 1934 Act to require companies to keep reasonable records and to devise an adequate system of internal accounting for the protection of assets.¹⁵⁶ The FCPA itself was amended by the Omnibus Trade and Competitiveness Act of 1988¹⁵⁷ and further amended by the Private Securities Litigation Reform Act of 1995¹⁵⁸ and the Sarbanes-Oxley Act of 2002.

Companies with securities registered under the 1934 Act must make and keep books, records, and accounts that, in reasonable detail, accurately and fairly reflect the company's transactions and dispositions of assets. In addition to the record-keeping requirement, companies with securities registered under the 1934 Act will be required to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that:

• Transactions are executed in accordance with management's general or specific authorizations.
• Transactions are recorded as necessary (1) to permit preparation of financial statements in conformity with generally accepted accounting principles or any other criteria applicable to such statements, and (2) to maintain accountability for assets.
• Access to assets is permitted only in accordance with management's general or specific authorization.
• The recorded accountability for assets is compared with the existing assets at reasonable intervals, and appropriate action is taken with respect to any differences.

The SEC has imposed sanctions against companies and their officers and directors for failure to maintain the necessary accounting controls. See In re MMI Med., Inc.,¹⁵⁹ in which the SEC issued a cease and desist order by consent when the SEC had alleged that neither the company nor its subsidiary had a sufficient system of internal controls. Section 404 of the Sarbanes-Oxley Act added a requirement that the auditors not only audit the financial statements, but also that they provide a report on the company's controls and procedures.¹⁶⁰

The FCPA also prohibits payments to foreign officials intending to influence an act or decision of a foreign official, or to influence the foreign official not to perform an act, unless the payments are "those facilitating or expediting payment [intended] to secure the performance of a routine government action," or if the payments are lawful under the written laws of the foreign official's country.¹⁶¹ The Attorney General may issue guidelines under the FCPA and respond to inquiries. The 1988 amendments to the FCPA extend the anti-bribery prohibitions to domestic actions, also.

The Private Securities Litigation Reform Act...