On November 14, 2012, the SEC's Enforcement Division and the DOJ's Criminal Division released new non-binding guidance on the US Foreign Corrupt Practices Act (FCPA) in the form of a guide entitled, A Resource Guide to the U.S. Foreign Corrupt Practices Act (Guide). Using hypotheticals, examples of enforcement actions and applicable case law, the Guide illustrates how businesses and individuals can comply with the FCPA, detect and prevent violations and implement effective compliance programs. While the Guide does not reflect a significant change in the enforcement approach of the SEC and DOJ towards FCPA violations, it represents the government's first attempt to comprehensively collect and explain the positions it has expressed in past enforcement actions.

The Guide provides insight into the government's interpretation of certain aspects of the FCPA, including:

The Guide affirms the broad scope of the FCPA, detailing both:

In addressing who is subject to the FCPA, the Guide affirms that the FCPA applies broadly to three categories of the individuals and entities:

When considering the conduct that triggers the application of the FCPA, the Guide highlights certain key characteristics:

In addition to the anti-bribery provisions, the Guide elaborates on the accounting provisions of the FCPA. It notes that these provisions "operate in tandem with the anti-bribery provisions." Key topics addressed in the Guide include:

The Guide clarifies what constitutes a foreign official under the FCPA, taking an expansive view. It notes that the FCPA applies broadly and regardless of rank to officers and employees of a foreign government and any of its departments, agencies or instrumentalities.

The Guide provides a non-exhaustive list of factors to review when deciding if an entity is an instrumentality of a foreign government. These factors focus on the entity's relation to the government, including:

While the Guide states that no one factor is dominant, it notes that as a practical matter an entity is unlikely to be considered an instrumentality if the government does not own a majority of its shares.

The Guide also expands the term foreign official to include employees and representatives of public international organizations. Public international organizations are designated by executive order under the International Organizations Immunities Act and include entities like the World Bank and the International Monetary Fund.

The Guide also reminds businesses that whether an entity is an instrumentality of a government or a private entity, bribery and corruption can still be prosecuted under other laws, including the Travel Act, anti-money laundering laws and other US federal or foreign laws.

The Guide provides guidance on gifts, travel, entertainment and charitable contributions, which it illustrates with examples of the types of items that may violate the FCPA. Generally the Guide notes that any gifts, travel, entertainment and charitable contributions should be:

The Guide notes that companies should generally avoid large, extravagant gifts. Specifically the Guide advises that individual gifts should be:

Regarding travel, meals and entertainment, the Guide emphasizes that reasonable and bona fide promotional expenditures do not violate the FCPA. To avoid FCPA enforcement, the Guide recommends that travel expenditures be:

Companies should also take care when making charitable contributions. The Guide notes that charitable contributions should be:

According to the Guide, a parent can be found indirectly liable for the conduct of a subsidiary if the subsidiary is acting as an agent of the parent company. However, the applicable agency standard is more expansive than the traditional agency standard applied in cases of parent-subsidiary liability. Traditionally the parent's control over the illegal conduct is the determinative factor. By contrast, the Guide states that the key factor in assessing whether the agency standard applies to an FCPA violation is the parent's general control over the subsidiary, a much broader standard.

Regarding successor liability, the Guide states that the general principle, that a company assumes the liabilities of any company it acquires or with which it merges, applies to FCPA-related liabilities. The Guide therefore cautions companies to perform proper due diligence before closing an acquisition or merger to identify any potential FCPA concerns.

The Guide states, however, that an acquiring company may avoid prosecution under the FCPA for a target's pre-acquisition FCPA violations if the acquiror has:

While these steps may help the acquiring company avoid a separate FCPA enforcement action for a target's pre-acquisition FCPA violations, they do not absolve the target company from liability for its pre-acquisition conduct.

When pre-acquisition due diligence is not possible, the Guide suggests that companies may be rewarded if they conduct post-acquisition due diligence and recommends incorporating an acquired company into the acquiror's internal controls, including its compliance program. After an acquisition, companies should also consider:

For more information on M&A due diligence, see Practice Note, M&A Due Diligence: Assessing Compliance and Competition Risk.

The Guide notes that the adequacy of a company's compliance program is a key consideration of the DOJ and SEC when deciding whether to bring an enforcement action. According to the Guide, the hallmarks of an effective compliance program are:

Without providing much detail, the Guide states that the DOJ and SEC will consider a broad range of resolutions for companies and individuals that have been investigated for a violation of the FCPA, including:

The Guide provides concrete anonymous examples of situations where the agencies have declined to pursue charges under the FCPA, demonstrating what the SEC and DOJ consider when investigating charges of bribery. These considerations include:

The Guide provides the following step-by-step instructions for obtaining a DOJ opinion, which can be a useful indicator of whether the DOJ may prosecute a company for the proposed behavior:

After these steps are completed, the DOJ will evaluate the request and if it chooses to will respond with an opinion within 30 days.

The Guide does not reflect a dramatic shift in the DOJ's and SEC's positions on the FCPA, but may be a useful reference for companies and FCPA practitioners seeking a comprehensive collection of the agencies' current views on FCPA compliance and enforcement.

For resources dealing with compliance with the FCPA, including Practice Notes, Checklists, Standard Documents and more, see the Bribery and Corruption Toolkit.