From the perspective of FCPA compliance, whether as an international lawyer, accountant, or consultant providing advice to an issuer or individual subject to the accounting and record-keeping provisions of the FCPA, one must always keep in mind the extremely low threshold for an enforcement action by the U.S. Securities and Exchange Commission (“SEC”). Similar in certain respects to Section 7 of the UK Bribery Act, the implications cannot be overstated when consideration is given to the extent to which vicarious liability can be imposed.
No “knowing” requirement for civil liability exists under the accounting and record-keeping provisions. Strict liability is imposed. No proof of intent is required. This has dramatic ramifications for an issuer or anyone subject to the FCPA’s accounting and record-keeping provisions. The evidentiary requirements of what must be proven in order to establish a civil violation of the accounting and record-keeping provisions is very low. All that is required is that the substantive violation be proven by a preponderance of the evidence.
An individual or entity not directly subject to the terms of the accounting and record-keeping provisions can still held liable for being an accessory to a violation. However, for an entity or individual not subject to the accounting and record-keeping provisions of the FCPA, proof of intent may be required to establish civil liability for aiding and abetting a violation of the accounting and record-keeping provisions.
Sec. & Exch. Comm’n. v. McNulty, 137 F.3d 732, 740-41 (2d Cir. 1998); Sec. & Exch. Comm’n v. Softpoint, Inc., 958 F. Supp. 846, 865-66 (S.D.N.Y. 1997), aff’d on other grounds, 159 F.3d 1348 (2d Cir. 1998); Sec. & Exch. Comm’n v. Sys. Software Assocs., Inc., 145 F. Supp. 2d 954, 958 (N.D. Ill. 2001); World-Wide Coin Invs., Ltd., 567 F. Supp. 724, 749 (N.D. Ga. 1983). See also Ponce v. Sec. & Exch. Comm’n, 345 F.3d 722, 736 n.10 (9th Cir. 2003). See id., at 737; Sec. & Exch. Comm’n v. Autocorp Equities, Inc., 292 F. Supp. 2d 1310 (D. Utah 2003) (knowledge or reckless disregard of the fact that the defendant was aiding or abetting a violation of securities law must be established).