While the U.S. Securities and Exchange Commission polices markets in America, regulators around the globe have been actively investigating and bringing civil and criminal securities fraud enforcement cases.

Canada

• The much discussed insider trading cases of former investment banker Andrew Rankin appear to be coming to an end. Mr. Rankin faced civil and criminal charges arising out of claims that traded and tipped his friend Daniel Duic, who also traded on inside information over a period of years. Last year, Mr. Rankin was acquitted of insider trading charges and had his conviction for tipping overturned on appeal. During that time, Mr. Duic settled claims that he traded based on inside information obtained from Mr. Rankin. As a second criminal trial began, Mr. Rankin reached a tentative settlement on the civil enforcement charges, contrary to the usual pattern where criminal cases are usually settled first.

Vincent Lacroix was sentenced to 12 years less one day and fined $225,000 by a Quebec judge for running a boiler room operation. Courtroom spectators burst into applause following the sentence. The case follows on the heals of a study which found that more than one million Canadians had lost money to some kind of investment fraud.

Nigeria

• The Securities and Exchange Commission reminded all operators that insider dealing is a criminal offense in the capital markets and urged all dealers to operate within the limits of the regulations. This announcement followed the commencement of an inquiry into the trading in the shares of African Petroleum Plc, Big Treat Plc, Afroi Plc, First Aluminum Plc, Capital Oil Plc and IPWA Plc. There were allegations of price manipulation and other improper practices.

Japan

The Financial Services Agency plans to double fines for insider trading and other illegal securities-related activities. Currently, fines on profits from insider trading are based on the difference in the stock price on the day following the company announcement and the day the shares were purchased.

The Securities and Exchange Surveillance Commission plans to recommend to the Financial Services Agency that fines be levied on three NHK employees for insider trading. The fines are expected to range from 60,000 yen to 200,000 yen per person.

Australia

The Australian Securities Exchange launched a special investigation into more than 900 trades by directors in their companies made since the end of the year. This inquiry followed a study by corporate governance experts which suggests that directors are trading in the shares of their companies prior to important announcements.

• Another report claims that insider trading is so rampant in the Australian stock market that it is weakening the reputation of the local bourse. Some executives have been quoted as saying that insider trading has become a part of the system.

The FCPA evolved out of the Watergate scandal, a series of SEC fraud enforcement actions and the volunteer program crafted by then SEC Enforcement Director Stanley Sporkin. Under that program, over 400 companies admitted making questionable foreign payments to obtain or retain business. As an SEC report later concluded:

Subsequent Commission investigations revealed that instances of undisclosed questionable or illegal corporate payments – both domestic and foreign – were indeed widespread and represented a serious breach in both the operation of the Commission’s system of corporate disclosure and, correspondingly, in public confidence in the integrity of the system of capital formation.

Promotion of Reliability of Financial Information, Exchange Act Release No. 34-15,570 (Feb. 15, 1979).

The Act, passed in 1977 and amended in 1988, has two primary components: the books and records and internal controls provisions and the anti-bribery provisions. The former are much broader than the anti-bribery provisions, extend to all SEC reporting companies and are not limited to corrupt payments. The latter generally prohibit bribery of foreign government or political officials to obtain or retain business.

The FCPA is enforced by the SEC and DOJ. The SEC has the authority to bring civil injunctive and administrative proceedings to enforce all FCPA provisions against issuers. DOJ has the authority to bring criminal actions against any person or company for violations of the bribery and books and records and internal control provisions. The department also has the authority to bring civil injunctive actions against any domestic concern (as defined in the statute) for violations of the anti-bribery provisions.

Until 1997, only the U.S. had provisions such as those contained in the FCPA. Critics contended that the Act impeded the competitiveness of U.S. business – similar claims to those now being levied against the Sarbanes-Oxley Act. In 1997, however, the OECD Convention on Combating Bribery of Foreign Officials in International Business Transactions was adopted. Today many countries around the globe have adopted provisions similar to the FCPA.

Next: An overview of the books and records and internal controls provisions