Transcript Slide 1

Chapter 6
The Role of
Government
McGraw-Hill
Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved.
"People who enjoy eating sausage
and obey the law should not
watch either being made.“
Otto von Bismarck (1815-1898)
Chancellor of Germany
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Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved.
Key Legislation
• The Foreign Corrupt Practices Act (1977)
• The U.S. Federal Sentencing Guidelines
for Organizations (1991)
• The Sarbanes-Oxley Act (2002)
• The Revised Federal Sentencing
Guidelines for Organizations (2004)
• The Dodd-Frank Wall Street Reform and
Consumer Protection Act (2010)
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Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved.
The Foreign Corrupt Practices Act (FCPA)
Prior to the passing of this law, the
illegality of paying bribes was punishable
only through ‘secondary’ sources of
legislation:
– The Securities and Exchange Commission
(SEC) could fine companies for failing to
disclose such payments under their
securities rules.
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The Foreign Corrupt Practices Act (FCPA)
• The Bank Secrecy Act also required the
full disclosure of funds that were taken
out of or brought into the USA.
• The Mail Fraud Act made the use of the
US Mail or wire communications to
transact a fraudulent scheme illegal.
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Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved.
The Foreign Corrupt Practices Act (FCPA)
• FCPA is enforced jointly by the US
Department of Justice (DOJ) and the
Securities and Exchange Commission
(SEC).
• The Act encompassed all the ‘secondary’
measures that were currently in use to
prohibit such behavior by focusing on
two distinct areas:
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Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved.
The Foreign Corrupt Practices Act (FCPA)
• Disclosure – the Act required corporations to
fully disclose any and all transactions
conducted with foreign officials and
politicians, in line with the SEC provisions.
• Prohibition – the Act incorporated the
wording of the Bank Secrecy Act and the
Mail Fraud Act to prohibit the movement of
funds overseas for the express purpose of
conducting a fraudulent scheme.
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The U.S. Federal Sentencing Guidelines For
Organizations (FSGO) 1991
• Holds organizations liable for the
criminal acts of their employees and
agents
• Penalties under FSGO included:
– Monetary fines
– Organizational probation
– The implementation of an operational
program to bring the organization into
compliance with FSGO standards
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The U.S. Federal Sentencing Guidelines For
Organizations (FSGO) 1991
MONETARY FINES
If an organization is sentenced under
FSGO, the calculation of the fine is
determined through a three-step
process:
1. The determination of the ‘base fine’
2. The Culpability Score
3. The total fine amount
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Revised FSGO 2004
• Formally adopted in November, 2004
• Three key changes
• Companies required to periodically evaluate the
effectiveness of their compliance programs on the
assumption that there was a substantial risk that any
program was capable of failing
• The revised guidelines required evidence of an active
promotion of ethical conduct rather than just
compliance with legal obligations.
• Accountability was more clearly defined in the revised
guidelines
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Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved.
Sarbanes-Oxley Act (SOX) 2002
• Public Company Accounting Oversight Board
(PCAOB)
• Auditor Independence
• Corporate Responsibility
• Enhanced Financial Disclosures
• Analyst Conflict of Interest
• Commission Resources and Authority
• Studies and Reports
• Corporate and Criminal Fraud Accountability
• White Collar Crime Penalty Enhancements
• Corporate Tax Returns
• Corporate Fraud & Accountability
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Dodd-Frank Wall Street Reform 2010
• Consumer Financial Protection Bureau
(CFPB)
• Financial Stability Oversight Council
(FSOC)
• The Volcker Rule
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Copyright © 2012 The McGraw-Hill Companies, Inc. All rights reserved.