Mike Koehler of FCPA Professor argues that many FCPA enforcements are based on arbitrary interpretations of the requirement to have internal accounting controls of “such level of detail and degree of assurance as would satisfy prudent officials in the conduct of their own affairs.”
Koehler cites a judicial decision stating that “the main problem with the internal accounting controls provision of the FCPA is that there are no specific standards by which to evaluate the sufficiency of controls.” Absent more specific standards, he argues that the SEC equates failure to act consistent with “best practices” (itself vaguely defined) with legal violations.
However, he notes that a recent decision by the influential Delaware Chancery Court – in a case unrelated to the FCPA – rejects the assertion that failure to act consistent with best practices equates to a legal violation. The ruling comments, “This case, however, is a prime example of the difference between a best practice and a legal obligation.”
