When and How Companies Should Include FCPA Risk Disclosures in SEC Filings (Part Two of Three)

More and more companies are disclosing FCPA-specific risks in their SEC filings before an FCPA violation is even on their radar.  Some, however, question whether that kind of disclosure is advisable.  FCPA experts are sharply divided on whether the benefits outweigh the disadvantages of such disclosure, and guidance from the government is scarce and vague.  Should an FCPA violation, past or potential, influence this decision?  If a company does disclose FCPA risks, what should it be telling regulators and the public about those risks in its filings?  To help shed light on this controversial but critical issue, the Anti-Corruption Report is publishing a multi-part series addressing the strategy and mechanics of disclosure of FCPA risk in the Risk Factors section of SEC filings.  This article, the second in the series, discusses the consequences of including FCPA-specific disclosures and provides insight into drafting risk-based disclosure.  The first article in the series discussed the SEC rules governing such disclosure and the evolution of the disclosure of risk factors related to international operations, and examined both sides of the debate as to whether such disclosure is necessary and prudent.  The third and final article in the series will include a compendium of actual FCPA Risk Factor disclosures from recent SEC filings to aid practitioners in drafting their own disclosures, compiled with help from Intelligize’s database and search tools.  For more on disclosing corruption investigations in SEC filings, see the Anti-Corruption Report’s Guide on that topic – Parts OneTwo and Three, and the compendium of relevant disclosures in Part Four.

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