Financial Services, US Foreign Corrupt Practices Act & Dodd Frank - Written by on Tuesday, March 15, 2011 0:06 - 1 Comment

Financial services & corruption: Private Equity in the spotlight?

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In January, after the SEC issued information requests to at least ten banks and private equity firms, the Wall Street Journal reported that the US Securities & Exchange Commission is in the early stages of a investigation into banks and private equity firms.

Reportedly the probe relates Private Equity firms and their dealings with Sovereign Wealth Funds reportedly for violations of the US Foreign & Corrupt Practices Act (“FCPA”).

Is this the beginning of a sector sweep which will see the Private Equity sector and the financial services industry subjected to additional scrutiny?

Private Equity, Banks and Sovereign Wealth Funds

While details of the FCPA probe remain sketchy commentators have speculated that the enquiry could relate to possible bribery by banks and private equity firms of employees of sovereign wealth funds as an inducement to obtain access to capital.

Scarce assets, the argument goes (think oil, precious metals, real estate etc.), often go hand in hand with corruption.  Post Credit Crunch cash has become the one of the scarcest assets of all and Sovereign Wealth Funds have a lot of it.

The US DOJ first hinted at interest in the sector over two years ago when Chief of the Fraud Section, Steve Tyrrell, in DOJ’s Criminal Division, said the “recent boom of sovereign wealth funds is an area at the top of the Justice Department’s hit list” and noted that the credit crunch could result in more corruption cases.

What starts in the US has a habit of crossing the Atlantic.  Will the US investigation create a ripple in the Private Equity capital of London, Mayfair?  We’ll keep you posted.

Time to get ready

In the meantime, Private Equity and its younger sibling would do well to gear up and get ready for the Bribery Act and ensure that they are already up to speed with existing UK laws which cover anti-corruption as their industry attracts attention from investigators stateside.

This is the first in a series of articles we’ll be posting about the risks to Private Equity, Venture Capital and Financial Services from anti-corruption legislation.  We’ll be highlighting key areas and suggesting ways of limiting risk.


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Compliance Bits and Pieces for March 18 | Compliance Building
Mar 18, 2011 6:02

[…] Financial services & corruption: Private Equity in the spotlight? and Financial Services: M&A, Private Equity and the lifebelt in […]

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