With assets totaling trillions of dollars, non-U.S. asset owners, including foreign pension plans and sovereign wealth funds, are fertile ground for investment managers to increase their assets under management. But they could also create unexpected and unwanted exposure to regulatory scrutiny.
In 2011, whistle-blower provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act were enacted, creating the incentive for employees to report possible violations of the Foreign Corrupt Practices Act and other instances of fraud and corruption. The act provides for awards of 10% to 30% for reporting violations that result in a fine or penalty exceeding $1 million.
In this environment, it is critical that firms holding or considering investments by foreign investors evaluate these relationships and perform appropriate due diligence on any investments by foreign governments, as well as relationships with those governments' agents.
Over the nearly 35 years the FCPA has been in effect, it has had minimal direct impact on money managers. Instead, FCPA enforcement historically has focused on industries such as energy, telecommunications and defense, where large government contracts, natural resource availability or other possible advantages involving significant sums of money are at stake.