USA Law and Practice Contributed by: Emily Hughes, Charles Kalil, Cori Lable and Ryan Raybould, Kirkland & Ellis
laration made under penalties of perjury, that they do not believe to be true and correct as to every material matter. Those convicted are subject to fines of not more than USD100,000 (USD500,000 in the case of a corpora - tion) or imprisonment of up to three years, or both, together with the costs of prosecution (26 USC Sec - tion 7206). Aid or Assistance A person is guilty of aiding or assisting under IRC Sec - tion 7206 (2) if they wilfully aided, assisted, procured, counselled, advised or caused the preparation and presentation of a return that was fraudulent or false as to a material matter. The government must prove that the defendant acted with specific intent to defraud the government. Violators face fines of up to USD100,000 (USD500,000 in the case of a corporation) or impris - onment of up to three years, or both, together with the costs of prosecution (26 USC Section 7206). 3.6 Financial Record-Keeping FCPA As noted in 3.2 Bribery, Influence Peddling and Related Offences and 3.3 Anti-Bribery Regulation , the FCPA requires “issuers” to: • keep accurate books and records; and • have a system of adequate internal accounting controls (15 USC Section 78m(b)(2)). Violators must knowingly falsify books or records, or knowingly circumvent or knowingly fail to implement a system of internal accounting controls (15 USC Sec - tion 78m(b)(5)). The SEC has two additional rules to aid in the enforcement of the record-keeping provi - sions: • no person shall directly or indirectly falsify any book, record or account; and • officers and directors of issuers are prohibited from making material misrepresentations or omis - sions in the preparation of reports (17 CFR Section 240.13b2-1; 17 CFR Section 240.13b2-2). Individual violators face a maximum fine of USD5 mil - lion or imprisonment of up to 20 years, or both; entity
violators face fines of up to USD25 million (15 USC Section 78ff(a)). Securities Exchange Act of 1934 SEC Rule 17a-4 (b)(4) requires registered members, brokers and dealers to preserve original copies of all communications sent and received by the registrant that relate to its business for at least three years. The SEC has brought several cases against broker-dealers for failing to preserve records from “ephemeral mes - saging” platforms – such as Signal and WhatsApp – where messages are automatically deleted after a set amount of time or after viewing. Securities Fraud Under the SOX Act, it is a felony to knowingly exe - cute, or attempt to execute, a scheme or artifice to defraud any person in connection with any security of an issuer that has a registered class of securities or is required to file periodic or other reports with the SEC. Violators face a fine or imprisonment of not more than 25 years, or both (18 USC Section 1348). It also requires financial statements to be filed periodically and be accompanied by written certifications from the company’s CEO and CFO (18 USC Section 1350). CEOs and CFOs who certify statements knowing that the periodic report violates the requirements of this provision are subject to fines of up to USD1 million and imprisonment for ten years. If wilful, the maximum fine increases to USD5 million, and the prison term increases to up to 20 years (18 USC Section 1350). The SOX Act also contains an executive claw-back provision requiring CEOs and CFOs of issuers that engaged in misconduct to forfeit for a 12-month period their bonus, certain other compensation and profits from the sale of company stock (15 USC Sec - tion 7243 (a)). Other Financial Fraud A variety of financial or accounting frauds may be prosecuted federally as instances of mail, wire or bank fraud (18 USC Sections 1341, 1343 and 1344). Viola - tors must knowingly devise a scheme to defraud oth - ers through materially false or fraudulent pretences, representations or promises, and must act with the intent to defraud.
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