Donald Trump’s nomination of Jay Clayton to chair the Securities and Exchange Commission (SEC) has attracted some attention and concern from the anticorruption community. That concern is due mainly to a report issued by a New York Bar Foundation committee, chaired by Mr. Clayton, which criticized the Foreign Corrupt Practices Act (FCPA) for its alleged adverse and asymmetric impact on U.S. corporations. Though it remains to be seen how strongly committed Mr. Clayton is to the views expressed in the report, the concern is understandable given that the SEC is one of the two agencies—along with the Department of Justice (DOJ)—that is responsible for enforcing the FCPA. This controversy also highlights another, broader question that some FCPA critics have raised: Why is the SEC even involved in FCPA enforcement in the first place?

Congress created the SEC in 1934 through the aptly named Securities Exchange Act to enforce federal regulations regarding the trade of securities after they have been issued. The main impetus for the SEC’s creation was the belief that an under-regulated securities market helped drive the 1929 stock market crash. However, over the past 80 years, the SEC has expanded into other areas of enforcement—such as FCPA enforcement—that seem tentatively tied to the SEC’s original mandate. Some have argued that due to resource limitations, it does not make sense for the SEC to pursue vigorous FCPA enforcement at the expense of diverting resources from protecting investors. In pushing this point, some critics also point out that the SEC’s major regulatory fumbles of the past decade coincide with the escalation of FCPA enforcement activity—which perhaps suggests that expanding the SEC’s responsibilities beyond its original mandate has indeed weakened the agency.

The reasons for the SEC’s involvement in FCPA enforcement are partly historical, as explained further below. But beyond that, despite the critics’ complaints, in fact FCPA enforcement remains a valuable use of the SEC’s resources in the 21^st century.

First, a bit on the historical reasons for the SEC’s role in FCPA enforcement: The FCPA developed during a colorful time in U.S. history. By the late 1970s, some U.S. corporations developed an unsavory reputation for bribing foreign officials. These ranged from minor payments to local bureaucrats to multi-million dollar bribes paid to foreign presidents to manipulate the tax policies of other nations. At the time, these bribes weren’t illegal under U.S. law, as long as the payments were properly disclosed to shareholders. Congress was still working through the aftermath of the Watergate scandal during this period, and some of the worst examples nefarious activities conducted by U.S. corporations in foreign countries were first exposed by post-Watergate investigations conducted by the SEC and the Church Committee. Spurred by the desire to combat corruption in the post-Watergate environment and advance U.S. strategic interests abroad, Congress passed the FCPA. Congress ultimately split enforcement duties, with the DOJ controlling criminal enforcement and civil enforcement against entities that do not list securities on a U.S. exchange, while the SEC headed civil enforcement against issuers. These FCPA responsibilities were added to the SEC’s traditional duties, which include civil enforcement of federal laws governing security issuers, the exchange of securities, and corporate record keeping.

But why was the SEC involved? At first glance, SEC involvement in FCPA enforcement seems a bit peculiar, especially since FCPA enforcement can entail criminal charges, which fall entirely outside the SEC’s purview. But, given the nature of the investigations that led up to the creation of the FCPA, the SEC’s involvement makes perfect sense. When the U.S. enacted the FCPA, it was forging a new path. No other country had seriously considered making these bribes illegal, and some countries treated them as ordinary business expenses, allowing tax deductions for bribery payments made to further business abroad. Without any foreign models to follow, Congress turned to the SEC, since many of the major bribery scandals first came to light as a result of larger SEC investigations, and the SEC wound up releasing a report assessing the dangers of corporate bribery activity. Due to these investigations, some Congressmen felt that the SEC was, “the only government agency that [had not] gone to sleep on this issue.” So, when the FCPA was passed, Congress tied it into the 1934 Securities Exchange Act; and specified that it would be unlawful for issuers already regulated by the SEC to make payments to foreign officials.

Nevertheless, for the first two decades after its enactment, the FCPA was not vigorously enforced. Between 1977 and 1997 there were only 17 corporations and 33 individuals who faced prosecution under its provisions. This all changed in the early 2000s, with a well-documented increase in FCPA enforcement. Though the DOJ’s efforts sometimes get more attention, the SEC has remained at the forefront of the FCPA enforcement surge. During this time, the SEC created a unit dedicated to FCPA enforcement, increasing coordination with similar units in the DOJ and FBI due the SEC’s limited civil enforcement mandate. By 2015, the SEC was handling a large chunk of FCPA enforcement actions, leading ten of the twelve enforcement actions related to FCPA violations.

Of course, just because we can discern the historical reasons for the SEC’s enforcement role, this does necessarily mean we should accept the current state of enforcement.  Yet despite the critics’ protestations that there’s no justification for the SEC to be involved in FCPA enforcement, in fact the SEC’s role in this area makes good sense, for two main reasons:

• First, SEC enforcement of the FCPA adds a layer of flexibility that would be more difficult to achieve if the SEC were removed from the process. For example, although DOJ has at times been the more active FCPA enforcement agency, the DOJ enforcement slowed in 2015 compared to 2014 and 2013, probably because of an internal reorganization coupled with a few key departures within the DOJ. But while DOJ enforcement dropped off slightly, SEC enforcement stayed at a consistent level. As a result, the changes at the DOJ had less of an effect on overall FCPA enforcement. By keeping FCPA enforcement split across two agencies, both the DOJ and SEC can reshape the internal FCPA units without risking damage to overall enforcement – even if the SEC is limited to only civil enforcement against issuers. Removing the SEC from the process would magnify the effects of another year like 2015, potentially hampering overall enforcement.
• Second, keeping the SEC involved in FCPA enforcement encourages the growth of internal FCPA auditing methods in publicly traded companies. This is because the SEC is able to bring civil enforcement action not just for FCPA violations, but also for auditing failures related preventing the improper use of funds. An example of this is the case the SEC brought against Oracle for failure to adequately monitor a subcontractor that committed FCPA violations. These types of enforcement actions are important, as they force business and their counsel to consider their corporate practices in order to protect themselves. The growth of a compliance culture that takes FCPA violations seriously is beneficial as a tool for developing corporate norms, and will hopefully lead to a higher rate of self-reporting. The SEC is far better suited for these types of cases than the DOJ, since the SEC pursues similar “bookkeeping”-style civil cases in other arenas.

It’s clear that the SEC should remain involved in FCPA enforcement. There may be certain tweaks that should be made, but both the SEC and the DOJ are constantly evolving their enforcement units, and it is likely that these incremental changes will be far more beneficial in the long run than simply pulling FCPA enforcement away from one of the agencies.