Global investigations
What to advise your board
Marius Berenbrok
Edward Braham
Matthew Herman
Melissa Thomas
29 February 2012
Freshfields Bruckhaus Deringer LLP
Today’s agenda and speakers
What best practices should
you have in place in relation
to compliance?
Matthew Herman
Partner, New York
When and how do you start
an investigation?
Marius Berenbrok
Partner, Hamburg
T +1 212 277 4037
M +1 646 327 3953
E matthew.herman@freshfields.com
T +49 40 3690 6210
M +49 172 40 08 783
E marius.berenbrok@freshfields.com
How do you conduct and control
an investigation?
Melissa Thomas
Partner, Beijing
T +86 10 6535 4602
M +86 13 9110 73349
E melissa.thomas@freshfields.com
Dealing with the aftermath of
an investigation
Edward Braham
Partner, London
T +44 20 7832 7084
M +44 7802 848989
E edward.braham@freshfields.com
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What best practices should you have in place in relation
to compliance?
• No ‘one size fits all’ approach
• ‘Tone from the top’
• Tailored risk assessment – identify high-risk locations/businesses
• Alignment with corporate strategy
• Clear policies and procedures – communication and understanding are key
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What best practices should you have in place in relation
to compliance?
• Robust investigation and reporting
- adequate resources
- audit, disclosure and financial reporting teams involved
• Audit and testing of programmes
• Best practices in M&A
- Risk based approach
- CPI score and nature of target’s business
- Sensitive to process
- Evaluate significance of diligence
- Equally as important in sell-side process
• Approach in China
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When and how do you start an investigation?
When might you need to start an investigation?
General rule
Relationship with regulators
• Some examples
- inappropriate business practices identified that may lead to litigation
exposure
- government/regulatory investigations
- investigations that relate to competitors
- audit problems
- unusual trading patterns
- whistleblower allegations
- press reports
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When and how do you start an investigation?
Practical considerations before starting an investigation
Matter of judgement in each case
• Degree of concern
• Size of the issue
• Risk of regulatory action or stakeholder interest
• Seniority of those potentially involved
• Cultural impact
What about directors’ fiduciary duties?
• General duties of care, loyalty and good faith also include oversight duties
• Violations of duty of loyalty may lead to a loss of coverage under the
D&O insurance
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When and how do you start an investigation?
Who should supervise the investigation?
• Supervisory board/management board
• Audit committee
• Special committee
• General counsel/head of compliance/other senior management
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How do you conduct and control an investigation?
Who should the board instruct?
• In-house counsel?
• Outside counsel (pre-existing relationship or independent)?
• Forensic accountants?
• IT experts?
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How do you conduct and control an investigation?
Self-reporting considerations – whether and when to do so?
What is the nature of the issue?
• Confined to a subsidiary? Or is the parent involved?
• An isolated incident? Or systemic?
Are you able to investigate the issue internally, to understand the
issue properly?
• Do you have the time?
• Is the information available to you?
• Do you need independence for ‘credibility’?
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How do you conduct and control an investigation?
Self-reporting considerations – whether and when to do so
• Will the regulator/enforcement agency find out about the issue from
another source?
• Is a competitor/the industry sector subject to investigation?
• Might a competitor or internal whistleblower tip off the regulator?
• Will you have to make any related notifications (eg to other regulators/in
other jurisdictions)?
• Is a regulator in another jurisdiction already investigating?
• Is there any associated publicity in the press?
Other considerations
• Overall exposure to fines
• Possibility of amnesty/leniency/settlement?
• Risk of follow-on litigation
• Risk of criminal sanctions
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How do you conduct and control an investigation?
Public disclosure issues
• Announcements to the markets?
• Employee/works council consultations?
• Other contractual/statutory reporting obligations?
10
How do you conduct and control an investigation?
PR issues/media strategy
• Identify PR angles early and plan a response
• Have a central point of decision-making to ensure consistency/credibility
of message
• Good consultation, including with external advisers to reflect legal risks, factual
issues and market reactions
• Effective system for handling press enquiries
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How do you conduct and control an investigation?
D&O insurance
What does it cover?
• costs of defending civil, regulatory and criminal investigations
• costs of responding to informal inquiries/requests for information
• deductibles, caps and other limitations
Also need to consider if it is not available due to a fiduciary duty breach
Notification requirements
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Dealing with the aftermath of an investigation
Depends on facts of the investigation as well as the industry
Recurrent themes
• Cultural change
• Changing the business model
• Impact on contracts and procurement processes
• Employment issues
• Reporting issues
• Dealing with a monitor or regulator who is watching your every move
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Questions?
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SRA authorisation reference: 049/FRS
LONBS8924896
This material is for general information only and is not intended to provide legal advice.
© Freshfields Bruckhaus Deringer LLP 2012
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