CONDUCTING INTERNAL INVESTIGATIONS
CD: Reflecting on recent months, could you provide an overview of some of the prevailing causes of companies launching an internal investigation? Are you seeing any common themes?
Lavender: It is now much more common for firms to consider launching an internal investigation as a defensive or proactive measure. If a peer market participant is alleged to have engaged in misconduct, a firm will want to make sure that its own house is in order. Financial regulators in particular now expect firms to monitor industry developments and to launch their own investigations wherever necessary. Generally, conducting a voluntary internal investigation is perceived to be a good protection mechanism. However, firms need to be mindful that in some jurisdictions there is an obligation to report misconduct to regulators – for example the Financial Conduct Authority (FCA) in the UK. Many regulators will assess a firm’s response to an issue – including whether the firm decides to bring its own voluntary investigation – as one of the criterion when deciding whether or not to bring enforcement action.
McCahearty: A key theme over recent months has been the increase in investigations into potential tax evasion. The impact of the Panama Papers continues to be felt and in the UK new legislation has been proposed which will introduce a new offence for corporations of failing to prevent tax evasion – this offence has been modelled closely on the corporate offence of failing to prevent bribery under the Bribery Act. These changes have led many businesses to more closely scrutinise their tax affairs and those of their customers and clients. Politicians are under increasing pressure to ensure that businesses and high-net worth individuals pay their taxes, making this likely to be a ‘hot topic’ in the months ahead. Whistleblowing – or the threat of whistleblowing – and antitrust concerns are other increasingly common causes of investigations. Generous ‘bounties’ and legislation protecting their rights have dramatically increased the incidence of whistleblowing and LIBOR and recent changes in legislation and regulation have handed many antitrust authorities significantly increased prominence and powers.
Oct-Dec 2016 issue