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Freshfields Bruckhaus Deringer LLP Resolution of external investigations: strategies and limitations Paul Lomas Helen Buchanan Tim Coleman Laurent Garzaniti.

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Presentation on theme: "Freshfields Bruckhaus Deringer LLP Resolution of external investigations: strategies and limitations Paul Lomas Helen Buchanan Tim Coleman Laurent Garzaniti."— Presentation transcript:

1 Freshfields Bruckhaus Deringer LLP Resolution of external investigations: strategies and limitations Paul Lomas Helen Buchanan Tim Coleman Laurent Garzaniti 10 July 2012

2 1 Today’s agenda and speakers Introduction Do you have to make admissions? What about publicity? Paul Lomas Partner, London T M freshfields.com Process for reaching a settlementHelen Buchanan Partner, London T M freshfields.com Reasons for settlement– pros and cons Tim Coleman Partner, Washington T M freshfields.com Multi-jurisdictional settlements Follow on litigation risks Laurent Garzaniti Partner, Brussels T M freshfields.com

3 2 Introduction Companies should aim to coordinate a global resolution with all regulators that have an interest in the investigation Issues to consider include: What form of resolution is available in each jurisdiction How to coordinate resolutions with multiple jurisdictions What disclosures and admissions are required to reach resolution in each jurisdiction The impact of settlements on related investigations and related civil litigation How to minimise the PR and capital market impact of any resolution

4 3 Process for reaching a settlement Process for reaching a settlement will vary across jurisdictions Also depends on the regulator that you are dealing with Examples: US – can reach deferred prosecution agreements/non-prosecution agreements with DoJ/SEC/settlements with other regulators Brazil – settlements possible with federal and state prosecutors; leniency programme offered by Brazilian anti-trust authorities UK – negotiated settlements possible with the FSA and HMRC; leniency programme/early resolution offered by OFT, proposals for deferred prosecution agreements with the SFO Hong Kong – settlements available with SFC, HKMA and stock exchange France – AMF can settle cases involving administrative breaches using composition administrative; settlement also available with Autorité de la Concurrence; Law of 13 December 2011 now enables public prosecutor to accept guilty pleas for all offences

5 4 Process for reaching a settlement NB Not all regulators are able to enter into settlements Japan – unable to agree formal settlements Italy – regulators unable to enter into formal settlements but possible to reach an understanding with the regulator(s) that no further action will be taken. Plea bargaining is available for criminal actions Germany – no official settlement mechanism but regulators will often enter into discussions and reach informal agreements China – no official settlement procedures to resolve enforcement action by CSRC, SAIC, NDRC for market manipulation, bribery and securities law related offences; no plea bargaining or amnesty arrangements under criminal-procedural law BUT settlement mechanism is available with SAIC and NDRC for anti-monopoly law offences. Leniency programme has been introduced in anti-trust context

6 5 Do you have to make admissions? Again practices vary between jurisdictions and between regulators UK – anti-trust regime requires admission to infringement to benefit from leniency regime; but FSA/UKLA only requires that facts and matters in enforcement notice won’t be disputed; certain admissions likely under proposals for DPA US – SEC, DOJ and other civil settlement agreements can include no admissions or even denials; criminal plea agreements and DPAs require binding admissions Spain – admissions are not necessary in proceedings with CNMV or competition authorities; enables a corporate to undertake to change conduct without admitting a prior infringement Italy – making an admission likely to be viewed as cooperative behaviour by the regulator and could lead to a reduction in sanction Hong Kong – admission not required for settlements with SFC or stock exchange but SFC will only do so in appropriate cases, eg Lehman ‘minibonds’ settlement

7 6 What about publicity? Can you negotiate terms of the settlement announcement with the regulator? Settlement will usually trigger disclosure obligations to the capital markets Timing of disclosure? What information should the announcement contain? ­Information about the termination of the investigation ­Report on the findings/conclusions ­Any remediation steps that are being taken ­Details of any redress Include details in normal reporting requirements eg auditing reports/periodic returns (eg US SEC 10K filings)

8 7 What about publicity? Dealing with other interested parties: other regulators (potentially in other jurisdictions) briefings to analysts inquiries from shareholders to the investor relations department employees customers the press trade bodies – when industry-wide issues are involved consumer bodies

9 8 Reasons for settlement – pros and cons Pros Enables the company to demonstrate good corporate governance – being ‘a responsible corporate citizen’ Implementation of remediation and redress plans Reduced penalty may be possible eg DPA/NPA/leniency programmes Avoids further civil or criminal litigation by regulator Generally minimises damage to the company’s reputation ­one PR hit vs continued PR coverage Can minimise impact on shareholder value Brings finality to the investigation

10 9 Reasons for settlement – pros and cons Cons Impact of disclosures/admissions made during the settlement process Can lose control over the outcome The penalty (can be significant in some jurisdictions) Other consequences – eg debarment risk Impact on the business model – significant changes may be required as part of the settlement deal (eg exiting certain lines on business) Ongoing conditions of settlement – eg use of monitors Risk of follow-on civil litigation from other interested third parties

11 10 Follow-on litigation risks Risk of follow-on litigation from a number of parties Other regulators in same jurisdiction Regulators in other jurisdictions Civil litigation by third parties Examples: ­cartel damages claims ­securities litigation

12 11 Can you do multi-jurisdictional settlements? Trend towards coordinated multi-jurisdictional settlements Recent examples: ­European Commission settlement with DRAM producers ­DOJ/SEC/Munich prosecutors with Siemens ­DOJ/SEC/OFAC/SFO with Innospec ­DOJ/SFO with BAE ­World Bank/SFO with Macmillan ­CFTC/DOJ/FSA settlement with Barclays

13 12 Can you do multi-jurisdictional settlements? Need a coherent strategy that considers actual/potential interests of all relevant regulators and prosecutors Issues to consider: Different objectives in different jurisdictions Substance of resolution in each jurisdiction Disclosures and admissions in each jurisdiction Cross-impact of resolutions Impact on related investigations/civil litigation PR and capital markets impacts

14 13 Conclusion A coordinated approach to resolution across jurisdictions is vital to the success of any cross-border investigation. Regulators are increasingly cooperating with each other’s efforts and sharing information, so consistency of approach between jurisdictions is essential.

15 Questions?

16 15 Freshfields Bruckhaus Deringer LLP is a limited liability partnership registered in England and Wales with registered number OC It is authorised and regulated by the Solicitors Regulation Authority. For regulatory information please refer to Any reference to a partner means a member, or a consultant or employee with equivalent standing and qualifications, of Freshfields Bruckhaus Deringer LLP or any of its affiliated firms or entities. This material is for general information only and is not intended to provide legal advice. © Freshfields Bruckhaus Deringer LLP 2012 LON


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