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7 Corporate Compliance Takeaways for 2013
Did you know five of the 10 largest federal criminal fines levied against corporationseverwere meted out in 2012? They ranged from Barclays Banks $450 million settlement over the LIBOR manipulation scandal to GlaxoSmithKlines $3 billion settlement in connection with off-label marketing and other charges.
1. Broaden Your Focus
Between new conflict minerals rules and sanctions on Iranboth of which fall outside the traditional emphasis of the Securities and Exchange Commissionthere is no question that a broader compliance effort is needed, says Washington D.C.-based partner Amy Goodman, who co-chairs the firms securities regulation and corporate governance practice group.
2. Take Cues from Morgan Stanley
While a former managing director at Morgan Stanley was charged with violating the Foreign Corrupt Practices Act last year, the company wasnt. And although the government has declined to prosecute corporations before, this is the first time [an enforcement agency] made a public announcement that they were not going to prosecute a company after an FCPA investigation, says Wong, who co-chairs Gibson Dunns securities enforcement practice group out of the San Francisco office.
3. Compliance Officers are Government Targets, Too
In-house counsel and corporate compliance officers are also on the hook for their actions (or their failure to act). At least three chief compliance officers settled charges last year with the SEC, according to Gibson Dunn. One CCO of an investment adviser, settled allegations that she failed to supervise an employee who misappropriated $7 million from clients, the firm reports. In another case, the firm says, a registered broker dealers CCO settled charges that he and his firm aided and abetted manipulative trading by ignoring multiple red flags.
4. Clawbacks as a Consequence
If company executives need more reason to get behind compliance efforts, how about the threat of losing their bonuses? Clawbacks for non-culpable executives are prevalent in settlement agreements with the government, Gibson Dunn reports. And such provisions are also showing up in Corporate Integrity Agreements and plea agreements in the healthcare space. In other words, clawbacks are an enforcement imperative, says F. Joseph Warin, chair of the litigation department in the firms Washington D.C. office.
5. Whistleblowers Are Out There
Dont ignore the fact that whistleblowers are willing to go to the governmentand that many try reporting internally first, says Warin. The volume of whistleblower reports to the SEC3,0001 tips in 2012breaks down to more than 8 tips a day, or one every three hours. This is being used very, very extensively, says Warin.
6. Boards Want Info on Compliance
Compliance efforts matter to directors. Were seeing boards themselves ask for more information in this area, Goodman points out.
7. Dont Forget the Tone in the Middle
Tone from the top is crucial to enacting an effective compliance agenda, but its got to permeate the organization, says Goodman. What a lot of compliance officers are most concerned about is making sure the middle managers and supervisors are trained to report information up the chain when they receive a complaint from an employee, she adds.