The recent enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the finalization of the Securities and Exchange Commission’s related whistleblower rules significantly impact three interrelated facets of corporate internal investigations, namely, implementing and educating employees about corporate internal controls to set the foundation for an investigation, conducting the investigation itself, and interacting with regulators. Internal investigations enable a company to examine and respond to potential corporate malfeasance in a manner that signals to shareholders and regulators that the company is committed to good corporate citizenship. Internal and outside investigative counsel must therefore understand how Dodd-Frank impacts internal investigations and how to use Dodd-Frank—both before an investigation is on the horizon and during an investigation—to a company’s advantage.
Sarbanes-Oxley Model
For nearly a decade, internal investigations have been conducted against the backdrop of the Sarbanes-Oxley Act of 2002 (SOX), including its requirement that corporations enact internal controls, such as “up the ladder” reporting requirements. SOX also reinforces that a corporation’s independent directors (and in particular the audit committee) function as a “watch dog” to guard against corporate mischief, i.e., SOX establishes a model by which a company’s board is expected to root out problems.
