Speak up and other internal investigations are on the rise (see our article here) amid increasing scrutiny from the media, public, authorities and other stakeholders of how investigations are conducted. Indeed, in higher profile matters the way in which an investigation is conducted can receive as much attention as the underlying issues.
The recent draft guidance published by the Solicitors Regulation Authority (SRA) (the Guidance) highlights the importance of effective internal investigations, but also the challenges and risks that they present for in-house counsel. When investigations are not handled correctly, there may be significant legal and reputational risks, as well as the risk (for those involved) of breaching professional duties to act independently, to treat colleagues fairly, and to act in a way that upholds public trust and confidence in legal profession.
Internal investigations are often conducted under real time pressure, and can give rise to tensions within an organisation, with different stakeholders mindful of their own positions and, in some cases, seeking to influence the scope or findings of the investigation. As the Guidance flags, in-house counsel may “risk being put in situations in which their instructions risk conflicting with their regulatory obligations” (and failing to carry out investigations properly can give rise to serious consequences for the organisation and individuals, including breach of professional duties, employment/data privacy laws, and regulatory expectations). These may give rise to reporting obligations to the SRA.
In this blog we look at some of these considerations, and how in-house counsel can best manage these risks throughout the course of an internal investigation.
Independence
At the outset of an investigation, the independence of in-house counsel (and the broader investigation team) should be carefully reviewed. This assessment and any steps taken to manage independence should be documented clearly. As the Guidance notes, if an investigation is not sufficiently independent, it risks giving rise to breach of in-house counsel’s obligations to act with independence and integrity (Principles 3 and 5) and to avoid acting where they have or risk an own interest conflict. Consideration should be given to the following (which can be documented in terms of reference and/or a scoping document):
- who commissions the investigation and determines its scope (this person or committee should have appropriate authority and not be connected to or implicated in the allegations);
- who leads and conducts the investigation (the Guidance notes that in-house counsel should ensure that they, or any other internal team assisting with the investigation, are independent of the matters being investigated and not have preconceived ideas about the outcome of the investigation);
- whether a more serious investigation should be instructed by a subcommittee of the board (for example the audit committee);
- whether it is appropriate to appoint external counsel to lead the investigation (to give a greater degree of independence, but also to provide subject matter expertise, additional resource, and to strengthen legal privilege arguments, particularly in jurisdictions where the work of in-house counsel may not be subject to privilege).
Independence should be kept under review as the investigation progresses, for example as new allegations or evidence emerge which could put those commissioning or conducting the investigation at risk of actual or perceived conflict, or if senior management seeks to inappropriately steer or narrow the investigation process or findings. The Guidance emphasises that in-house counsel should take a step back and:
“be sure that they are “in a confident position to give independent, objective advice to [their] client. The ‘client’ for these purposes may not necessarily be the individual or team who has commissioned your advice or with who you have day-to-day interactions.”
We recommend periodic investigation “check ins” where these issues can be reviewed and documented, along with the project scope, methodology and implications of the investigation. Any conflict issues should be escalated (for example to a board subcommittee).
Particular care is required in relation to the findings of an investigation (see further below). As the Guidance notes, the outcome of the investigation being improperly influenced can itself give rise to a regulatory breach, for example if the findings or investigation report do not accurately reflect the true findings of the investigation.
Interviews
Interviews can be stressful for those involved. In-house counsel should consider how interviewees can be best supported and how interviews can be conducted in a way that minimises stress (for example considering the number and seniority of interviewers, and the interview setting). This is a balance: interviewees need to be treated fairly and with respect, but it is important that interviews are sufficiently thorough and probing.
The start of an interview and any pre-discussions should be carefully scripted. It should be made clear to interviewees that the interviewers are acting on behalf of the company, and that only the company may elect to waive privilege or confidentiality. That said, it is also important that interviewees do not perceive that their rights to speak up or “blow the whistle” are being curtailed in any way. It may be helpful to communicate the basis of the interview in advance.
In-house counsel (and any other individuals) conducting interviews should have sufficient interview expertise and training. It is important to plan interviews very carefully, ensuring that the right documents are available and put to employees, avoiding leading questions, allowing sufficient time for interviewees to read documents, and ensuring that an accurate note of the meeting is taken (ideally by a lawyer, though noting that the relevant circumstances, such as whether there is imminent or pending litigation or relevant enforcement action, will determine whether the note is privileged).
Findings
Issues of independence and integrity can come to a head when it comes to communicating the findings of the investigation. As the Guidance notes:
“In-house solicitors can experience pressures from senior leaders to take steps or reach conclusions that inappropriately pre-empt or influence the outcome of an investigation. We have also heard about outcomes of internal investigations being blocked from being reported, or outcomes being manipulated, before being presented.”
While it is of course important that investigation findings are fully challenged and tested before being finalised, it is crucial that investigation reports (whether oral or written) accurately reflect the strength of the evidence identified and that changes to findings (and the rationale for those changes) are carefully documented.
How can we help?
We have significant experience advising clients on investigations in various contexts. Preparedness is key. To this end, we have recently been supporting various clients to enhance and formalise their internal investigation procedures. Many clients have found it very helpful to have in place (or enhance) written triage processes, protocols and investigation precedents to ensure that investigations are conducted efficiently and consistently, whilst managing the risks involved.