SFO issues new guidance on corporate cooperation
On August 6, 2019, the U.K.’s Serious Fraud Office (the SFO) – the U.K’s primary enforcement authority for economic crimes – released new guidance detailing actions companies should take while cooperating with agency investigations. With the recent implementation of a Deferred Prosecution Agreement (“DPA”) regime for corporate wrongdoing in Canada, together with other more established credit for cooperation programs developed by various provincial securities regulators, the SFO guidance is instructive for corporations choosing to cooperate with enforcement agencies in the Canadian context.
Highlights of SFO Corporate Cooperation Guidance
The SFO guidance emphasizes a “genuinely proactive approach” upon discovering wrongdoing, noting that mere compliance with mandatory steps in the investigative process is not an indication of cooperation. Rather, cooperation is “providing assistance to the SFO that goes above and beyond what the law requires.” Under the guidance, this includes:
- Identifying suspected wrongdoing and criminal conduct together with the people responsible, regardless of their seniority or position in the organization;
- Reporting to the SFO within a reasonable time of the suspicions coming to light; and
- Preserving available evidence and providing it promptly in an evidentially sound format.
The guidance outlines several best practices in preserving and providing materials, offering industry knowledge and background information, and making witnesses available for interviews. Some indicators of good practice include:
- Preserving digital and hard copy relevant material using a method the prevents the risk of document destruction or damage;
- Obtaining and providing material promptly on request, responding to SFO requests and meeting agreed-upon timelines;
- Alerting the SFO to relevant digital materials the organization cannot access;
- Identifying relevant material in the hands of third parties, and facilitating the production of third-party material;
- Making accountants and/or other relevant personnel available to produce and speak to financial records;
- Identifying potential defenses that are particular to the market or industry at issue; and
- Consulting in a timely manner with the SFO before interviewing potential witnesses or suspects to avoid prejudice to the investigation.
The guidance does not guarantee leniency in exchange for cooperation, but emphasizes that it will be taken into account when laying charges, noting cooperation benefits the public interest by allowing enforcement agencies to more efficiently and effectively investigate corporate wrongdoing.
OSC Credit for Cooperation Program
The SFO’s guidance is similar in many ways to that contained in the Ontario Securities Commission’s (the “OSC”) Revised Credit for Cooperation Program. Pursuant to the OSC program – based on the principle that self-policing, self-reporting and self-correcting are in the public interest and should be encouraged – market participants who cooperate with OSC staff may receive credit ranging from narrowing the scope of the allegations in an enforcement proceeding to reduced sanctions or resolution through a settlement agreement. In certain limited circumstances, OSC staff may agree to take no action against a cooperating market participant.
In order to receive credit for cooperation, market participants are expected to cooperate fully with OSC staff. Indicators of cooperation under this program closely resemble SFO guidance, including expectations of prompt disclosure, access to necessary materials, and availability of potential witnesses for interviews.
Implications for Cooperation in the Canadian context
The SFO’s guidance, in tandem with Canadian guidance such as that from the OSC, is instructive to Canadian companies cooperating with regulatory authorities, particularly in light of Canada’s recent introduction of a DPA regime.
As discussed in our previous post, a DPA is an agreement entered into between a prosecutor and a company alleged to have engaged in economic crimes, the effect of which is to suspend the outstanding prosecution while simultaneously establishing specified undertakings that the organization must fulfill in order to avoid facing the potential criminal charges. Self-reporting to and cooperating with regulatory authorities – encouragement of which are the primary purposes behind a DPA regime – are generally a precondition to receiving a DPA. In addition, in the absence of a remediation agreement, Canadian companies may still also benefit from cooperation with regulatory authorities as a mitigating factor in sentencing for any conviction.
Companies should actively investigate any allegations of corporate wrongdoing in order to determine the veracity thereof and whether to report such conduct to regulators, and should seek advice from external counsel both during the investigation and in determining whether to self-report any given allegation. In circumstances where Canadian companies decide it is prudent to report to or cooperate with regulatory authorities, the SFO’s guidance may be of assistance in determining the manner in which such cooperation should take place.