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31 Days to More Effective Compliance Programs

Legal requirements of the Board regarding compliance


Welcome to this month’s offer of 31 Days to a More Effective Compliance Program. This month I will focus on the Board of Directors and its role in an effective compliance program. At the end of August, you will not only have a good summary of the basics of a best practices compliance program for a Board of Directors but information that you can incorporate into your compliance regime.
Case law. As to the specific role of best practices in the area of general compliance and ethics, one can look to Delaware corporate law for guidance. The case of In Re Caremark International Inc., 698 A.2d 959, (Del. SCt. 1996) was the first case to hold that a Board’s obligation “includes a duty to attempt in good faith to assure that a corporate information and reporting system, which the board concludes is adequate, exists, and that failure to do so under some circumstances may, in theory at least, render a director liable for losses caused by non-compliance with applicable legal standards.”
2020 FCPA Resource Guide, 2nd edition and U.S. Sentencing Guidelines. A Board’s duty under the FCPA is well-known. In the  FCPA Resource Guide, 2nd edition, there are two specific references to the obligations of a Board. The first, in Hallmark No. 1, states: “Within a business organization, compliance begins with the board of directors and senior executives setting the proper tone for the rest of the company.” The second is found under Hallmark No. 3 and notes that the CCO should have “direct access to an organization’s governing authority, such as the board of directors and committees of the board of directors (e.g., the audit committee).” Further, under the U.S. Sentencing Guidelines, the Board must exercise reasonable oversight on the effectiveness of a company’s compliance program. The DOJ’s Prosecution Standards posed the following queries: 1) Do the Directors exercise independent review of a company’s compliance program? and 2) Are Directors provided information sufficient to enable the exercise of independent judgment?
From the Delaware cases, a Board must not only have a corporate compliance program in place but actively oversee that function. Further, if a company’s business plan includes a high-risk proposition, there should be additional oversight. In other words, there is an affirmative duty to ask the tough questions. The specific obligations set out regarding the FCPA drive home these general legal obligations down to the specific level of the statute.
Three key takeaways:

  1. The Delaware courts have led the way with the In Re Caremark and Stone v. Ritter decisions.
  2. Note the obligations of the Board under the Ten Hallmarks of an Effective Compliance Program.
  3. The U.S. Sentencing Guidelines also require Board involvement and oversight.

A special thanks to this month’s sponsor, Affiliated Monitors, Inc. 

 

Categories
FCPA Compliance Report

Mike DeBernardis on 2020 Update to the Evaluation of Corporate Compliance Programs and FCPA Resource Guide, 2nd edition


In the Episode, I am joined by Mike DeBernardis, Counsel at Hughes Hubbard, in the firm’s Washington office and a member of the firm’s Anti-Corruption and Internal Investigations and White Collar & Regulatory Defense practice groups. He represents corporate and individual clients in criminal, civil and administrative enforcement matters, including matters involving the Foreign Corrupt Practices Act and securities and accounting fraud. In this episode we take a deep dive into the DOJ’s 2020 Update to the Evaluation of Corporate Compliance Programs and DOJ and SEC FCPA Resource Guide, 2nd edition.
Some of the highlights include:

  1. What were the top changes DeBernardis observed in 2020 Update to Evaluation of Corporate Compliance Programs?
  2. What were the top changes for you in FCPA Resource Guide, 2nd edition?
  3. How should one read the Resource Guide, 2nd with the 2020 Update? In conjunction, separately or in some other way?
  4. Is there any significance  to the two documents being released so close together in time?
  5. Should you advise clients to do anything different because of these documents?
Categories
Daily Compliance News

August 3, 2020-the New Normal edition


In today’s edition of Daily Compliance News:

  • A new normal for businesses arises. (WSJ)
  • Will the Wirecard scandal finally cause EU to do something? (FT)
  • Deutsche Bank opens investigation in Kushner banker. (NYT)
  • Microsoft still to pursue TikTok. (WaPo)