Corporate Investigations 2019

Author:Dr. Andreas D. Länzlinger and Sarah Mahmud
Profession:Baer & Karrer

1 The Decision to Conduct an Internal Investigation

1.1 What statutory or regulatory obligations should an entity consider when deciding whether to conduct an internal investigation in your jurisdiction? Are there any consequences for failing to comply with these statutory or regulatory regulations? Are there any regulatory or legal benefits for conducting an investigation?

Swiss law does not impose direct obligations on companies to conduct internal investigations. However, duties to cooperate with and provide regulatory authorities with accurate information can indirectly compel them to do so. The Swiss Financial Market Supervisory Authority ("FINMA"), for example, frequently orders regulated entities to explain incidents and produce documents relating to matters under its supervision, and the entities are also under an ongoing obligation to immediately and proactively notify material events. The stock exchange, SIX Swiss Exchange, imposes a similar ad hoc notification requirement, and financial intermediaries have duties to investigate and report suspicious activity to the Swiss Money Laundering Reporting Offices. Conducting an internal investigation is often the only way to gather information and comply with such duties, and sanctions for non-compliance can be serious. Providing FINMA incorrect information, even if only negligently, is a criminal offence attracting a fine of up to CHF 250,000, while intentional non-compliance bears a maximum sentence of three years' imprisonment. Sanctions against the entity can go as far as the regulatory authority revoking an entity's licence to engage in business, particularly if it fails to remediate the conduct in issue.

Regulators such as FINMA usually have the power, under their overarching authority to remediate unlawful conduct and restore compliance, to order internal investigations. If necessary, FINMA can appoint an independent investigator (usually a law firm or an audit firm) to investigate and implement remedial measures within a regulated entity. By taking a proactive and early decision to investigate, entities have the advantage of preserving a degree of control over their investigations, and give themselves time to prepare responses to any government or media enquiries before they arise.

Another incentive to investigate is that the Swiss Criminal Code ("CC") imposes corporate criminal liability for failure to take adequate measures to detect or prevent the commission of offences within an organisation. A legal entity may thus be convicted for failing to implement reasonable measures to prevent an exhaustive

list of catalogue offences (known as primary corporate criminal liability); or, if the organisation does not have adequate corporate and compliance structures to identify the natural person responsible, it can be made (secondarily) liable for any felony or misdemeanour committed during the ordinary course of its business. The criminal prosecution authorities recently rewarded a company's proactive initiation of an internal investigation, cooperation with the authorities and its implementation of compliance measures by treating these as mitigating factors at sentencing (cf. question 2.1 below).

An entity's board of directors and its executive organs also have duties of care under company law, which can require them to set up compliance and control systems to detect, investigate and remediate misconduct. In addition, key employees, such as senior management or compliance officers, may be held criminally liable for failing to take action to prevent criminal conduct within the organisation.

A specific benefit to conducting an internal investigation in competition law is that a statutory leniency programme can grant companies complete or partial...

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