While you may think that the potential of a regulatory investigation is remote, you should consider making plans to deal with such an eventuality; failing to do so may not be prudent. By planning, you may well reduce the risk of having to deal with a regulator in the first place. In line with best business practice, there are a number of ‘golden rules’ you should follow:
1. Prepare a Business Continuity Plan
Hopefully, you will never need to put it into action, but if your business should ever be subjected to the scrutiny of a regulator, a Business Continuity Plan will mean you will be well placed to deal with an investigation and minimise the long-term impact on your business. Your plan will need to take into consideration:-
- The potential loss of key personnel for the duration of the investigation.
- The financial resources required to meet the investigation.
- Who from your team will “command the response”.
- What sources of external support including legal and financial should be on hand.
2. Don’t hesitate – take action early
The most effective responses to regulatory investigations are invariably where a business has spotted the danger signs and taken immediate action. A major incident such as a fatality or office raid will always require an immediate response. Others such as increased stops/inspections and warning letters may need a different level of response. Nonetheless even in these cases it may be inadvisable for you and the team to delay. If internal investigations are delayed you may be missing a crucial opportunity to “nip a problem in the bud” before it leads to further significant difficulties.
It is also crucial that your senior management/the Board are informed. That way you know that proper management control of the situation has been taken from the start. Any issues should remain on the agenda of your management or Board Meetings until they are resolved.
3. Establish a clear chain of command
It is essential that you have a chain of command so that those responsible for the day to day activities of the business are encouraged to report regulatory issues and problems to their managers and on to senior management. If this chain is broken in any way, the business will not be able to respond properly, and is more likely to face prosecution for non-compliance. Individual Directors or managers may face personal risk in terms of civil law and criminal prosecution.
4. Be fully prepared for interviews
If a regulator has signalled an intention to interview your company or an individual about alleged offences, it is critical that legal advice is taken. The first issue to be considered if both you and a team member are to be interviewed is whether there is a conflict of interest and if separate legal representation will be required. Any interviewee answering on behalf of the company will need to be fully briefed and be properly able to answer questions. Most crucially, the approach to the interview must be resolved.
Key questions for you to address with your advisers include:
- If an interview request is refused, could an individual be arrested?
- Should a list of questions be requested in advance?
- What disclosure can be expected? · Should questions be answered?
These are critical issues that require careful and well considered legal advice at the outset. Recently, the writer represented a security company accused of trading standards’ breaches. No disclosure was made by the local trading standards department and when the interview was attended, the questions were to be about what the company knew about the actions of one rogue salesman. No allegations were made. The company was advised to walk out of the interview and trading standards took no further action. The right approach (taken with the benefit of legal advice) resulted in the best possible outcome.
5. Understand the powers of the regulator
Different regulators have different powers. Some have the power to force you to answer questions: for example, the HSE under S.20 Health and Safety at Work Act. However under the laws which govern a regulator’s investigative powers, a regulator may well be limited in what actions can be taken. Legal advice is critical in informing the tactical response of your business to a regulatory investigation.
6. Have an emergency response plan in place
It is critical for you to bear in mind that regulatory issues, particularly those relating to major incidents and raids, do not necessarily happen in working hours. When planning for a business response to investigations, make sure that you and your advisers are available to respond 24 hours a day and at very short notice. Being on a scene first, dealing face to face with investigators, taking early witness statements and so on can make a considerable difference to the outcome.
