22 June 2012 at 14:21 BST

A regulator calls

Many a chief executive has nightmares featuring the heavy tread of regulators approaching the boardroom door. Deborah Blaxell suggests that having key information prepared in advance can take the worry out of such visits

Day break: it's when the investigators like to come knocking

In a constantly evolving panorama of national and international regulation and legislation, businesses, supported by their lawyers, have to keep abreast of, and comply with, a complex range of rules and laws.
Being able to locate key information is critical to answering investigatory queries and proving that a business has taken reasonable measures to prevent legal or regulatory contravention. Failure to do so can mean incurring hefty fines and damage to corporate reputation.
To understand the extent to which US and European businesses are prepared for e-disclosure in relation to possible investigation by regulatory or legal authorities, 2,000 firms in the UK, US, France and Germany were surveyed recently.

Accurate access

More than half of corporations (58 per cent) across the US and the key economies of Europe say they do not have rapid and accurate access to key documents should a regulator make an inspection.
Companies in Germany are most confident about being able to produce the relevant documents rapidly (47 per cent are not capable), followed by the US (56 per cent not capable) and UK firms (59 per cent not capable). French firms were the least confident, with 69 per cent of corporations declaring that the majority of companies in their sector would not be able to access all the key information and types of document demanded by a regulator during the course of an investigation.
With more than half of companies across the US and Europe declaring they are in such an unprepared position, many will find it challenging to deal with an investigation effectively and efficiently.
It is imperative, however, that businesses make themselves e-disclosure ready. Proactive measures will allow companies to respond adequately if they either suspect wrongdoing has occurred and wish to conduct internal investigations as a precursor to self-reporting or if they are faced with a regulatory request for information.

Continuous monitoring

Businesses will need to acquire the ability quickly and effectively to locate relevant data. This will require continuous monitoring of a wide range of activities, undertaken by numerous staff members, who will often be located in several jurisdictions, and who will be using a variety of information management systems and other communication tools. Knowledge of how the business communicates with its contacts and where the information is stored will be essential to complying with the key legislation and regulations, and avoiding or reducing judicial or regulatory criticism.
Whether monitoring corporate information for potential breaches, or dealing with an internal investigation, it is important that companies have the ability to search this data for high-risk communications using the most up-to-date and appropriate technologies available.
Costs will be reduced if those managing the disclosure exercise gain an early appreciation of the nature of the data, and are able to assess what is likely to be relevant to the investigation and what can safely be removed from the data set prior to review.
Robust systems for capturing, categorising and retrieving key documents and data are necessary to ensure that information is rapidly retrievable. An investment in this area can prove beneficial on many fronts as systems can easily be adapted for different legislative or regulatory requirements.
The existence of these systems and their use within a firm can contribute to the establishments of a defence – either ameliorating the severity of the regulator’s view, or providing a defence and helping companies avoid incurring heavy fines and lasting brand damage.

•The research was conducted by Epiq Systems and a full version is available at: http://www.epiqsystems.com/regulator.aspx
Epiq is hosting a London panel debate on the use of technology to reduce costs in litigation. The discussion will look at the approach that courts are likely to take when considering arguments about the defensible use of technology-assisted review, the effect that review system has on law firm fees and how law firms and their corporate clients can expect to be penalised in costs if they fail to match up to the expectations of the court.
The panel will feature Senior Master Steven Whitaker of England’s Queen’s Bench Division and Magistrate Judge Andrew Peck of the US District Court for the Southern District of New York.
This event is from 8.15am-10am on Wednesday 27 June 2012 at 60 Cannon Street, London EC4N 6NP. Attendance is free but prior registration is required.

Deborah Blaxell is a legal consultant at global specialist technology business Epiq Systems.


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