spRING 2011 GlobAl MARKETs INTERNATIoNAl - Willis

dIreCtors and offICers
CuRReNt tReNds
Following the global financial collapse, an
inevitable outcome was going to be an increase
in regulatory and criminal investigations into
companies and individual directors. There has
also been an emphasis by the regulators on the
criminalisation of corporate conduct.
The idea of targeting individuals for
prosecution by regulators, such as the
Financial Services Authority, is based upon
the belief it has a greater deterrent effect.
Another trend is official bodies, such as the
Serious Fraud Office and Securities Exchange
Commission, have been actively encouraging
self-reporting and whistle-blowing within
organisations. In the U.S., for example, there
are actual monetary incentives of a percentage
of the eventual fine being awarded to those
who expose the wrongdoers. There has already
been a USD 1m payment.
There has also been significant growth in
trans-border investigations and cooperation
between regulators from different countries.
Regulatory and criminal investigations and
prosecutions raise important coverage issues
in relation to D&O policies, the least of which
is whether or not the policy will respond to
such proceedings.
" regulatory
and CrImInal
InVestIgatIons and
ProseCutIons raIse
ImPortant CoVerage
Issues In relatIon to
d&o PolICIes"
26 | Willis | Mining Market Review 2011
iNvestigatioNs – aRe they CoveRed uNdeR youR d&o PoliCy?
Many policies offer cover for investigations, but coverage triggers may
vary according to the type of investigation costs that have been incurred:
• Regulators can conduct formal or informal investigations prior to a
formal proceeding commencing;
• Corporations can conduct their own internal investigations in
reaction to an allegation of wrongdoing ;
• Shareholders seeking a derivative claim on behalf of the company
against the directors and officers are generally required, by law, to
demand that the Board of Directors authorises the company to file
the lawsuit. In response to that demand, the Board usually appoints
a Litigation Committee composed of disinterested outside directors,
who then conduct an independent investigation of the alleged
wrongdoing for the purpose of determining if the prosecution of the
proposed lawsuit is in the best interests of the Company
Reference to investigations in the policy cannot be read in isolation
and must be viewed in conjunction with other policy terms and
conditions which actually may limit the cover available, such as:
• The definition of ‘Claim’;
• The policy language relating to Claims against insured’s for
‘Wrongful Acts’ ;
• The definition of ‘Loss’ incurred by insured.
eXaMPles oF iNteRNatioNal legislatioN aFFeCtiNg d&o
CoveRage aNd MiNiNg CoMPaNies
1 The Foreign Corrupt Practices Act , 15USC Sections 78dd - 1 and
78dd-2 as amended by the Anti - Bribery and Fair Competition Act of
1998 ( Foreign Corrupt Practices Act) (FCPA) of the United States of
America; and
2 Bribery Act 2010 coming into force in the United Kingdom in
April 2011 (Bribery Act):
In the last 24 months, the issue of how global companies conduct
themselves abroad in securing contracts has come firmly into focus,
with record fines under the FCPA, and with the overhaul of
anti-bribery legislation in the U.K.. We look at the FCPA and Bribery
Act to see what the implications of this legislation are, and what
Directors and Officers need to be aware of.