A firm faced with a regulatory investigation should hire outside counsel to bring objective analysis to the situation. Although it may seem simple, the question that must first be addressed is who the lawyer represents.
If the firm itself is the subject of the inquiry, then the firm needs representation. However, that same lawyer should not represent any individual employees who are subject to the review as well because there could be conflicts of interest between the firm and the employee.
In this situation, the company’s lawyer should advise the individual that they should retain their own counsel. Depending upon the situation, the firm should consider whether to pay for that separate counsel.
Similarly, the communications between the company lawyer and the firm should be limited to those in the firm who are part of what has been termed the “legal control” group. In other words, the group should comprise of individuals who are specifically designated to address the regulatory issue before the firm. By keeping the communications between the firm and its counsel limited, there is less likelihood of any attorney-client privilege being inadvertently waived.
Although this may all seem to be promoting the legal profession, there is much more to the story. How a firm handles an investigation of a regulatory issue may say more about the firm than the issue itself. Will the firm portray the image that it is simply trying to sweep everything under the carpet by keeping the review in-house? Or, will the firm be able to meet the regulatory review and be able to say and demonstrate that it took an objective approach to address the situation.
How you decide this matter may have a large bearing on what happens as a result of the regulatory review. Think twice before you decide.
* photo from freedigitalphotos.net.