Legal and Compliance Programs: Ethics and Effectiveness

SEGMENT 1:
Matthew G. Nielsen, Partner,
Andrews Kurth LLP 
FUNDAMENTALS OF AN EFFECTIVE COMPLIANCE PROGRAM TO FACE UNPRECEDENTED CHANGES

The current regulatory environment has created unprecedented securities compliance challenges for companies of all size and throughout all industries.

• Dodd-Frank contains more than 90 provisions requiring new rules by SEC and dozens of provisions providing the Commission with discretionary rulemaking authority. The SEC has adopted more than three-quarters of mandatory rules, but many have yet to be finalized.
• Delays in rulemaking and legal challenges to more controversial rules have created uncertainty for SEC compliance.
• In addition to the slew of new rules, SEC enforcement activity is at all-time high. During last two years, the SEC has brought nearly 1,500 enforcement actions, obtaining orders for more than $5.9 billion in penalties and disgorgement.

The avalanche of new rules, the uncertainty of what is to come, and the SEC’s enforcement vigor require that companies of all size have formalized, defined, and robust compliance programs.

This presentation will focus on the fundamentals of an effective compliance program, which both comports with principles set forth by agencies such as the US Department of Justice and lays the compliance foundation to effectively implement new rules and enforcement trends

SEGMENT 2:
Barbara (Bobby) Kipp , Partner, 
PricewaterhouseCoopers 
Conflict Minerals (Dodd-Frank Section 1502): PwC path to compliance: Beyond the rules and preparing throughout the next 12 months

Preparing for compliance with these rules could be complex and time consuming. The SEC estimates initial costs of compliance at $3-6B and ongoing annual compliance costs at $200-600M—affecting approximately 6,000 issuers and 275,000 non-public suppliers.

Companies will need to understand if they are subject to this rule and take decisive steps in order to prepare for compliance. At a high level, companies need to:

• Examine their products to determine whether and to what extent the rule applies to them;
• Develop and conduct a “reasonable country of origin inquiry” and, if necessary, additional due diligence;
• Obtain a third-party independent audit of their due diligence; and
• Comply with disclosure requirements.

Issuers will be required to provide annual disclosures on a new “Form SD” to be filed with the SEC. The annual disclosure period spans a calendar year for all issuers – regardless of their fiscal year end. The filing deadline for annual disclosures is May 31. Companies will first comply with the disclosure requirements on May 31, 2014 (for the 2013 calendar year).

This presentation will provide the necessary insight to prepare, operate and report for compliance withthis act.

1. Discuss the Dodd-Frank conflict mineral requirements
2. How to evaluate and determine your products for conflict minerals
3. Leading practices on evaluating your supply chain and reporting requirements

SEGMENT 3:
Andrew Morris, Partner, 
Morvillo LLP 
MAINTAINING A ROBUST COMPLIANCE PROGRAM WHILE MINIMIZING COMPLIANCE OFFICERS’ EXPOSURE TO PERSONAL LIABILITY

The challenge: enhancing CCO authority without rendering the CCO vulnerable to liability for the misconduct of line employees
Legislators and regulators require that CCOs have strong authority
Increased authority can mean increased risk of personal liability
Attempts by the SEC to hold CCOs liable as “supervisors” of line employees because they have authority

• Background: The duty of line managers to supervise line employees.
• In re John Gutfreund: The SEC staff contends that a general counsel is liable as a line supervisor
• Subsequent SEC actions and endorsements of this standard
• In re Theodore W. Urban: A compliance officer is liable as a line supervisor

The Theodore W. Urban case illustrates the dilemma that confronts compliance attorneys
Some practical steps to reduce personal exposure