RCC Investigations, Reporting, and Ethics 3 — Questions and Answers
Question 1: What does 'attorney-client privilege' protect in the context of an internal compliance investigation?
- All communications between any employee and any lawyer
- Confidential communications between an attorney and client made for the purpose of obtaining legal advice (Correct answer)
- All investigation documents prepared by compliance staff
- Communications between company executives about legal risk
Correct answer: Confidential communications between an attorney and client made for the purpose of obtaining legal advice
Attorney-client privilege covers confidential communications between an attorney and client specifically for legal advice, not all attorney involvement in business matters.
Question 2: An employee submits an anonymous tip through the hotline alleging financial fraud. The tip lacks specific details. What is the best initial compliance response?
- Close the matter due to insufficient information
- Conduct a preliminary inquiry to determine if the allegation has merit (Correct answer)
- Immediately notify law enforcement
- Forward the tip to the CFO for review
Correct answer: Conduct a preliminary inquiry to determine if the allegation has merit
A preliminary inquiry allows the compliance team to assess whether the allegation warrants a full investigation without prematurely escalating or closing the matter.
Question 3: Under the Dodd-Frank Act, which of the following individuals is eligible to receive an SEC whistleblower award?
- An external auditor who discovers fraud in the normal course of their engagement
- An employee who reports information that leads to a successful SEC enforcement action exceeding $1 million (Correct answer)
- A compliance officer who reports internally and the company self-discloses to the SEC
- An attorney who learns of fraud from a client and reports it to the SEC
Correct answer: An employee who reports information that leads to a successful SEC enforcement action exceeding $1 million
Dodd-Frank awards go to individuals who voluntarily provide original information leading to a successful SEC enforcement action resulting in sanctions over $1 million.
Question 4: What is 'spoliation of evidence' and what are its potential consequences in a compliance investigation?
- Releasing investigation findings to the press prematurely; reputational risk
- Destruction or alteration of relevant evidence after a legal hold is triggered; adverse inference or sanctions (Correct answer)
- Sharing investigation documents without redacting PII; privacy violations
- Failing to notify regulators within required timeframes; fines
Correct answer: Destruction or alteration of relevant evidence after a legal hold is triggered; adverse inference or sanctions
Spoliation occurs when relevant evidence is destroyed after a litigation or investigation hold is in place, and courts may instruct juries to draw adverse inferences.
Question 5: Which element is NOT typically part of a root cause analysis conducted after a compliance violation is found?
- Identifying systemic process failures
- Assessing training and awareness gaps
- Determining disciplinary outcomes for the responsible party (Correct answer)
- Evaluating whether controls failed or were bypassed
Correct answer: Determining disciplinary outcomes for the responsible party
Root cause analysis focuses on systemic causes and control failures, not on determining individual disciplinary outcomes, which is a separate process.
Question 6: A compliance officer suspects that an ongoing investigation may be compromised because the subject has access to the investigative files. What should the officer do?
- Continue the investigation but document the concern
- Restrict the subject's access to relevant systems and files immediately (Correct answer)
- Pause the investigation and consult legal counsel before proceeding
- Transfer all files to a secure external location only
Correct answer: Restrict the subject's access to relevant systems and files immediately
Restricting the subject's access to investigative materials immediately protects the integrity of the investigation and prevents evidence tampering.
Question 7: What is the primary purpose of a compliance program's Code of Conduct?
- To serve as a legally binding contract with employees
- To establish clear behavioral expectations and ethical standards for the organization (Correct answer)
- To replace detailed policies and procedures
- To satisfy SEC registration requirements
Correct answer: To establish clear behavioral expectations and ethical standards for the organization
A Code of Conduct communicates the organization's values and expected behaviors, providing an ethical framework for all employees.
RCC Investigations, Reporting, and Ethics 3
What does 'attorney-client privilege' protect in the context of an internal compliance investigation?