The Good Board
Agenda · The board in distress

Regulatory investigation opens

The first seventy-two hours frame the next three years.

Status
First edition · 2026-05-05
Category
In distress
Last reviewed
2026-05-05

Note

Procedural references are to the Swiss Criminal Procedure Code (StPO) and sectoral supervision acts.

If the clock is running now, call directly.

A FINMA supervisory letter arrives at the general secretariat. A Public Prosecutor’s office serves a seizure order on the company at seven in the morning. A US Department of Justice subpoena is delivered through Swiss mutual legal assistance channels. The specific form varies; the pattern does not. In each case, the board has a narrow window — measured in hours, not weeks — to take the structural decisions that will govern the company’s, and the directors', position for years afterwards. Most of the enduring errors in investigation defence are made in those first hours, not later. This page sets out what a disciplined board does and does not do in that window.

1. The duties that bear on this

The company is a separate defendant. Under Art. 112 StPO, a company exposed under Art. 102 StGB is a party in its own right and must be represented. The representative carries the procedural rights of the accused; if the natural person chosen is themselves under suspicion, the company is disarmed procedurally from day one.

Preservation is immediate. Document destruction during an investigation is separately punishable and produces adverse inferences on the merits. From the moment the board becomes aware that an investigation is plausible, standard retention cycles in the affected scope must be suspended. This is not a compliance-team project; it is a board instruction.

Individual and company interests diverge quickly. The interests of the company, of implicated directors, of implicated officers, and of employees may converge today and diverge tomorrow. Treating them as coincident — and using a single counsel for all — is the structural error that almost always produces later conflicts, disqualifications, and malpractice exposure.

2. The process — first seventy-two hours

  1. Convene the board or, if the matter cannot wait, the chair and the audit-committee chair within hours. Not days.
  2. Instruct external counsel for the company. Do this before internal counsel makes assessments that may later be discoverable.
  3. Issue a written preservation notice to IT and to every function that holds in-scope records. Preserve, do not copy; do not collect into new repositories without counsel’s guidance.
  4. Designate a company representative under Art. 112 StPO who is not conflicted. This is ordinarily not the CEO.
  5. Separate counsel for the company from counsel for directors and officers who appear implicated. Do this early, before privileged communications have blurred the line.
  6. Decide, on advice, the scope and timing of the first authority interaction. Premature contact can waive rights; prolonged silence can be read as non-cooperation.
  7. Open the D&O insurance notification chain. Most policies require notice within defined windows; late notice can prejudice coverage.
  8. Lock communications. No public statements, no internal all-hands, no customer note, until drafted by counsel and approved by the board or its delegate.

3. Questions to ask management (and counsel)

4. The record to leave

Every material decision taken during the investigation is a decision that will be reviewed by someone — directors' counsel on civil liability, insurers on coverage, courts if matters do not settle. The board’s instruction to preserve, the designation of the company’s representative, the decision on cooperation, the approval of public statements: all belong in minutes of enough substance that a later reader can see the reasoning. Privilege discipline applies simultaneously: minutes reflecting the substance of counsel advice, if circulated freely, risk compromising the privilege in the underlying advice. A separate, narrower minute for privileged deliberations, kept by counsel and not circulated to the broader board pack, is the usual solution.

5. Failure modes

The shared-counsel trap. The company’s counsel also represents the CEO and the CFO. Six months in, a conflict emerges that was present from day one. Counsel must withdraw; the company loses continuity; the CEO and CFO now contest the defensive posture the company has publicly adopted. This pattern is avoided by treating the conflict analysis as an early-first-hours item, not a problem to be dealt with when it arises.

Premature cooperation. The company waives privilege and hands over an internal-investigation memorandum to Swiss authorities in exchange for cooperation credit. The memo reaches foreign authorities through MLA channels and directors' counsel in the US derivative action through third-party production. What looked like a domestic-Swiss concession turns into global adverse material.

Document destruction framed as routine retention. Email purges and document-management cycles continuing after the board knew of the investigation — whether or not anyone said “stop the deletion.” Courts and prosecutors treat inattentive continuation of routine destruction as the equivalent of deliberate destruction for adverse-inference purposes.

Cognitive register. The opening days of an investigation produce predictable cognitive dysfunctions in the implicated board. The ostrich effect (Karlsson, Loewenstein & Seppi, 2009) — the documented tendency to avoid information that might worsen the picture — manifests as delays in commissioning the internal investigation, in broadening the document preservation, in telling counsel the full facts. Denial closes cognitive bandwidth; the director who cannot bring himself to acknowledge the exposure cannot think clearly about the response. Normalcy bias treats the investigation as another compliance matter when it is not. The seventy-two-hour discipline above is prescriptive precisely because the psychological pressure at that moment favours every variant of non-action; the procedural steps are a bulwark against the cognitive pull toward waiting.

6. See also