ANNUAL REVIEW

D&O Risk & Liability 2014

March 2014  |  RISK MANAGEMENT

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Financier Worldwide canvasses the opinions of leading professionals around the world on the latest trends in D&O risk & liability.

 

UNITED STATES

James Q. Walker

Richards Kibbe & Orbe LLP

“The SEC’s renewed vigilance in pursuing corporate wrongdoers was demonstrated by its announcement that in ‘egregious cases’ respondents who wished to settle with the SEC would have to admit to wrongdoing, rather than the traditional ‘neither admit nor deny’ compromise. D&Os need to be concerned that carriers may view admissions specifying individual misconduct as grounds to deny coverage if they are deemed to have admitted to fraudulent conduct or illegal profits. In addition, the SEC reported that whistleblower tips increased to 3238 in 2013, up from 3001 in 2012, and the report of payment of a $14m bounty award will only further motivate reports.”

 

BRAZIL

Patrizia Mastrapasqua

Lockton

“The inclusion of personal liabilities for corporate directors and officers by third parties, and especially regulators and creditors, is a way of speeding up litigation processes brought against a corporation. The freezing of personal bank accounts and assets as well as the reputational exposure involved makes corporations act effectively to solve the litigation rapidly, in order not to affect their D&Os. That is why most of the claims borne by insurers in Brazil are still represented mainly by lawyers’ fee payments.”

 

UNITED KINGDOM

Ed Brittain

JLT Specialty Limited

“D&O insurance is an essential tool to give peace of mind to D&Os. The complexity of the fiscal rules, the rising activity of regulatory bodies and the increasing awareness of their rights by the wider community have triggered a considerable number of actions against D&Os. This type of insurance has increased exponentially over the last 10 years, reflecting the attention that is being paid to the issue. We see a lot of directors requiring D&O insurance as a sine qua non condition to accept a job offer and law firms giving advice to their clients to seek protection.”

 

GERMANY

Björn Fiedler

Friedrich Graf von Westphalen & Partner

“According to our experience, the ‘political pressure’ to file D&O claims has increased in Germany within the last 10 years. There is, however, no legal pressure for third parties to bring an action against directors and officers. This is due to the fact that liability under the applicable German corporate act is based on the so called Innenhaftung, or internal liability. This means that the director is only liable towards his company, and a liability with regard to third parties only arises in exceptional cases.”

 

FRANCE

Frédérique de la Chapelle

Eversheds LLP

“In addition to the risks and liabilities resulting from financial regulation, the pressures are due to there being escalating regulation and case-law, increasing the personal risks for D&Os in numerous other areas such as health and safety and employment issues, money laundering, anti-bribery and corruption, among others. Furthermore, there are numerous independent regulatory authorities including the AMF – the financial market authority; the ACPR – the supervisory authority for financial institution; and CNIL – an independent body for data protection. These regulators and independent authorities have increased the number of investigations and enquiries carried out.”

 

RUSSIA

Vladimir Kremer

AIG

“We are experiencing a revision of corporate governance standards in connection with Moscow becoming an international financial centre. We are seeing corresponding tendencies in litigation practice – it is becoming easier to prove the link between the actions of D&Os and the corresponding loss of third parties. One of the significant milestones in this respect is the recent decision of the Russian High Arbitration Court which sets new, easier standards for proving the guilt of individual directors in particular cases – for example approval of unprofitable deals, unreasonable or unthoughtful selection of a contractor, improper set up of the management system, and so on.”

 

CHINA & HONG KONG

Nathan Dentice

Reed Smith Richards Butler

“Recently, we have seen changes in the legal and regulatory framework in Hong Kong and China which increase the likelihood of claims being made against directors. In Hong Kong, for example, the legislature has introduced a new regime for the disclosure of inside information which gives investors a direct right of action against D&Os for breaches of their disclosure obligations. The SFC has started bringing claims against directors seeking damages for breaches of duties owed to their company, and we have seen shareholders making increasing use of provisions enabling them to obtain access to corporate records in order to explore the possibility of making claims against D&Os.”

 

SINGAPORE

Aruno Rajaratnam

Ince & Co

“The personal liabilities of D&Os in Singapore are well established by various statutes and common law. Over the past 15 years, new statutory enactments like the Securities and Futures Act, the Competition Act, the Environmental Protection and Management Act, the Computer Misuse and Cybersecurity Act, and the Personal Data Protection Act 2012 have added new exposures and pressures for Singapore D&Os. Also, there have been several amendments to the Singapore Companies Act to bring it in line with international standards of corporate governance and compliance.”

 

MIDDLE EAST

Alexander Blom

AIG

“The Middle East region is seeing increasing focus from regulators and authorities in respect of cases concerning alleged corruption and fraud – possibly influenced by the effects of the Arab spring. A recent jail sentence of three senior officials relating to a bribery case in Oman is evident of the legal regime in respect of cases of this nature. Also, as a consequence of the global financial and economic crises, D&Os have become more closely scrutinised by stakeholders and regulators, their decisions are more frequently challenged, and they are more regularly named and brought to account.”


CONTRIBUTORS

AIG

Eversheds LLP

Friedrich Graf von Westphalen & Partner

Ince & Co

JLT Specialty Limited

Lockton

Reed Smith Richards Butler

Richards Kibbe & Orbe LLP


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