Board Audit & Compliance Committee Conference

Transcription

1 SOCIETY OFCORPORATECOMPLIANCE AND ETHICS Board Audit & Compliance Committee Conference Role and Responsibility of the Audit & Compliance Committee November 8, 2016 Thomas F. O Neil III The Saranac Group LLC Debbie Dudley Branson, Esq. The Law Offices of Frank L. Branson, P.C. Introduction Debbie Tom Goals and Format of the Discussion SCCE: November Preliminary Considerations Sector Public vs. Private Profit vs. Non profit Regulatory Expectations and Guidance Federal State SCCE: November

2 REGULATORY GUIDANCE Publicly Traded Companies Publicly traded companies must follow corporate governance regulations, guidance and standards issued by the SEC and their listing market (e.g., NYSE, NASDAQ) The SEC requires Audit Committee members to be independent, restricts financial arrangements between committee members and the company, and requires Audit Committees to have whistleblower and hotline mechanisms. 17 C.F.R A 3 Listing standards relating to audit committees. Both NYSE and NASDAQ listing rules have corporate governance standards requiring the adoption of: Corporate governance standards Independent directors Audit Committee organization, duties and membership Code of Conducts Related party transactions See NYSE Arca Equity Rules 5.3 et seq.; NASDAQ Equity Rule 5600 et seq. SCCE: November REGULATORY GUIDANCE In organizing its Board of Directors, a health care organization should determine whether applicable regulatory rules require the board to be composed of a majority or super majority of independent directors. Board Audit Committees of publicly traded health care organizations must be composed entirely of independent directors. Independent directors should meet, without management and management directors present, during part of each regular board meeting. SCCE: November COMPOSITION AND CHARTER Even if a health care organization is not for profit or privately held, it should consider the guidance of the SEC and listing exchanges in creating a charter and bylaws for the Audit (& Compliance) Committee. Tax exempt, not for profit health care organizations should also consider Internal Revenue Service rules and guidance in organizing their governing boards and audit committees. Tax exempt 501(c)(3) organizations must establish that they are not organized or operated for the benefit of private interests. SCCE: November

3 Key Functions Internal Audit Legal Compliance When should Compliance and Legal be separated so that both lead executives report to the Chief Executive Officer and the Board (or one of its standing Committees)? Should the General Counsel also serve as the Chief Compliance Officer? SCCE: November Fiduciary Duties Care Loyalty Obedience Sarbanes Oxley Robust verification through, among other things, certifications and independent advice SCCE: November THE DUTY OF CARE Reasonable care in making decisions and in monitoring the organization s activities Obligation to act in good faith Decisions should be well informed, rational and made independently Reliance on information from management must be well placed Does an adequate information and reporting system exist? Reasonable inquiry What care would an ordinarily prudent person use under similar circumstances? SCCE: November

4 THE DUTY OF LOYALTY Board members must act In good faith; In the best interest of the organization; and Not on behalf of any personal or third party interest SCCE: November THE DUTY OF OBEDIENCE Decisions must be faithful to, and promote, the organization s mission Board members may not commit unauthorized acts SCCE: November Core Oversight Duties Efficacy and Integrity of the Financial Reporting Process Efficacy of Internal Accounting and Financial Controls Internal Audit Retention of Independent Auditor Annual Audit of Financial Statements Enterprise Risk Management SCCE: November

5 Compliance Program Oversight Performance of the Compliance Officer and Department Management Compliance Committee Code of Conduct and Ethics; Compliance Policies and Procedures Auditing and Monitoring Compliance Hotline and Open Door Reporting SCCE: November Compliance Program Oversight (cont.) Compliance Investigations Corrective and Disciplinary Actions Disclosures Periodic Effectiveness Reviews by Independent Third Party Reports to the Board SCCE: November Stewardship During a Crisis Identify key stakeholders Assess facts, operational weaknesses and legal/regulatory exposure Evaluate leadership emphasize ownership, accountability, integrity and transparency Establish reporting lines Ensure that management develops an effective Communications Plan SCCE: November

6 When should a Board form a separate Compliance and Ethics Committee? Relevant considerations The industry and attendant regulatory expectations Public or private organization Size and complexity of the business The Audit Committee s workload Potential benefits of greater Board level compliance expertise Structure and resources of the Compliance Program Role of Internal Audit in compliance auditing Ability to maintain holistic communication channels between senior management and the Board and between Board Committees SCCE: November If a new committee is formed, the Audit Committee must continue to receive regular reports from the Chief Compliance and Chief Legal Officers Both Committees should periodically meet in executive session with the Chief Compliance Officer Consider adopting an Event Reporting Policy SCCE: November Thank you for joining us enjoy the conference! SCCE: November