Client Alert: Protecting the Company— and Its People:

Navigating the Growing Need for Separate Legal Counsel for Government Investigations

September 9, 2025

Companies involved in regulatory investigations and enforcement actions face many difficult decisions. Among the hardest is when to retain separate counsel for individual officers and other employees. Companies must weigh costs, efficiency, and ethical issues. Recently, regulatory agencies and the Department of Justice have sharpened their focus on individual accountability. This trend may tip the scales in favor of hiring separate counsel for certain individuals.

Background:
When a company is under government investigation, it’s common for in-house or outside counsel to represent both the entity and its employees. However, when the interests of the company and the individual diverge, or when an individual is suspected of wrongdoing, they should have their own separate legal representation. Precisely when to bring in separate counsel, and for whom, can be a difficult decision.

Consider the following common situations:

• An individual physician receives a Civil Investigative Demand alleging violations of the False Claims Act.
• The SEC subpoenas a company’s Chief Compliance Officer for his or her testimony.
• Investigators from the CFTC issue a subpoena for documents requesting the trading records of several of the employees working on a company’s trading desk.

If the facts reveal that an individual’s interests are adverse to the company, counsel’s ability to represent both the company and that individual, and the company’s ability to defend itself, may be compromised.

Considerable Factors:

• Conflicts of Interest: The primary reason some companies engage separate outside counsel for their officers or employees is to avoid a conflict of interest, i.e., when the interests of the company and those of an individual employee or officer diverge.
• Integrity of the Representation: Proactive retention of separate counsel can insulate a company’s attorneys from potential disqualification or challenges to attorney client privilege.
• Optics: In some circumstances, law enforcement may be more likely to trust a witness with independent counsel.
• Cooperation: Retaining separate counsel for individual witnesses may signal to the government that a company is fully and proactively cooperating, which can be advantageous in settlement negotiations.

Current Trend: Increased Focus on Individual Culpability
Increasingly, we have seen the winds shift toward individual liability for corporate malfeasance. Several government agencies are actively prioritizing the prosecution of individual actors. For example, last year, the CFTC warned that it would pursue more individual liability cases, particularly, against chief compliance officers. This year, the SEC’s Division of Enforcement confirmed it would place an increased emphasis on individual accountability in its corporate investigations. We can expect government regulators to scrutinize individual conduct, including whether officers and supervisors tolerated or facilitated the misconduct of others. This trend joins the DOJ’s ongoing prioritization of individual prosecutions for those who commit and profit from corporate malfeasance.

Analysis
The rising risk of individual liability increases the likelihood of conflicts of interest when companies rely on dual representation. To mitigate this risk, companies should proactively assess which employees and officers may face scrutiny during a government investigation. Companies should think broadly – the government will not focus just on individuals’ actors, but also on the managers who supervised the activities in question and the officers who set the tone at the top. In short, companies must consider bringing in separate counsel earlier in the investigative process and for a greater number of individuals.

As regulatory scrutiny changes, companies must evolve their response strategies. Increasingly, ensuring that officers and employees have independent legal representation is no longer a luxury—it’s a necessity.

If you are considering retaining separate outside counsel for officers or employees during a regulatory enforcement investigation or civil action, CFDB is here to help. CFDB has many highly skilled attorneys with experience representing companies and individuals in regulatory investigations and enforcement actions, including former Senior Trial Counsel at the SEC and CFTC and former Assistant United States Attorneys. If you have any questions, please reach out to Ariella Guardi, Michael Claus, or Michael Frisch.

Key Contacts:

Ariella Guardi
aguardi@crokefairchild.com
872-224-2922

Michael Claus
mclaus@crokefairchild.com
312- 291-8888

Michael Frisch
mfrisch@crokefairchild.com
847-530-7419