Global Investigations Review - The law and practice of international investigations

Securities & Related Investigations

Last verified on Tuesday 15th November 2016

Italy

Pietro M Fioruzzi, Fabio Saccone and Andrea Mantovani
Cleary Gottlieb Steen & Hamilton LLP

    Regulatory environment

  1. 1.What are your country’s primary securities or related law enforcement authorities? 
  2. Consob is the Italian securities and exchange authority. It is responsible for regulating and supervising financial markets, enforcing securities laws, and issuing the related administrative sanctions.

    The public prosecutor is the authority in charge of enforcing criminal law, including those securities law provisions that provide for criminal sanctions.

  3. 2.What are the principal violations or legal issues that the securities or related law enforcement authorities investigate?
  4. Consob’s and the public prosecutor’s investigative and sanctioning powers concern the following main areas:

    • insider trading and market manipulation;
    • issuers of securities (eg, public offers of securities, takeover bids, disclosure of price sensitive information, accuracy of financial statements, disclosure of significant shareholdings and shareholders’ agreements in public companies, and proxy solicitations);
    • broker-dealers and asset managers (eg, licensing, prudential, organisational and reporting requirements, significant shareholdings, conduct of business rules and conflicts of interests);
    • stock exchanges and other trading venues as well as central depository systems; and
    • credit rating agencies.

    Directive 2014/57/EU (the Market Abuse Directive) has not yet been implemented in Italy. Additionally, the Italian legislature has not adopted the measures set out in article 30 of Regulation (EU) 2014/596 (the Market Abuse Regulation). 

  5. 3.If there is more than one authority involved in a securities or related investigation, how is jurisdiction allocated? What is the interplay between the securities regulator and the public prosecutor?
  6. Consob is the Italian authority in charge of securities investigations that concern violations subject to administrative sanctions.

    The public prosecutor is in charge of securities investigations that concern violations subject to criminal sanctions.

    Certain violations (eg, insider trading and market manipulation) are subject to both criminal and administrative sanctions. In Grande Stevens v Italy, the European Court of Human Rights found that such a "double sanctioning" mechanism violated the double jeopardy principle, also embedded in the Italian Constitution (see also Recital 23 of Directive 2014/57/EU (the Market Abuse Directive)). As a consequence, the relevant sanctioning provisions were examined by the Italian Constitutional Court, which, however, in its judgment No. 102/2016 held the petition inadmissible.

    Consob’s and the public prosecutor’s respective jurisdictions are thus formally independent. However, (i) Consob has a general duty to inform the competent public prosecutor of any facts it ascertains within its supervisory activities that may constitute a criminal offence and (ii) with respect to market abuse violations, the Italian Legislative Decree No. 58 of 24 February 1998 (TUF) sets forth a broader duty of mutual cooperation between public prosecutors and Consob, including, inter alia, exchange of information, documents and data, as well as sharing reports on investigations.

  7. 4.Do the securities or related law enforcement authorities have investigatory powers? Can they bring administrative, civil or criminal proceedings? 
  8. Consob can avail itself of extensive investigatory powers, including the power to:

      (i) interview, or request information, data, or documents from any person informed about the facts under investigation;

      (ii) request existing telephone records or telephone traffic records;

      (iii) carry out searches;

      (iv) carry out on-site inspections;

      (v) access certain information and data collected by public administrations, including tax records and banking records; and

      (vi) seize those assets that can be subject to confiscation.

    Power under point (i) and (vi) above can only be exercised upon the authorisation of the public prosecutor. Such authorisation is required also to exercise powers under (iv) and (ii) in relation to entities not subject to Consob’s supervision.

    Failure to comply with Consob’s requests is a violation subject to administrative sanctions and may amount to a criminal offence.

    Consob is only entitled to bring administrative proceedings. In fact, (i) securities-related criminal proceedings can be brought only by public prosecutors, and (ii) civil claims for damages can be brought only by the persons that directly suffered the damages (however, with respect to market abuse violations, Consob is entitled to bring civil claims aimed at obtaining compensation for damage caused to the market’s integrity).

    Compared to Consob, public prosecutors have greater powers during investigations. For instance, only public prosecutors can apply precautionary measures and order wiretapping.

  9. 5.Are regulatory or criminal securities and related investigations public? Under what circumstances? 
  10. Both Consob’s investigations and criminal investigations are secret and information relating thereto may generally not be disclosed to any persons until the investigation is terminated.

    As to Consob’s administrative proceedings, information on the investigation is made available to the investigated party (but not to the public) when Consob has sufficient facts to bring a case, and a formal letter of charge is sent to the investigated person. Moreover, the final sanctioning decisions, which normally include a summary of the investigations carried out, are generally published on Consob’s bulletin.

    As to criminal proceedings, investigations are secret until the end of the preliminary investigations (except for certain limited acts that the person under investigation has a right to assist in, which are therefore disclosed only to that person but not to the public). Third parties may file a petition with the public prosecutor or the court (depending on whether the investigation is, respectively, ongoing or closed) to access the investigation file. Access may (totally or partially) be granted only to parties that have a qualified interest, which is to be assessed by the public prosecutor or the court. The decision denying access is not subject to challenge. Leakage of information concerning an ongoing investigation to the press is quite common.

  11. 6.Are regulatory or criminal securities and related investigations targeted at the company or the individuals involved, or both?
  12. Whether the investigations are targeted at the legal entities or at the individuals involved depends on the specific facts under investigation. 

    Administrative sanctions can be imposed on both legal entities and individuals, while criminal sanctions can be imposed only on individuals. However, for certain crimes (including insider trading and market manipulation), quasi-criminal sanctions – that, for breaches of securities law, include monetary sanctions and confiscation of the profits arising from the breach – may be imposed on legal entities under Legislative Decree No. 231/2001. Legal entities may shield themselves from such sanctions if certain requirements are met, including the implementation of a compliance programme adequate to prevent crimes similar in nature to the one that was committed and the establishment of an independent and autonomous internal body having the power to supervise such implementation.

    Pursuant to Legislative Decree No. 231/2001, compliance programmes must:

    (i) detect the activities that, when performed, may give rise to crimes or facilitate their commission;

    (ii) set forth, with reference to the activities referred to in (i) above, protocols governing procedures for making and executing decisions;

    (iii) set forth such procedures for managing financial resources as may be necessary in order to avoid the commission of crimes;

    (iv) set forth reporting duties with respect to the supervising body; and

    (v) set forth disciplinary measures in the case of violations of the compliance programme.

    Whether a compliance programme adopted by a company does shield the company from administrative liability is subject to a case-by-case analysis by criminal courts.

    Investigation procedure

  13. 7.How do the securities and related law enforcement authorities typically begin an investigation?
  14. No formal procedure is set forth by Italian law for the beginning of an investigation by Consob or the public prosecutor

    Consob typically begins an investigation when it becomes aware of possible administrative violations of securities laws while exercising its supervisory activities or through the reporting of private parties.

    In this respect, while, in principle, any person may inform Consob of possible breaches of securities law, the TUF specifically provides that:

      (i) asset managers, broker-dealers and stock exchanges must report to Consob any transaction that may reasonably constitute a market abuse violation and have in place appropriate measures to allow their personnel to report to Consob any violations of the applicable rules (see answer 11 below);

      (ii) in respect to issuers, both external and statutory auditors must report to Consob irregularities that they have found during their activities; and

      (iii) public prosecutors are requested to report to Consob any information relating to the possible commission of market abuse violations.

    Alternatively, Consob may begin an investigation on the basis of reports made by public prosecutors.

    Similarly, public prosecutors begin an investigation when they become aware of possible criminal violations of securities laws. Public prosecutors’ investigations on securities law breaches are often prompted by information received from Consob.

  15. 8.What level of suspicion of wrongdoing is required for the securities or related law enforcement authorities to begin an investigation?
  16. Under Italian law, there is no express minimum level of suspicion of wrongdoing required to initiate an investigation. 

  17. 9.May the securities or related law enforcement authorities conduct dawn raids? Does this depend on the nature and seriousness of the allegations?
  18. Yes, Consob can conduct dawn raids, but it needs the authorisation of a public prosecutor when the dawn raid involves body searches, onsite searches, or onsite inspections (not involving any searches) concerning persons not subject to Consob’s supervision. The decision to carry out dawn raids normally does not depend on the nature and seriousness of the allegations, but if dawn raids are conducted in places other than those relating to the exercise of business activities, Consob’s decision depends on the existence of serious indications of the commission of a breach. 

  19. 10.Must the findings of a company internal review be reported to the securities or related law enforcement authorities? When and under what circumstances?
  20. There is no general provision requiring a company that carried out a spontaneous internal review to voluntarily disclose the findings thereof to Consob. The company may, however, decide to do so if it is aware that an investigation is ongoing and wants to take a cooperative approach with Consob. In deciding whether to disclose the findings, companies will need to take into account (i) Consob’s power to request companies to provide documents or information –including documents or information relating to the internal review – (see question 4 above), (ii) the auditors’ duty to report irregularities to Consob (see question 7 above), and (iii) the issuers’ general obligation to disclose inside information to the public. 

  21. 11.Are whistleblowers a frequent source of information for securities and related investigations? 
  22. There is no official information on how frequently Consob’s investigations benefit from information from whistleblowers, so it is not possible to estimate how often whistleblowers are used.

    However, whistleblowers in Consob’s investigations will likely drastically increase in the next few years as Italy, (i) in 2015, in implementing Directive 2013/36/EU (the CRDIV Directive), has included in the TUF the whistleblowing system, which requires (a) broker-dealers, asset managers and stock exchanges to adopt appropriate measures aimed at allowing their personnel to report to Consob any violations of the applicable rules, and (b) Consob to ensure, inter alia, confidentiality and protection from retaliatory or discriminatory conduct for whistleblowers, (ii) will need to ensure implementation of Regulation (EU) 2014/596 (the Market Abuse Regulation), under which whistleblowing systems must be adopted by issuers.

  23. 12.Describe the typical phases of a securities or related investigation in your country.
  24. Consob’s proceedings typically consist of the following stages:

    (i) During the investigation stage of the proceeding, the relevant Consob office exercises its investigation powers (as described in question 4) to ascertain the facts and assess possible breaches of securities law. The investigation phase does not follow a formal path, and the investigated persons are not entitled to participate in or defend themselves in this stage of the proceeding and are not even informed of the existence of the proceeding.

    (ii) Within 180 days (360 if the investigated person is based abroad) from ascertaining an alleged violation of securities laws, the competent Consob office for the investigation (different from Consob’s Sanction Office) must notify the investigated person with a formal letter of charge describing, inter alia, (a) the supervisory and investigation activities carried out by Consob, (b) the alleged violations, (c) the unit responsible for the proceeding, and (d) the defensive powers available to the investigated party. The sanctioning proceeding should be completed within 200 days from the notification of the letter of charge.

    (iii) Within 30 days from the notification of the letter of charge (this term can be extended up to additional 30 days upon request), the person under investigation has the right to exercise a series of defensive activities, including: (i) filing a statement of defence and the related documentation with Consob’s Sanction Office, (ii) requiring a hearing before Consob’s Sanction Office to deliver its oral argument, and (iii) accessing the files of the proceeding (including the investigation).

    Notwithstanding the defendant’s right of defence, the defence activities, in the sanctioning proceeding, are carried out pursuant to the principle of fair cooperation between the parties and Consob. Therefore unnecessarily excessive, irrelevant or disordered exhibition of documents by the parties shall be evaluated by Consob as a negative element in assessing the degree of cooperation. 

    (iv) After the exercise of the defensive activities described above, Consob’s Sanction Office evaluates all the evidence, information and documents of the proceeding and, if it needs further information, may request from the competent Consob’s office responsible for the investigation (or to any other Consob office whose support is useful for the case) a report on the defence activities carried out by the investigated person. The investigated person may reply to such a report.

    (v) Within 15 days before the above-mentioned term of the proceeding, Consob’s Sanction Office has to complete its evaluation, and must send to Consob’s Board its final report on the case, with its conclusion on the existence of the alleged violation and the amount of the sanction (if any) to be applied. In the above-mentioned report, Consob’s Sanction Office, in the event of non-significant breaches of law, may formulate a motivated proposal for removing the alleged breaches, as an alternative to the administrative pecuniary sanctions and, furthermore, can set out the measures that have to be adopted for removing those breaches. Eventually, Consob’s Sanction Office, to the extent that all the breaches have been removed by the offenders, takes it into account in the motivated proposal for Consob’s Board for the conclusion of the proceeding. The investigated person has the right to reply to the final report of Consob’s Sanction Office within 30 days.

    (vi) Lastly, Consob’s Board reviews all the documentation of the case and, if it needs further information, may request an additional report to the Sanction Office, to which the investigated person may reply. After that, the Consob Board rules on the existence of the breach by either issuing a sanctioning decision or dismissing the case.

    (vii) The decision of Consob’s Board may be challenged by the defendant before the Courts of Appeal within 30 days from the date thereof (or 60 days if the defendant is based abroad).

    (viii) An excerpt of the sanctioning provision is published in the Consob Bulletin after the decision has been notified to the person concerned. Such excerpt must contain, at least: (a) the sources of law that form the basis of the sanctioning proceeding, (b) the alleged facts and the breach of law, (c) a short indication of the proceeding’s acts, and (d) Consob’s Board decision], with the indication of the person sanctioned, the confirmed breach, the type and the severity of the imposed sanction, and the criteria on the basis of which the sanction was determined. 

  25. 13.What are the mechanisms by which a securities or related law enforcement authority may cooperate and coordinate with authorities outside your jurisdiction?
  26. The cooperation mechanisms with foreign authorities are generally provided for under either (i) international – either bilateral or multilateral – memorandums of understanding with one or more of those authorities (a list of which may be found here www.consob.it/main/consob/cosa_fa/impegni_internazionali/accordi.html), or (ii) EU securities law that governs its relationship with authorities of other EU member states. Some of the most important examples of those instruments are:

    (i) The OICV–IOSCO multilateral memorandum of understanding of May 2002 revised in May 2012 (the OICV–IOSCO MoU), entered into among the securities law authorities of more than 100 states and provides several cooperation mechanisms between them in connection with the enforcement of various kinds of securities law provisions (including market abuse prohibition, offer and sale of securities, reporting requirements and regulation on financial intermediaries, investment companies, investment funds, markets managers, and clearing or settlement operators). In particular, under the OICV-IOSCO MoU, the signatory authorities shall provide each other with the fullest assistance possible to secure compliance with the above-mentioned securities law provisions, including by: providing information and documents held in the files of the requested authority, obtaining information and documents from third parties, and taking statements or testimonies under oath.

    (ii) The ESMA multilateral memorandum of understanding of 29 May 2014 (the ESMA MoU), entered into by the 31 EEA securities law authorities, requires the signatory authorities to provide each other the fullest assistance possible in investigation, supervision, and enforcement activities relating to securities and financial markets laws. In particular, under the ESMA MoU, the requested authorities shall give access to documents of any persons, request information from any person, carry out on-site inspection or other investigation activities, provide records of telephone conversations or other communications held by investment companies, and provide data traffic records.

    (iii) The Market Abuse Regulation, which applies from 3 July 2016, provides an obligation for all securities law authorities of EU member states to cooperate with each other in investigation, supervision and enforcement activities relating to, inter alia, market abuse prohibition, issuers’ disclosure requirements, internal dealing and dissemination of investment recommendations. In particular, under the Market Abuse Regulation, EU securities law authorities shall exchange and provide each other with information as well as carry out on-site inspections or other investigation activities upon request of other EU securities law authorities. The requested authorities may choose to carry out the requested investigation activities by themselves, allow the requesting authority to participate in such investigation activities or allow the requesting authority to directly carry out those activities.

    (iv) The Consob–SEC memorandum of understanding of 3 May 1993 (the Consob–SEC MoU) provides several cooperation mechanisms between Consob and SEC in connection with the enforcement of securities law concerning market abuse, the obligation on issuers to disclose inside information and regulatory duties applicable to financial intermediaries, investment funds, market managers, clearing houses, and other securities market operators (including duties relating to handling, transmitting, and executing orders, managing securities portfolios, settling securities transactions, safeguarding customer securities, and complying with financial or operational requirements). Under the Consob–SEC MoU, the two authorities shall provide access to each other to the information in their respective files, request information or documentation from any person, and carry out on-site inspections and other investigation activities.

    Cooperation mechanisms are also set forth in Directive 2014/91/EU on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) as regards depositary functions, remuneration policies and sanctions, which was implemented in Italy in 2016.

    Judicial cooperation in criminal matters is governed by European rules, and bilateral or multilateral treaties.

  27. 14.Will a securities or related law enforcement authority take into account findings by a law enforcement authority outside your jurisdiction in the course of its investigation?
  28. Under Italian law, there is no limitation for Consob to take into account findings of foreign enforcement authorities in the course of its investigations. However, in order to issue a letter of charge and a sanction, Consob should, in principle, make its own ascertainment and assessment of the facts and should not rely exclusively on how facts have been evaluated by foreign authorities.

    Document production

  29. 15.What can the securities and related law enforcement authorities require to be produced as part of an investigation? Do the powers of a regulator differ from those of the public prosecutor?
  30. Consob may require production of: any information, data (including personal data) or documents from anyone who may be informed of the facts or from any other governmental body, existing telephone records or telephone traffic records, and data and information included in tax registry office records, national register of accounts and deposits, national register of money-laundering operations and Bank of Italy’s central credit register.

    Consob’s powers concerning document production resemble those attributed to the public prosecutor. However, in Consob’s investigations, requests for documentation have a central role, while searches have, in principle, a residual scope of action and seizures may be applied to only a limited list of assets. On the other hand, in criminal investigations, the public prosecutor generally relies on searches to obtain the relevant documentation.

  31. 16.Will a litigation hold or will other instruction to preserve documentation need to be issued? When?
  32. Under Italian law, there is no specific provision allowing or governing litigation holds. However, a litigation hold is by all means advisable. An indirect protection of the documentation relevant for a Consob’s investigation may be granted by law provisions that sanction the obstruction to Consob’s supervisory functions and, under certain circumstances, the destruction or concealing of documents.

  33. 17.Can the securities and related law enforcement authorities request the production of materials protected by attorney-client privilege or work-product doctrine? Can the securities and related law enforcement authorities use protected materials if it obtains them from third parties?
  34. Legal privilege protects (i) communications exchanged with external counsel and (ii) other materials concerning the defence. While communications with external counsel cannot be seized (or otherwise controlled), other materials concerning the defence cannot be seized only when they are still under the control of counsel (and, thus, privilege is waived if they have been delivered to the client or third parties). Authorities may request documents covered by legal privilege, in which case the addressee must assert the privilege. Inspections and searches at the office of external counsel are normally prohibited unless specific requirements are met. Furthermore, external counsel have the right not to testify on matters that they have become informed of because of their professional activities. Disputes over privilege between the authorities and addressees of requests are adjudicated by courts.
    Materials obtained in breach of these rules cannot be used by the authorities.
    These rules apply to both Consob’s and criminal investigations. Despite these rules, the sense of the community of lawyers is that the protection granted by legal privilege in Italy is, as a matter of fact, low.

  35. 18.How is confidential information or commercially sensitive information treated by the securities and related law enforcement authorities?
  36. See question 5 above. The law does not provide for a specific standard of protection for confidential or commercially sensitive information possessed by the authorities. 

  37. 19.Can the target of a document request exercise a right not to produce?
  38. The target of a document request does not have the right not to produce, unless the document is covered by legal privilege (see question 17 above).

  39. 20.Do any data privacy or bank secrecy laws restrict the production of materials to a securities or related law enforcement authority in your jurisdiction? An authority outside your jurisdiction? May the company under investigation provide personal or bank customer data on a voluntary basis?
  40. Consob is allowed to request the communication of materials that may contain personal data protected by privacy law (see question 4). Restrictions set forth by privacy law can be avoided by foreign authorities when they can seek the cooperation of Consob under the international cooperation mechanisms described in question 13 above to obtain materials containing personal data.

    By 6 May 2018, Italy will have to implement Directive 2016/680/EU on the protection of natural persons with regard to the processing of personal data by competent authorities for the purposes of the prevention, investigation, detection or prosecution of criminal offences or the execution of criminal penalties, and on the free movement of such data, which, inter alia, contains provisions regarding transfers of personal data to third countries or international organisations.

    With respect to voluntary production of documents protected by privacy law, as a general rule – and subject to certain requirements depending on the case – persons may use third parties’ personal data to defend their rights in court (either in Italy or abroad) without obtaining those third parties’ consent and (when the data is not collected directly from the data subjects) even without informing them of the data processing. Although reasonable, no well-established precedents clarify whether this permitted use also includes production in Consob’s and other non-judicial authorities’ proceedings. Therefore – when possible – it is advisable to redact personal information protected by privacy law from documents to be produced before the said authorities.

    As far as bank secrecy is concerned, although there is no specific provision regulating the matter, insofar as information in the possession of banks concerns names and other data allowing the identification of clients, employees, or any other natural person, such information falls within the broad definition of ‘personal data’ protected by privacy law and therefore is subject to the same considerations set out above with respect to the use of personal data.

  41. 21.Are there any data privacy, bank secrecy or other laws that restrict where documents or other communications may be stored or reviewed for the investigation?
  42. In principle, documents and other communications protected by data privacy law should not be stored outside the European Union without the consent of the persons to whom the data relates. However, this consent is not necessary when certain requirements are met (eg, the transfer abroad is necessary to defend a right in court or to apply provisions concerning administrative sanctions).

  43. 22.Are the securities and related law enforcement authorities able to obtain documents from outside the country?
  44. Consob’s jurisdiction is in principle limited to Italy. However, under international cooperation mechanisms mentioned in question 13, Consob may seek the assistance of foreign securities law authorities in order to obtain documents from outside the country (see answer 13 for additional details).

    Witness interviews

  45. 23.Will the securities and related law enforcement authorities conduct witness interviews? If so, will the interviews be on the record? Will the interviews be made public?
  46. Consob and the public prosecutor may conduct witness interviews of any person who may be acquainted with the facts. Minutes of the interview must be drafted and must be signed by the witness. With the exception of this communication to the witness himself and to the additional limited disclosure mentioned in question 5, the interview and its minutes are covered by professional secrecy and cannot be communicated to any person not involved in the investigations. However, it is possible that they are summarised or quoted in the sanctioning decision issued by Consob, which would be public. The rationale of courts’ decisions is instead published with redactions aimed at hiding the names of individuals or entities mentioned therein (access to full text is governed by the same rules governing access to the investigation file – see question 5).

  47. 24.Can witnesses exercise a right not to testify? Will any adverse inference be drawn if they do so?
  48. Witnesses are entitled to abstain from testifying (before both Consob and the public prosecutor) only in the limited cases in which such an abstention is allowed under the Italian Code of Criminal Procedure, including if the witnesses are close family members of the person under investigation, are requested to testify on matters covered by professional, confessional or office privilege (including privilege granted to lawyers, journalists, doctors and ministers), or are requested to testify on matters covered by public office privilege or state secrecy privilege. In such cases, no adverse inference against the party under investigation may be drawn.

  49. 25.Do witnesses receive separate counsel? Who provides counsel for witnesses?
  50. There are no specific provisions under Italian law governing, prohibiting or mandating legal advice to witnesses in the context of Consob or criminal investigations. Counsel may be present when witnesses are interviewed by Consob, and are not present when witnesses are interviewed in the context of criminal investigations. As a general rule, counsel are appointed by the individual who needs advice. 

    Advocacy

  51. 26.Can the target of a securities or related investigation challenge the investigation in court while the investigation is ongoing?
  52. Targets of securities or related investigation are not entitled to challenge the investigation while it is ongoing. 

  53. 27.What opportunity will there be to respond to a securities or related law enforcement authority’s theories or allegations prior to the authority bringing charges?
  54. During the investigations, there may or may not be opportunities to respond to the theories or allegations of the authorities. The opportunity to respond to the theories or allegations generally arises when public prosecutors apply or request the court to apply preventive measures against the target of the investigation. The target of the investigation, in any event, may ask to be heard and file statements and documents. 

    In criminal investigations, the target of an investigation has the right to be heard by the prosecutor only after the investigation is completed or if precautionary measures are applied.

  55. 28.What form does the advocacy with a security or related law enforcement authority typically take? 
  56. The right of defence may be exercised in several forms (filing of statements and documents, examination of the file of the authorities to the extent it is accessible, etc), none of which may be deemed typical. Informal communications with the authorities are frequent and may play a significant role. Specific forms are required to challenge certain specific orders issued during the investigation phase (such as, for example, preventive seizure orders).  

  57. 29.Are statements or advocacy positions taken by an investigated party during the investigation process deemed admissions and binding in future proceedings? Would such statements be made public?
  58. Statements by the investigated party (which has the right to abstain from answering questions made by the authorities) and advocacy positions may be deemed admissions. They are not formally – but may as a matter of fact and depending on the circumstances be – binding in future proceedings.

    A party's statements and advocacy positions are not made public, but it is possible that they are summarised or quoted in the sanctioning decision issued by Consob. The rationale of courts’ decisions is instead published with redactions to delete the names of individuals or entities mentioned therein (access to the full text is governed by the same rules governing access to the investigation file – see question 5).

    Timing

  59. 30.What is the limitation period for charges for securities and related violations?
  60. The limitation period is five years for violations that are not crimes. For crimes, the limitation period is equal to the maximum penalty applicable for the crime and cannot be shorter than six years (or four years for less serious offences). 

  61. 31.When does the limitation period begin to run?
  62. The limitation period begins to run from the day on which the violation is committed. 

  63. 32.What can suspend the running of the limitation period? Can the securities and related law enforcement authorities request a tolling agreement?
  64. For violations that are not crimes, the limitation period starts to run again from the beginning every time Consob serves on the offender an act aimed at ascertaining the violation or issuing the sanction (including the letter of charge and the sanctioning decision).

    For crimes, the limitation period is extended every time the authorities serve on the offender certain orders identified under the law (generally those that apply preventive measures or raise charges).

    Under specific circumstances – which are less common than those that cause the limitation period to start running again from the beginning – the limitation period may also be suspended.

    Tolling agreements are not allowed. The person under investigation may, however, waive the limitation period after such period has expired.

  65. 33.How long does a securities or related investigation typically take?
  66. There is no public information on the average duration of Consob’s investigations. The investigation stage of the proceeding prior to the notification of the letter of charge (see point (i) of question 12) usually takes from two to 18 months, while the following stage from the notification of the letter of charge to the issuance of the final decision by Consob (see points (ii)–(vi) of question 12) should in principle not exceed 230 days.

    The public prosecutor must complete the investigations within six months and can be authorised by the court to continue the investigations for a maximum of (depending on the nature of the crime allegedly committed and the complexity of the investigation) three additional six-month periods.

    Resolution

  67. 34.What is the process for closing an investigation if the investigation does not reveal a violation of securities or related laws? Will the securities or related law enforcement authorities provide written confirmation that the investigation is closed without action?
  68. If the competent Consob office closes the investigations before sending a formal letter of charge, it dismisses the case without informing the investigated party that the investigation was initiated and subsequently dismissed. If, however, the competent Consob office delivers a letter of charge and starts a formal sanctioning proceeding, the person under investigation will be informed of Consob Board’s decision dismissing the charges.

    The public prosecutor must, at the end of the investigation, request the court to allow the case to either proceed to trial or be closed. If the public prosecutor requests the court to allow the case to be closed, the court may approve the request, order further investigations, or order the public prosecutor to proceed with formal charges to be discussed in a hearing (at the end of which a decision on whether to proceed to trial will be taken).

  69. 35.How will the resolution or settlement process be initiated?
  70. Consob’s resolution proceedings relating to charges of securities law violations start when the Consob Sanction Office notifies to the investigated person a letter of charge (see point (ii) of question 12).

    For criminal investigations, the resolution process starts when, at the end of the investigation, the public prosecutor requests the court to allow the case to either proceed to trial or be closed.

    There is no provision under Italian law allowing Consob to enter into settlement agreements with persons under investigation.

    However, with respect to breaches of certain specific limited securities law provisions (which do not include, inter alia, market abuse and other major securities law offences) investigated by Consob, there are two available options. The offender may discretionally elect (without Consob’s consent) to settle the violation by paying an amount equal to twice the minimum penalty provided for under the applicable sanctioning provisions, within 30 days from the delivery of the letter of charge, provided that the offender did not avail himself of this option in the previous 12 months; or, if the breach did not cause significant damage or danger, Consob may discretionally elect (without the offender’s consent) not to apply the sanctions provided for under the applicable sanctioning provisions, but to order him to remove the breaches by carrying out specific actions within a specific period of time. Failure to comply with Consob’s order would result in the application to the offender of the sanction provided for the initial breach being increased by up to one-third.

    Crimes that would be punished with monetary sanctions or imprisonment for a period not longer – based on the particulars of the case and a one-third reduction – than five years (insider trading and market manipulation would generally be covered) can be settled during the investigations through a plea bargain. The plea agreement must set forth a penalty to be applied to the target of the investigation, is entered into by and between the target of the investigation and the public prosecutor, and is subject to scrutiny by the court. The court assesses, inter alia, whether the penalty is adequate in light of the circumstances of each specific case.

  71. 36.Who decides whether to proceed with charges and what charges to select? 
  72. The Director of the Consob Investigating Unit in charge of the investigation and Consob’s General Director are jointly competent to decide whether to proceed with formal charges and to select the charges to proceed with.

    In case of criminal investigations, the public prosecutor decides whether to proceed with charges and what charges to select. The choice of the public prosecutor is subject to scrutiny by the court. If the public prosecutor asks the court to allow the case to proceed to trial, the court may order the case to be closed, approve the request and amend the charges, or order further investigations. Also, the request to allow the case to be closed is subject to scrutiny by the court (see question 34).

  73. 37.What factors would a securities or related law enforcement authority consider in selecting charges and the severity of any penalty or fine?
  74. To select charges to proceed with, Consob shall identify the factual and legal elements of the case and evaluate which sanctioning provision (if any) would apply when those elements are present.

    If Consob officers conclude that there are elements sufficient as to believe that a violation was committed, they have a duty to bring charges and cannot refrain from doing so, taking into account any kind of factors.

    Only with respect to breaches of certain specific limited securities law provisions (which do not include, inter alia, market abuse and other major securities law offences), Consob officers must evaluate whether those breaches caused damage to the investors’ protection, to the market for corporate control, to the financial markets or to the exercise of its supervision activities, and, if this is not the case, they cannot proceed with charges. However, also in this case, the decision not to bring charges is not discretionary upon Consob’s officers, but is an obligation when they have ascertained that the above-mentioned circumstances occurred.

    As to the severity of the penalty, the Consob Sanction Office and Consob Board shall take into account several factors when respectively proposing and applying sanctions, including: the severity and duration of the breach, the degree of liability of the offender, the financial capacity of the offender, the profits gained or losses avoided by the offender, the damage caused to third parties, the level of cooperation of the offender with Consob and previous breaches of securities law by the offender after the breach itself, in order to avoid its repetition in the future.

    With respect to the amount of penalties, the Consob Sanction Office and Consob Board shall refer to the relevant turnover, using the offender’s annual turnover for the last financial year in which the financial statement has been approved by the competent commission. The means of calculating the relevant turnover are in an annex attached to the Consob Regulation on Sanctioning Proceedings.

    Similar principles apply in case of criminal violations.

  75. 38.What remedies can the securities or related law enforcement authorities consider? How are penalties calculated?
  76. A broad range of remedies is available for breaches of securities law provisions. The main remedies (that, depending on the specific breach and the circumstances of each specific case, may be applied either jointly or severally) are:

    (i) imprisonment of the offender (only for crimes);

    (ii) monetary sanctions against the offender;

    (iii) disqualification of the offender from maintaining or taking offices as a member of the management or supervisory board of asset managers, broker-dealers, stock exchanges, audit firms, issuers or companies belonging to the same group of issuers or of other private companies;

    (iv) in case of market abuse violations, disqualification of the offender from owning a significant shareholding in asset managers, broker-dealers and stock exchanges;

    (v) in case of market abuse violations, an order to asset managers, broker-dealers, stock exchanges, issuers and audit firms not to avail themselves of the services of the offender;

    (vi) in case of market abuse violations, suspension of the offender from exercising his or her professional activity;

    (vii) in general, disqualification of the offender from exercising specific professions, businesses or jobs that require an authorisation from public administration if he committed the offence exploiting his or her profession, business or job;

    (viii) in case of market abuse violations committed in the interest of or for the benefit of a company, monetary sanctions against the company in which the offender works as a director, manager, legal representative or employee (see question 6);

    (ix) confiscation of the profits made by the offender, the products of the violation and the goods and assets used to commit it;

    (x) only in case of market abuse violations, compensation for the damages caused to the markets as a result of the breach;

    (xi) in limited cases, as an alternative to the above penalties, order for the offender to remove the breaches by carrying out specific actions within a specific period of time (see question 35); 

    (xii) disclosure to the public of the sanctioning decision; and

    (xiii) in case of minor breaches  which are no longer effective,  as alternative to the above penalties, competent authorities  may apply the penalty of a public disclosure of the identity of the breach committed and the offender.

    As to the calculation of penalties, see question 37.

  77. 39.Do illegal profits have to be disgorged, and if so, how are they determined?
  78. Profits made by the offender as a result of securities law violations and the products of such violations have to be disgorged. Profits shall be identified as the economic benefit or advantage gained by the offender as a direct result of the offence, and the products in the things that were created, manufactured, modified or purchased through the offence (eg, securities in the case of insider trading offences).

    If it is not possible to specifically confiscate the above-mentioned profits or products (eg, because they have been destroyed, sold, lost or moved outside the jurisdiction), money, goods or other assets having a value equal to them can be confiscated.

  79. 40.Can criminal charges be brought against companies in your jurisdiction for violations of securities and related laws?
  80. As better described under answer 6, in principle, criminal charges can be made only against natural persons under Italian law. However, under Legislative Decree No. 231/2001, companies can be charged with 'quasi criminal’ liability when crimes such as insider trading or market manipulation are committed in their interest or for their benefit by their directors, managers, legal representatives or employees (in such cases, sanctions for the company would be monetary, profits arising from the offence would be confiscated and the judgment would be published). Additionally, criminal courts may request companies to pay an amount equal to the penalty inflicted to their directors, managers, legal representatives or employees who committed a crime in breach of their duties or in the interest of the company and failed to pay the relevant penalty.

    Although liability under Legislative Decree No. 231/2001 is considered administrative in nature, infringements are investigated by public prosecutors and adjudicated by criminal courts, in parallel with the prosecution of the individuals’ related crimes and in accordance with the code of criminal procedure.

  81. 41.Will the securities and related law enforcement authorities provide a reduced penalty for cooperation? What standard will the authority use when taking into account any cooperation?
  82. The cooperation of the offender is one of the factors that must be taken into account when determining the amount of the penalty to apply (see answer 37 above). Standards to be followed are not expressly established.

  83. 42.Are deferred prosecution agreements or non-prosecution agreements permitted?
  84. Deferred prosecution or non-prosecution agreements are not permitted. 

  85. 43.Will a court need to approve the settlement agreement with a securities or related law enforcement authority?
  86. See question 35.

  87. 44.If a settlement occurs, will an admission to certain facts or wrongdoing be required?
  88. Only plea agreements are admitted under Italian law. 

  89. 45.Can the findings or decisions of the securities or related law enforcement authorities be administratively appealed? Appealed to a court?
  90. Yes, the offender has the right to challenge the findings of Consob Investigation Office, the findings of Consob Sanction Office and the decision of Consob Board. In particular:

    (i) the findings of the competent Consob Investigation Office (as described in the letter of charge) may be administratively challenged by the investigated party before Consob Sanction Office in the first stage of Consob’s sanctioning proceedings (see points (iii) and (iv) of answer 12);

    (ii) the findings of Consob Sanction Office (as described in its conclusions to the Board) may be administratively challenged by the investigated party before Consob Board in the second stage of Consob’s sanctioning proceedings (see points (v) and (vi) of answer 12); and

    (iii) the sanctioning decision of Consob Board may be appealed by the offender before the competent Court of Appeals (see point (vii) of answer 12).

    In criminal cases, decisions issued by the court of first instance are generally challengeable before the Court of Appeals, while decisions issued by the Court of Appeals may be challenged before the Court of Cassation only if certain specific conditions occur.

  91. 46.If a decision can be administratively or judicially appealed, what are the consequences of an adverse decision on appeal? What are the consequences of a positive decision on appeal? 
  92. The Court of Appeals is entitled to review all aspects, in respect of both law and fact, of Consob’s decision, assess de novo if the offence was committed and if the imposed penalties were proportionate, and modify Consob’s decision accordingly. In particular, as a result of its full jurisdiction review, the Court of Appeal may:

    (i) establish that the factual and legal conclusions and the amount of the penalties set forth in Consob’s decision are correct, and therefore dismiss the appeal and confirm Consob’s decision;

    (ii) establish that all or part of the factual or of the legal conclusions set forth in Consob’s decision are not correct, and therefore annul all or part of Consob’s decision; and/or

    (iii) establish that the amount of the penalties set forth in Consob’s decision is not correct, and therefore reduce the amount of such penalties (see articles 187‑septies and 195 of the TUF).

    The decision of the Court of Appeals can be further challenged before the Court of Cassation if certain specific conditions occur. The Court of Cassation, however, will provide a review limited to specific aspects of law. The Court of Cassation may also remand the case to the Court of Appeals (whose new decision could again be challenged before the Court of Cassation).

    The review conducted by the Court of Appeals and the Court of Cassation in criminal cases does not differ from that just described.

    Collateral consequences

  93. 47.What are some of the collateral consequences to a resolution or settlement with a securities or related law enforcement authority? 
  94. As mentioned in question 38 above, securities law offences may cause, inter alia, disqualifications of the offender from maintaining or taking offices as a member of the management or supervisory boards of companies, from owning a significant shareholding in supervised companies or from undertaking specific activities, professions, businesses or jobs.

  95. 48.What are some of the collateral consequences to a conviction or the imposition of liability by a court?
  96. The collateral consequences substantially correspond to those applicable by Consob. 

  97. 49.Can private securities or related legal claims proceed parallel to investigations by securities and related law enforcement authorities?
  98. Private securities or related claims may proceed parallel to investigations by Consob and the public prosecutor. However, rules on evidence in civil proceedings set forth deadlines by which documents and information need to be produced or alleged, and this may make it difficult to use information and documents that emerged at the end of the investigations in the context of civil proceedings started during the same investigations.

  99. 50.What effect will findings by an authority in another jurisdiction have in private proceedings?
  100. Findings by authorities in other jurisdictions would not be binding on Italian courts. Italian courts would evaluate the findings according to their careful assessment.

  101. 51.Can private plaintiffs obtain access to the files or documents the securities or related law enforcement authorities collected during the investigation?
  102. Private parties may obtain access to Consob’s investigation file only when the request is made by the person under investigation for the purpose of defending himself in the relevant Consob sanctioning proceeding (see Decisions of the Italian Constitutional Court Nos. 460/2000 and 32/2005, and Decision of the Administrative Court of Lazio No. 13562/2005).

    As mentioned in question 5, in criminal investigations, private parties that have a qualified interest may file a petition with the public prosecutor or the court (depending on whether the investigation is, respectively, ongoing or closed) to access the investigation file.

    In recent cases, access has been granted to shareholders of a company under investigation who are interested in assessing potential civil claims against the company.

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Questions

    Regulatory environment

  1. 1.What are your country’s primary securities or related law enforcement authorities? 
  2. 2.What are the principal violations or legal issues that the securities or related law enforcement authorities investigate?
  3. 3.If there is more than one authority involved in a securities or related investigation, how is jurisdiction allocated? What is the interplay between the securities regulator and the public prosecutor?
  4. 4.Do the securities or related law enforcement authorities have investigatory powers? Can they bring administrative, civil or criminal proceedings? 
  5. 5.Are regulatory or criminal securities and related investigations public? Under what circumstances? 
  6. 6.Are regulatory or criminal securities and related investigations targeted at the company or the individuals involved, or both?
  7. Investigation procedure

  8. 7.How do the securities and related law enforcement authorities typically begin an investigation?
  9. 8.What level of suspicion of wrongdoing is required for the securities or related law enforcement authorities to begin an investigation?
  10. 9.May the securities or related law enforcement authorities conduct dawn raids? Does this depend on the nature and seriousness of the allegations?
  11. 10.Must the findings of a company internal review be reported to the securities or related law enforcement authorities? When and under what circumstances?
  12. 11.Are whistleblowers a frequent source of information for securities and related investigations? 
  13. 12.Describe the typical phases of a securities or related investigation in your country.
  14. 13.What are the mechanisms by which a securities or related law enforcement authority may cooperate and coordinate with authorities outside your jurisdiction?
  15. 14.Will a securities or related law enforcement authority take into account findings by a law enforcement authority outside your jurisdiction in the course of its investigation?
  16. Document production

  17. 15.What can the securities and related law enforcement authorities require to be produced as part of an investigation? Do the powers of a regulator differ from those of the public prosecutor?
  18. 16.Will a litigation hold or will other instruction to preserve documentation need to be issued? When?
  19. 17.Can the securities and related law enforcement authorities request the production of materials protected by attorney-client privilege or work-product doctrine? Can the securities and related law enforcement authorities use protected materials if it obtains them from third parties?
  20. 18.How is confidential information or commercially sensitive information treated by the securities and related law enforcement authorities?
  21. 19.Can the target of a document request exercise a right not to produce?
  22. 20.Do any data privacy or bank secrecy laws restrict the production of materials to a securities or related law enforcement authority in your jurisdiction? An authority outside your jurisdiction? May the company under investigation provide personal or bank customer data on a voluntary basis?
  23. 21.Are there any data privacy, bank secrecy or other laws that restrict where documents or other communications may be stored or reviewed for the investigation?
  24. 22.Are the securities and related law enforcement authorities able to obtain documents from outside the country?
  25. Witness interviews

  26. 23.Will the securities and related law enforcement authorities conduct witness interviews? If so, will the interviews be on the record? Will the interviews be made public?
  27. 24.Can witnesses exercise a right not to testify? Will any adverse inference be drawn if they do so?
  28. 25.Do witnesses receive separate counsel? Who provides counsel for witnesses?
  29. Advocacy

  30. 26.Can the target of a securities or related investigation challenge the investigation in court while the investigation is ongoing?
  31. 27.What opportunity will there be to respond to a securities or related law enforcement authority’s theories or allegations prior to the authority bringing charges?
  32. 28.What form does the advocacy with a security or related law enforcement authority typically take? 
  33. 29.Are statements or advocacy positions taken by an investigated party during the investigation process deemed admissions and binding in future proceedings? Would such statements be made public?
  34. Timing

  35. 30.What is the limitation period for charges for securities and related violations?
  36. 31.When does the limitation period begin to run?
  37. 32.What can suspend the running of the limitation period? Can the securities and related law enforcement authorities request a tolling agreement?
  38. 33.How long does a securities or related investigation typically take?
  39. Resolution

  40. 34.What is the process for closing an investigation if the investigation does not reveal a violation of securities or related laws? Will the securities or related law enforcement authorities provide written confirmation that the investigation is closed without action?
  41. 35.How will the resolution or settlement process be initiated?
  42. 36.Who decides whether to proceed with charges and what charges to select? 
  43. 37.What factors would a securities or related law enforcement authority consider in selecting charges and the severity of any penalty or fine?
  44. 38.What remedies can the securities or related law enforcement authorities consider? How are penalties calculated?
  45. 39.Do illegal profits have to be disgorged, and if so, how are they determined?
  46. 40.Can criminal charges be brought against companies in your jurisdiction for violations of securities and related laws?
  47. 41.Will the securities and related law enforcement authorities provide a reduced penalty for cooperation? What standard will the authority use when taking into account any cooperation?
  48. 42.Are deferred prosecution agreements or non-prosecution agreements permitted?
  49. 43.Will a court need to approve the settlement agreement with a securities or related law enforcement authority?
  50. 44.If a settlement occurs, will an admission to certain facts or wrongdoing be required?
  51. 45.Can the findings or decisions of the securities or related law enforcement authorities be administratively appealed? Appealed to a court?
  52. 46.If a decision can be administratively or judicially appealed, what are the consequences of an adverse decision on appeal? What are the consequences of a positive decision on appeal? 
  53. Collateral consequences

  54. 47.What are some of the collateral consequences to a resolution or settlement with a securities or related law enforcement authority? 
  55. 48.What are some of the collateral consequences to a conviction or the imposition of liability by a court?
  56. 49.Can private securities or related legal claims proceed parallel to investigations by securities and related law enforcement authorities?
  57. 50.What effect will findings by an authority in another jurisdiction have in private proceedings?
  58. 51.Can private plaintiffs obtain access to the files or documents the securities or related law enforcement authorities collected during the investigation?