In connection with a high-profile insider trading investigation, the United States Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation utilized search warrants to raid the offices of three hedge funds on November 22. The use of search warrants on the premises of a business, although not new, is the latest step in the government’s use of aggressive techniques to investigate white-collar crime. News reports speculate that more searches will follow. The execution of a search warrant at a business presents many unique challenges. Such challenges include, but are not limited to: appropriate interaction with law enforcement agents; ensuring that the firm continues to have access to indispensable records and information; monitoring the manner in which the search is conducted; the protection of privileged material; and handling potential inquiries from the media, investors, and other businesses. Mounting an effective response to these challenges requires a business to implement appropriate procedures that allow the business to cooperate with the agents conducting the search while continuing to operate its business.

The Search

When law enforcement agents appear at a company’s offices with a warrant in hand, the firm’s Chief Legal Officer (or next in command or designee if necessary) should assume the position of initial liaison with the law enforcement agents. First and foremost, the company should immediately contact outside counsel. If at all possible, outside counsel should immediately come to the company’s offices and/or site of the search (if different). If outside counsel is not readily available, the Chief Legal Officer should otherwise ensure the immediate presence of in-house counsel at each search site. The Chief Legal Officer or designee should inform the law enforcement agents that counsel has been contacted, and ensure that counsel is able to connect with the law enforcement agents on site.

The Chief Legal Officer or designee should inform law enforcement agents that the firm intends to cooperate fully with their search, and will assist the agents in locating and indentifying documents responsive to the search warrant. Despite the disruption in the firm’s ongoing business that a search presents, it is essential for the individuals interacting with the law enforcement agents to maintain a tone and demeanor that establishes a cooperative (and not hostile) relationship.

Counsel should request a copy of the search warrant, which law enforcement agents are normally required to bring and provide to the operator of the premises. It is imperative to determine whether the warrant is a search warrant (authorizing an inspection of places where materials responsive to the warrant are likely to be found) or a seizure warrant (a narrower legal device often used in property forfeiture proceedings allowing merely the seizure of a particular item, such as a computer or personal property). Counsel must ensure that the premises to be searched and the items to be taken are covered by the warrant. Counsel should point out for the law enforcement agents any issues identified concerning the scope of the requests in the warrant. However, it is important to keep in mind that prior to the warrant’s execution, a federal or state judicial officer had reviewed the application for the search warrant and found that there was probable cause to believe that the items called for by the warrant were likely to be found on the premises. Additionally, counsel should obtain the names and contact information of the agents executing the warrant (at a minimum, the supervisory agent) as well as the prosecutor in charge of the investigation.

In executing the search warrant, law enforcement agents may temporarily and reasonably restrict the activities of employees to ensure that no responsive materials are removed or destroyed. Law enforcement agents may also inquire as to whether there are weapons on the premises (for their own safety). This is a standard request, even during the search of a business, and should not be cause for alarm. Employees should not make any attempts to restrict law enforcement agents from searching any areas. If a dispute arises about whether responsive materials may be found in a particular location on the premises, or whether a particular type of document is responsive to the warrant, the firm must involve outside counsel and take notes about the relevant issues, but no attempt should be made to block the agents from the search. Any such acts could be viewed by the agents as an attempt to obstruct the search or destroy evidence, and could result in even a temporary arrest of the employee.

Employees on the premises when a warrant is executed should be instructed to assist law enforcement agents in identifying the records called for by the warrant. To the extent possible, such assistance should be provided with counsel present. It is imperative to instruct employees that, unless cleared by counsel, they should not answer “interview” questions that go beyond what is necessary to assist law enforcement agents to identify the location of relevant records. Such questions may seem innocuous, but may later become problematic. For example, employees should not answer questions such as “Do you make entries in this trading blotter?” or “How do you record certain information?” These questions are not relevant to determining whether certain items are responsive to the warrant. Counsel should keep a record of any such questions and any answers given. If law enforcement agents appear to be asking excessive questions, counsel should ask to speak to the supervisory agent in charge or the prosecutor in charge to address this issue.

The execution of a search warrant at nearly all companies today will inevitably involve some search of computer records. Counsel should discuss the procedures for searching and seizing electronic storage devices with the supervising law enforcement agent or prosecutor. A full discussion of these issues is beyond the scope of this article. The standard procedure for such materials is to take a “mirror image” of the hard drives of computers, and leave the original machines behind. However, there are instances where law enforcement agents may insist on taking the original machine. Counsel should discuss such requests with the prosecutor in charge of the investigation. If at all possible, have an in-house computer technician respond to the premises to assist by answering questions, providing passwords and other access, and protecting against damage to data and storage devices. Moreover, given the potentially broad reach of the plain view doctrine as applied to searches of computers, counsel should carefully monitor the files on storage devices that are searched and/or seized.

Counsel should also focus on the protection of privileged material. When law enforcement agents are conducting the search, counsel must identify items that are privileged and carefully document how the agents handle such materials. On privilege issues, counsel should engage the agents (and the prosecutor if available) on the procedures established for handling privileged material. As a general rule, case agents should be walled off from potential exposure to privileged material to avoid tainting the investigation. If any materials identified as privileged are reviewed by the agents or seized, the materials should be sealed by a non-case agent and reviewed by law enforcement agents and prosecutors not involved in the investigation. To ensure that proper procedures are followed to protect privileged material, counsel should inquire as to which law enforcement agents are the case agents and which have been brought in merely to assist with the search. The agents may refuse to answer these questions. If so, counsel should record the names of any agents who come in contact with privileged material.

Counsel should assign an employee to keep a shadow inventory of what records are searched and what records are removed from the premises. It may be necessary for multiple employees to keep inventories if the scope of the search is large and covers separate areas within the offices of the business. In preparing these inventories, it is important to document not just what records were removed, but also how the search was conducted. If the search is overbroad, and is not conducted in good faith with respect for the restrictions in the warrant, counsel may have the opportunity to suppress the results of the search.

At the end of the search, law enforcement agents should provide counsel with a copy of their inventory of items seized and ask that it be inspected and signed. Counsel should take time to carefully review the inventory and make sure that it is as accurate as possible before signing. This document may later be used to argue that the firm effectively consented to certain items being taken even though they may not have been responsive to the warrant. Finally, before agents leave with documents and/or computers, the Chief Legal Officer should focus on particular records that are vital to the ongoing day-to-day management of the business (e.g., original trade blotters or accounting ledgers) and ask outside counsel to negotiate to retain working copies of any such records.

Advanced Preparation

An effective response to a search warrant requires that certain steps be taken even before agents arrive with the warrant. Key employees who might be called upon to assist in any search, especially those in charge of satellite offices, should be provided a copy of the relevant procedures now while there is no imminent threat of a warrant being executed to ensure that these employees are familiar with the procedures and to provide time to answer any questions they may have. The Chief Legal Officer should focus in advance on the identity and location of items that are indispensable to the ongoing day-to-day management of the business and be prepared to negotiate to retain working copies of any such records. Requests to retain working copies of important business records are often granted, but they must be reasonable in nature and scope. It is also extremely important for the Chief Legal Officer to focus in advance on the protection of privileged material by determining where such materials are stored and what subject matter they cover.

Communications With Investors, The Media And Other Businesses

When a search is conducted on the premises of a business, there is always the potential for the event to become public knowledge. If that happens, there is a strong possibility that the firm will receive inquiries from investors, the media, and others. It is important that the firm prepare responsive statements in advance that can be tailored later to address the particular circumstances of the situation. Generally speaking, however, until sufficient time has been devoted by management, counsel, and others as to what, if anything to provide the media, statements to the press should be limited to noting that the firm is continuing to operate its business and is cooperating fully with the government’s investigation, but will not otherwise comment on an investigation. Statements to investors and other businesses should contain similar statements about the ongoing operation of the business and cooperation with the government, and may also note that the firm will promptly disclose any material developments.


The execution of a search warrant at a business presents unique challenges that far exceed the issues arising when a business receives a subpoena requiring the production of documents. To appropriately address these challenges, it is important that the company and its outside counsel are proactive and establish procedures to follow in the event of a search. Establishing and following proper procedures will foster a more organized response to the execution of the warrant, underscore the company’s cooperation with the government, ensure that information vital to the ongoing activities of the business remains available, protect against the inadvertent seizure of privileged material, and ensure that the company has an effective communication strategy in place.