Judith A. McMorrow on Attorney Conduct and the SEC

Judith A. McMorrow on Attorney Conduct and the SEC


In the area of professional responsibility, a unique set of considerations accompanies practicing before the Securities and Exchange Commission (SEC). In this Emerging Issues Analysis, Judith A. McMorrow discusses attorney conduct and the SEC and examines the SEC Rules of Practice, the changes implemented from the Sarbanes-Oxley legislation, and the actions taken by the Commission in developing norms of professional conduct for attorneys. She writes:

     Rule 102(e)(1) of the Security Exchange Commission's Rules of Practice authorizes the Commission to censure or suspend from practicing before it any person who, after notice and a hearing, it has found does not possess the requisite qualifications to represent others,'' is lacking in character or integrity'' or has engaged in unethical or improper professional conduct,'' or who has willfully violated, or willfully aided and abetted the violation of any provision of the Federal securities laws or the rules and regulations thereunder.'' The terms requisite qualifications, character, and integrity are not defined or explained under Rule 102(e). . . .
 
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     With the passage of Section 307 of the Sarbanes-Oxley Act, the Commission was given much stronger authority to issue regulations governing attorney conduct. The thrust of the new Commission rules is that an attorney appearing before the Commission in the representation of an issuer owes professional and ethical duties to the issuer as an organization, not to any individual officer, director or employee. This obligation is consistent with the well-established obligations under the rules of professional conduct that govern most lawyers. A continuing challenge for corporate attorneys is keeping the interests of the corporation as an entity dominant when the individual corporate agent is the person with whom the lawyer interacts.
 
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     The legal obligations established by the Commission had a strong influence on the professional obligations required by state bars. Six months after the passage of the Commission's new standards, the American Bar Association amended the Model Rules of Professional Conduct involving representing corporate clients (Rule 1.13) and confidentiality obligations (Rule 1.6). Many states, in turn, have reviewed the changes and embraced them. . . . [N]ot all states have adopted the recommended changes, so lawyers must carefully review their own Rules of Professional Conduct to determine the scope of their duty under state law to maintain confidences and properly represent organizational clients.
 
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