Happy birthday Sarbanes-Oxley! The SEC got a nice birthday present regarding third-party liability when JP Morgan and Citigroup settled for big $$$ for their involvement in the Enron scandal. See http://www.sec.gov/news/press/2003-87.htm.
The SEC’s General Counsel, Giovanni Prezioso, has released a letter he sent to the State Bar of Washington regarding the attorney conduct rules at http://www.sec.gov/news/speech/spch072303gpp.htm. Washington’s State Bar has proposed a rule that would conflict with the SEC’s new Rule 205. Part 205.3(d)(2) provides that “an attorney appearing and practicing before the Commission in the representation of an issuer may reveal to the Commission, without the issuer’s consent, confidential information related
to the representation to the extent the attorney reasonably believes necessary…” to prevent certain specified harm. The State Bar’s proposal would prohibit Washington lawyers from disclosing confidential information to the Commission that Rule 205 would permit them to disclose.
It should be noted that the ethical rules of most – if not all – states prohibit the revelations allowed under Rule 205 unless a higher threshold is met. There has been a debate as to whether the permissive provision adopted by the SEC would preempt the prohibition set forth in the ethical rules of the various states. In this letter, the SEC’s General Counsel is taking the position that Rule 205 would preempt state law under the supremacy clause – and that a state bar can’t discipline an attorney, appearing and practicing before the Commission, who in good faith, reveals to the Commission without the issuer’s consent, confidential information related to the representation to the extent the attorney reasonably believes it is necessary to achieve one of the objectives of Part 205.3(d)(2).
Importantly, the SEC’s General Counsel does not address whether a state bar could discipline an attorney who in good faith believes such a revelation is necessary if the bar later finds that the belief was not reasonable. Thanks to Ken Winer for his help deciphering the GC’s letter!
For TheCorporateCounsel.net members, we have launched our “Blog City,” which consists of five different sets of practitioners – with varying areas of expertise – blogging for your enjoyment. I like to think that the paper analogy to this new concept is the use of columnists in your daily paper – so find a blogger or two that matches your particular interests and personality today at http://www.thecorporatecounsel.net/blog/blog_city.htm.
We also have posted two interviews: one with LaDawn Naegle and Randy Wong on how to file CEO/CFO certifications this quarter at http://www.thecorporatecounsel.net/member/InsideTrack/07_29_03_Naegle.htm – and the other with Caroline Gottshaulk on how SOX impacts voluntary filers at http://www.thecorporatecounsel.net/member/InsideTrack/07_25_03_Gottschalk.htm.