August 11, 2003

On Friday, the SEC posted

On Friday, the SEC posted its proposing release regarding disclosure of nominating committee activities and shareholder communications with directors.

A recent phenomenon are companies increasingly asking their outside counsel to sign off on their reporting up policies. This is a tough situation for outside counsel seeking to appease their clients – but not willing to take on unnecessary risk.

Whether outside counsel should indeed sign off probably depends on what the client is asking them to sign. If the client simply wants outside counsel to acknowledge that they have read it and that they will comply, there shouldn’t be a problem with signing. If the client is asking for more – or if the policy contains procedures that counsel doesn’t think they can live with – counsel should think twice before signing.

The bottom line is that it’s unclear what the signing gets the inhouse lawyer. If an inside lawyer gets “hooked” under the attorney conduct rules, that lawyer might have a claim against an outside lawyer who signed – but failed to comply. But this gets into a morass. If there is a contract right, it belongs to the company, not the inhouse lawyer who violated the rules. We shall soon see whether the ABA Task Force addresses this at the ongoing ABA Annual Conference. Tune into Wednesday’s webcast regarding “Designing Reporting-Up and Complaint Procedures” for more on this topic.

The PCAOB has configured its website to now accept registration applications from audit firms.