September 16, 2003

It looks like California has

It looks like California has joined the jurisdictional flap over the SEC’s new “reporting up” rule. In response to the SEC’s General Counsel’s letter to the State of Washington, the Corporations Committee of the State Bar’s Business Law Section has sent a letter to the SEC notifying it that new Rule 205.3(d)(2) conflicts with California law.

The Corporations Committee also notified the SEC that – in the absence of an appellate judgment in favor of the SEC’s pre-emption claim – the California State Bar may not refuse to enforce Section 6068(e) of the California Business and Professions Code. Under Section 6068(e), California attorneys have an ethical obligation to maintain client confidences “at every peril to himself or herself.”

As you may recall, back on July 23, the SEC’s General Counsel publicly released a letter stating that state bar associations were pre-empted from disciplining an attorney who made voluntary disclosure of client confidences to the SEC in reliance on its rules. This letter was in response to a proposed action by the Washington State Bar Association Board of Governors. On July 26, the Washington State Bar Association Board of Governors took its action notwithstanding the SEC’s position.

Next, the California State Bar Board of Governors Standing Committee on Professional Responsibility and Conduct (COPRAC) will prepare and issue an educational Ethics Alert on this matter and the Executive Committee of the California Business Law Section and the Corporations Committee will work together with COPRAC to study these issues and draft the Alert.

The PCAOB is holding an open meeting to adopt investigation, disciplinary and registration withdrawal rules this Friday at noon. On September 29, the PCAOB is holding a roundtable on audit documentation.

The SEC has posted its proposed rules regarding the foreign bank exemption under Section 402 and the unavailability of Form F-6 for unsponsored American depositary receipts if a foreign issuer separately lists deposited securities on a registered national securities exchange.

Regarding filing fees, the SEC already has adopted a continuing resolution in the event that Congress does not act on the SEC’s 2004 fiscal budget by the end of September 30th, which is the end of the SEC’s fiscal year. I don’t recall Congress ever acting timely – and last year, it dragged approval of the SEC’s budget all the way to Christmas I believe. This rate change is quite significant as the fee for all registrations under the 1933 Act (including proxy contest solicitations) will go up over 50%.