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Here is our October E-Minders – tomorrow, it will be emailed to all that signed up for it.

Enforcement Director Speaks on Gatekeepers

In probably his most significant speech to date, Enforcement Director Steve Cutler gave this riveting speech about gatekeeper responsibilities at UCLA a few weeks back. The speech is entitled “The Themes of Sarbanes-Oxley as Reflected in the Commission’s Enforcement Program.” The three themes identified were: fundamental significance of gatekeepers in maintaining fair and honest markets; importance of maintaining integrity in the investigative process aimed at ferreting out securities law violations; and need for greater personal accountability and deterrence at the top of the corporate world.

Here are some notable snippets that might be close to home for the lawyers out there:

– we named lawyers as respondents or defendants in more than 30 of our enforcement actions in the past two years

– close to half the Commission’s actions against lawyers during the past two years involved outside counsel

– we are also considering actions against lawyers, both in-house and outside counsel, who assisted their companies or clients in covering up evidence of fraud, or prepared, or signed off on, misleading disclosures regarding the company’s condition

– one area of particular focus for us is the role of lawyers in internal investigations of their clients or companies, as we are concerned that, in some instances, lawyers may have conducted investigations in such a manner as to help hide ongoing fraud, or may have taken actions to actively obstruct such investigations

– but what we want to do is focus their [gatekeepers’] minds, to have them think, when they wake up in the morning, if I fail to live up to my legal and fiduciary obligations, if I don’t hold the line with my corporate client and resist pressure to acquiesce in wrongdoing, the consequences will be swift and severe.