March 16, 2022
Targeting “Can-Do” Corporate Lawyering
Earlier this month, Commissioner Lee spoke at the PLI program Corporate Governance – A Master Class 2022 and took on the topic of over-zealous representation of clients by corporate lawyers. In particular, she called for the SEC to take steps to address situations where bad legal advice can inflict harm on investors. Commissioner Lee noted:
The “bad advice” I refer to arises from a type of “can-do” approach to lawyering that is ill-suited to lawyers in a gatekeeping role. It is born from a desire to give management the answer that it wants. Or, as a Delaware court recently stated, it stems from a “contrived effort to generate the client’s desired result when real-world facts would not support it.”
Commissioner Lee went on to note that bad advice can extend to disclosure decisions that public companies make, and that principles-based rules adopted by the SEC result in lawyers being more involved. She also noted how the involvement of lawyers can make it difficult to charge individuals for disclosure violations in Enforcement cases.
Commissioner Lee argued in her speech that the existing framework for professional conduct is not adequate to address these issues, and she suggests that the SEC use its authority under Section 307 of the Sarbanes-Oxley Act, which directs the SEC to adopt “minimum standards of professional conduct for attorneys appearing and practicing before the Commission in any way in the representation of issuers.”
– Dave Lynn