Securities Advisory: Attorney Professional Conduct Rules
8/1/2003
On August 5, 2003, the Securities and Exchange Commission's (SEC) new "attorney whistleblowing" rule will go into effect, imposing new obligations on attorneys to bring evidence of corporate wrongdoing to light. In brief, the new rule will require attorneys who appear and practice before the SEC and who become aware of evidence of material violations of securities laws or of material breaches of fiduciary duty by their issuer clients to report that evidence to the clients' chief legal officer, or to both the chief legal officer and chief executive officer. If a company receiving such a report does not under take an appropriate response within a reasonable time, the attorney must report the evidence "up-the-ladder" within the company, to either the board of directors, the audit committee or a similar committee of the board. Whether the new rule will dramatically alter the relationship between issuers and their legal advisors remains to be seen, but both companies and the lawyers who work with them on securities matters must be prepared for the new regime.
