Lawyers Balk at New SEC Rules

New rules established by the Securities and Exchange Commission encourage lawyers to break their client confidentiality compact when clients are suspected of financial fraud.

The SEC rules, part of the fallout from the Sarbanes-Oxley Act of 2002, require lawyers to report concerns of violations of securities laws to corporate executives. If companies continue the violations after discussions with lawyers, the SEC wants lawyers to become whistle-blowers, advising federal regulators that a company is engaged in fraudulent activities.

The SEC also wants to require lawyers to resign and notify the government if a company warned about securities laws violations continues to engage in such activities.

Lawyers have traditionally stood behind the attorney-client privilege to prevent them from having to disclose client wrongdoing. "One way to ensure greater transparency is to make sure clients and lawyers have free-flowing discussion," said Scott Falk, partner in Chicago law firm Kirkland & Ellis.

State and local bar associations have sent letters to regulators stating their opposition to the rules, as has the Securities Industry Association and the Business Roundtable, an organization made up of chief executives from the nation's largest companies.

Several states already allow voluntary whistle-blowing by lawyers. The ABA is expected to vote on this issue at its annual meeting later this month. An ABA task force on corporate governance has recommended that lawyers voluntarily disclose situations of fraud to an outside party but not be required to publicly resign from an engagement.

You may like these other stories...

Cybersecurity is no longer the domain of an organization's IT staff. It's moved to the boardroom, and in a big way. Accountants and financial managers may have been thinking it's just the province of the tech...
Boehner addresses GOP priorities ahead of midterm electionsHouse Speaker John Boehner (R-OH) on Thursday delivered what amounted to closing arguments ahead of the November elections, laying out a list of Republican...
Former DOJ Tax Division head Kathryn Keneally joining DLA Piper in New YorkGlobal law firm DLA Piper announced on Thursday that Kathryn Keneally, the former head of the US Justice Department Tax Division, is joining the firm...

Already a member? log in here.

Upcoming CPE Webinars

Sep 24
In this jam-packed presentation Excel expert David Ringstrom, CPA will give you a crash-course in creating spreadsheet-based dashboards. A dashboard condenses large amounts of data into a compact space, yet enables the end user to easily drill down into details when warranted.
Sep 30
This webcast will include discussions of important issues in SSARS No. 19 and the current status of proposed changes by the Accounting and Review Services Committee in these statements.
Oct 21
Kristen Rampe will share how to speak and write more effectively by understanding your own and your audience's communication style.
Oct 23
Amber Setter will show the value of leadership assessments as tools for individual and organizational leadership development initiatives.