After Sarbanes-Oxley: A Panel Discussion on Law and Legal Ethics in the Era of Corporate Scandal

Georgetown Journal of Legal Ethics, The, Fall 2003 by Gonson, Paul

I might say in general that the sec received extensive comments on these lawyers' rules, and I am probably overstating somewhat, but not by much, by saying that they generally divide into two camps: the organized bar, the practicing lawyers generally oppose them; the academics generally thought they were pretty good and favored them. We have a nice assortment of views on our panel tonight. We're going to open our discussion with a very brief overview of the new rules presented to us by Richard Humes, following will be Professor Hamermesh who will give an outline of the proposals of the American Bar Association Task Force on Corporate Responsibility. That will be the sort of formal introduction of the program and then all of us are going to participate in a discussion of the rules and at the end we'll save 15 or 20 minutes to answer questions that you may have. Now I turn it over to Rick Humes.

RICHARD HUMES

Thank you, Paul. Let me start by saying, as I must, that the views that I am expressing here today are my own and not necessarily those of the Commission or any individual commissioner. As Paul indicated, in section 307 of the Sarbanes-Oxley Act Congress directed the Commission to promulgate minimum ethical standards for lawyers appearing in practice and before the agency in the representation of issuers. It said at a minimum the rules must provide up-the-ladder reporting. And last December we put out our proposed rules, which not only included up the ladder reporting but also reporting out and a noisy withdrawal provision. And as we describe noisy withdrawal in our proposal, that would include requiring a lawyer that has reported up through a corporation and has not received an appropriate response to withdraw from representing the issuer citing professional reasons, to disavow any tainted documents, and to notify the Commission that he had withdrawn.

Shortly after promulgating the rules it was brought to our attention that perhaps lawyers in foreign countries were going to have a difficult time complying with the rule, and of course lawyers in this country were concerned about the proposed rule. So we held a roundtable in Washington, D.C. on December 17, and we invited a number of lawyers from foreign law firms, foreign professional responsibility attorneys, and attorneys from foreign issuers to give us input on the potential impact of the proposed rules. And almost universally they told us that there are laws in these foreign jurisdictions - that there are ethical rules that would make it illegal for them to comply with the rules and might even subject lawyers in some countries to criminal sanctions. But one development that came out of the roundtable was that a number of the lawyers indicated that if a report were made up through a corporation by a lawyer, and the issuer were required to [disclose] that the lawyer had withdrawn, that that would be acceptable. In February, as Paul indicated, we put out our final rule as we were required by statute to do. It includes a reporting up provision but does not include a reporting out or noisy withdrawal provision.