The Legal Media Group reports that the legal profession is seeking to defend client confidentiality as plans proceed for implementation of the Sarbanes-Oxley Act, scheduled to take place by the end of January 2003.
On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002. This legislation imposes new duties on public companies and their executives, directors, auditors, plan administrators and attorneys, as well as securities analysts. The act requires significant rulemaking by the Securities and Exchange Commission and the creation of the Public Company Accounting Oversight Board to oversee the audits of public companies.
Reportedly, the American Bar Association has launched a task force to head off the threat to client confidentiality posed by Section 307 of the Act. This section requires lawyers to report corporate wrongdoing by their clients.
ABA’s Section 307 Task Force was established in response to an invitation from the Securities and Exchanges Commission (SEC) for the profession to participate in a dialogue to formulate rules implementing this section. Section 307 establishes minimum standards of professional conduct for lawyers practising before the SEC, requiring them to report material violations of securities laws to corporate officers.
U.S. lawyers are worried that rule 307 could reduce the amount of information companies tell their lawyers for fear that this information could be passed on to a third party.
LMG also reports that England’s Law Society also is concerned about the requirements, and is taking a stand against the effect of the rule on international lawyer. A recent statement from the Society said, *”There is still a great deal of uncertainty over the implication of the rules. It is not clear for example what constitutes a material violation of securities laws.”*
The Law Society proposes to comment on the proposed rules, expected within two weeks. After publication, the rules will be open for consultation for 30 days only. It has been meeting with U.K. law firms to develop a common position in the fight for an exemption from the rule, which would affect all lawyers employed by or advising a company with a US listing.
The ABA Task Force, chaired by Peter Moser, former chair of the ABA Standing Committee on Ethics and Professional Responsibility, also is concerned with which body should be in charge of enforcing the reporting rule. Presently, lawyers conduct themselves under state rather than SEC jurisdiction.
The Sarbanes-Oxley Act has been described as the most fundamental overhaul of U.S. accounting and corporate governance law in 70 years. The Act requires extensive regulations to be adopted by the SEC, in almost all cases with fixed deadlines.
With over 15 years’ experience writing on legal issues affecting international businesses, Legal Media Group is established as the leading publisher in its field. Part of Euromoney Institutional Investor, the group’s magazines include International Financial Law Review, International Tax Review, and Managing Intellectual Property.