This year will mark the 15th anniversary of the enactment of the Sarbanes-Oxley Act of 2002. Known as SOX by attorney practitioners, as well as the multitude of corporations affected by its sweeping reforms in the aftermath of a series of corporate scandals of that era, the law made major changes to the landscape of corporate governance, financial reporting and accounting firm independence and oversight, among others. The focus of this article, however, is a narrow one – to assess and comment on the impact that one controversial provision of SOX, Section 307 and the Securities and Exchange Commission (SEC) Part 205 Rules promulgated thereunder, has had on attorneys appearing and practicing before the SEC.

The ethical duty of confidentiality v. the duty to refrain from assisting in a client’s fraud

An attorney’s obligation of confidentiality to his or her client is a bedrock principle that underlies the attorney-client relationship. Without its protections, clients cannot frankly discuss their legal problems with counsel, and consequently, attorneys would not have the requisite complete and unfettered factual predicate upon which to render their advice. Equally important to the legal profession, however, is the requirement that attorneys cannot counsel or assist a client in engaging in conduct that the lawyer knows is criminal or fraudulent. In practice, these two precepts, which are always in tension, can come into direct conflict: if a lawyer learns of prospective criminal or fraudulent activity, and advises (presumably against) such activity, but remains silent in the face of a persistent plan to engage in the activity nevertheless, he or she may be accused of having assisted the client in the activity.

Jan-Mar 2017 Issue

Foley & Lardner, LLP