The SEC’s Enforcement Focus on Lawyers

Broc Romanek has an interesting post ("General Counsels Pay Up") discussing SEC enforcement actions involving lawyers serving as general counsels. Of particular interest is this link here to a speech given in December of 2004 by Stephen Cutler, Director, Division…

Broc Romanek has an interesting post (“General Counsels Pay Up“) discussing SEC enforcement actions involving lawyers serving as general counsels. Of particular interest is this link here to a speech given in December of 2004 by Stephen Cutler, Director, Division of Enforcement for the SEC, in which he made the following remarks:

That brings me to the lawyers. And I’m reminded of Judge Sporkin’s question, in the context of another scandal, the S&L crisis: “Where were the lawyers?” Lawyers to funds, their independent directors, and investment management firms also have a critical role to play in helping to prevent violations of the law. So we’re looking at them closely. What are we looking for, exactly? Intentional, knowing misconduct, for one. But we are also looking hard at situations in which lawyer misconduct meets statutory scienter requirements that are short of actual knowledge. Having said that, I do want to be clear that we are not in the business of enforcing malpractice rules or sanctioning lawyers for providing negligent advice.

We all know that the business and professional pressures on lawyers to accede to clients’ wishes are greater than ever. But it is equally true that it is more important than ever (and, as a result of the Sarbanes-Oxley Act, sometimes even legally required) for lawyers to remain firm and stand up against a proposed action or course of conduct that would be inconsistent with the letter or intent of the law. And in advising clients, it is critical that lawyers take a sufficiently broad perspective in evaluating a client’s proposed course of conduct so as to understand not just what the client wants to do, in the most narrow sense, but why the client wants to do it – in order to be able to fully evaluate the legal implications of the client’s course of conduct. By following these principles, lawyers, and particularly in-house counsel, can play an integral role in fostering a culture of compliance within a firm.

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