Saturday, March 5, 2005
At the annual conference "The SEC Speaks" at which Commission members and staff discuss the state of securities law, Chairman William Donaldson gave the introductory speech that included some words directed at the lawyers in the audience, who probably accounted for over 90% of the participants. In his statements (available here), Donaldson stated:
I hope you will do your best to explain to your clients the principles behind our rules. Similarly, I hope you will not expend significant time, money, and energy devising structures aimed at evading requirements and trying to achieve an accounting or disclosure result that is “better” only because it achieves technical compliance with a rule while artfully dodging the rule’s purpose.
I hope you will focus attention on identifying what we sometimes call “appearance” problems, which refer to those potential but as-yet-undeveloped issues, such as conflicts of interest that can trip up a client, or new business relationships or revenue streams that could create conflicts with the best interests of the firm’s customers. You can help your clients to integrate compliance and ethics into discussions about new products or new business ventures, and address in real time the risks those new products or business lines may present.
You can help corporations to encourage their employees to learn from their mistakes. If there is a breach in ethics or compliance it is imperative to figure out what went wrong and how it can be prevented from happening again.
And most important, you can help corporate leaders to set a personal example, and insist that when a decision is made, no matter how large or small, everyone is obligated to check his or her internal compass and ask whether the course of action is the right thing to do.
This position is consistent with the SEC's view since enactment of the Sarbanes-Oxley Act of lawyers as gatekeepers of their securities clients, and the recent emphasis in enforcement actions on holding lawyers accountable for the legal advice they provide to clients.(ph)