Committee on Securities
of the Business Law Section of the
Maryland State Bar Association

March 31, 2003

Via email to

Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549-0609

RE: File No. S7-45-02

Dear Secretary Katz:

This letter expresses to the Securities and Exchange Commission (the "Commission" or "SEC") the comments of the Committee on Securities of the Business Law Section of the Maryland State Bar Association (the "Committee") with respect to the rules proposed in Release No. 33-8186 (the "Release"), Implementation of Standards of Professional Conduct for Attorneys (the "Proposal").

In a letter to the Commission dated December 18, 2002, the Committee commented on the original proposal presented by the Commission in Release No. 33-8150 (December 2, 2002) regarding standards of professional conduct for attorneys (the "Original Proposal"). Although the rules put forward in the Proposal is somewhat modified from the Original Proposal, many of the Committee's basic objections remain.

The Role of Counsel

As the Commission has acknowledged, the proposed rule requiring companies to report on attorney withdrawal transcends the mandate of the Sarbanes-Oxley Act (the "Act") and imposes new duties and responsibilities, beyond even those envisioned by Congress. Regardless of whether the attorney must make a "noisy withdrawal" and disaffirmation or whether the company is required to report the withdrawal, the Committee believes that these requirements will have a material adverse impact on the ability of attorneys to properly counsel their clients, inhibit companies from sharing important information with their attorneys, deter issuers from seeking guidance and advice, and frustrate - indeed radically change - the nature and entire purpose of the attorney-client relationship.

The Commission justifies the rationale on the basis that the attorney, like the auditor, should be charged with policing the issuer. However, the role of the auditor is clearly that of an objective assessor who determines the accuracy and adequacy of the financial statements; the auditor, therefore, must be independent to be objective. On the other hand, the attorney is the advocate for the client (i.e., to defend his or her client zealously), not the independent auditor.

Consequently, we recommend that the Commission propose rules for attorneys that set high standards of conduct and responsibility, and that the Commission abandon any proposal that requires a "noisy withdrawal" and disaffirmation or reporting by the issuer.

Changing the Nature of the Relationship; Inhibiting Compliance

The Proposal to mandate attorney oversight, combined with the expansive assertion of jurisdiction over all attorneys who counsel public corporations inside and out - even those whose names never appear in an SEC filing, approaches an unauthorized usurpation of the States' authority to prescribe the ethical requirements for their lawyers. This approach is counterproductive to the objectives of the Act. Furthermore, the exceptionally short time frames mandated for regulatory action do not allow for appropriate consideration of all of the competing interests involved.

By its Proposal, the Commission has unnecessarily entered an arena of huge controversy regarding which States have developed different approaches based on years of experimentation and experience. The practical effect of the Proposal is to put the attorney in the role of a policeman, rather than counselor, and impair open and candid attorney-client communications. We submit that the fallout from this intrusion will operate to exclude lawyers from the inner councils of the corporation, will inhibit open communications between attorney and client and consequently will reduce the lawyer's ability to secure voluntary and good faith compliance with the securities laws.

We submit that the Commission's right to file attorney grievances with state bars and to take enforcement action under existing Commission rules is wholly adequate to protect the public interest without impairing the objectives of the Act.

Notification of Withdrawal Violates Confidential Relationship

No matter how one slices it, whether the attorney has a duty to effect a "noisy withdrawal" and disaffirm filings, or whether the issuer has a duty to report the withdrawal, the withdrawal itself becomes the trigger for a public disclosure. This violates the very essence of the relationship - the confidentiality that defines the attorney's role and the privilege that, until now, has been universally recognized.

Moreover, it is frightening to think that the cascade of cataclysmic events that will naturally follow from this withdrawal could be triggered by an attorney making his or her own determination regarding the nature or sufficiency of alleged "evidence" of wrongdoing. Taken one step further, could this be triggered by a disgruntled attorney telescoping an immaterial, ambiguity into a scandal? Of course, after the allegation is made, the damage is effectively done.

Finally, while the issue is murky enough in dealing with outside counsel, the Proposal further muddies the waters by imposing similar requirements and responsibilities upon in-house lawyers employed by the corporation. It is essential that corporate management be in a position to place trust and confidence in in-house attorneys. We believe the rules will erode this trust and confidence and succeed only in making it less likely that in-house counsel will be consulted on difficult and thorny issues -- where advice of counsel is most critical. On the other hand, the rules will impose significant risks and pressures on in-house attorneys, particularly subordinate attorneys, which will far outweigh any potential benefits to investors. In sum, it is our view that in-house counsel should be excluded from the Proposal.

Summary and Conclusion

For the reasons described above, the Committee respectfully recommends that neither the "noisy withdrawal" and disaffirmation rules, nor the issuer reporting obligations, of the Proposal be adopted.

Very truly yours,

Committee on Securities
of the Business Law Section of the
Maryland State Bar Association

By: Abba David Poliakoff, Chair
Eugene C. Holloway
Kenneth B. Abel
Scott Freed