Mr. Jonathan G. Katz
Securities & Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609

December 17, 2002

Re: Proposed Rule: Implementation of Standards of Professional Conduct for Attorneys (File No. 33-8150.wp)

Dear Mr. Katz:

We are pleased to have this opportunity to comment on the proposed Part 205 (the Proposed Rule), which would establish standards of professional conduct for attorneys who appear and practice before the Commission. The proposal appears in Release No. 33-8150 (the Proposing Release).

This letter is being submitted on behalf of the law firms named above. We are all international law firms that have established US securities law practices. All of us have US attorneys as partners and associates and four of us have offices in the United States. However, the majority of our attorneys are admitted to practice law in jurisdictions other than the United States and are not US-qualified. Our firms represent a number of companies, both domestic and foreign, that are registered under the Securities Exchange Act of 1934 (the Exchange Act), on matters of both US and foreign law.

We are responding to the Commission's specific request for views on how the Proposed Rule will affect multi-jurisdictional law firms and foreign lawyers. We also share, however, many of the concerns expressed by US domestic law firms.

I. Deferral of coverage of non-US attorneys and "noisy withdrawal" pending further consultation

Since the Proposed Rule raises many serious and complicated issues with respect to its application to non-US attorneys, we request that the Commission exclude non-US attorneys from the application of the Proposed Rule pending further consultation in order to allow more time to consider and resolve these issues satisfactorily. We note that the Commission has previously granted a temporary exemption from the effect of new regulation for foreign issuers, pending further study and consultation by the Commission. See SEC Release Nos. 33-4725 and 34-7425 (September 29, 1964). In addition, because many of these issues arise out of the requirement for a "noisy withdrawal" and disaffirmation of Commission filings or submissions, and such a requirement is not contemplated by Section 307 of the Sarbanes-Oxley Act of 2002 (the Act) or its legislative history, we further request that the "noisy withdrawal" and disaffirmation provisions not be implemented pending further consultation and discussion.

II. Exclusion of non-US attorneys

We note that a number of commentators, particularly commentators outside of the United States including non-US law societies and bar associations, have objected to the application of the Proposed Rule to non-US attorneys because of concerns relating to, among other issues, comity and conflicts between the Proposed Rule and the rules governing non-US attorneys in their jurisdictions of qualification,1 and we share many of the same concerns. We believe that it would not be inappropriate, as a number of commentators have suggested, to exclude non-US attorneys from the coverage of the Proposed Rule. In this regard, we note that such non-US attorneys would remain subject to the requirements of Rules 102(e) and (f) of the Commission's Rules of Practice to the extent that such non-US attorneys are "practicing before the Commission" (as defined in Rule 102(f)).

III. Application of Proposed Rule to non-US attorneys

If the Commission determines that the Proposed Rule should apply to non-US attorneys, the rules, as proposed, give rise to serious conflict issues for non-US attorneys. Therefore, we have provided comments in this letter as to how we believe the Proposed Rule could be revised in order to minimize conflicts with the rules applicable to non-US attorneys in their jurisdictions of qualification.2 We note, however, that due to the complex and difficult nature of the problems raised by the Proposed Rule and the short time available for its consideration, the commentary set forth in this letter is not necessarily complete.

As discussed in more detail below, we believe that the objectives of Section 307 of the Act would be satisfied, and the burden on non-US attorneys reduced, by addressing the following issues raised by the Proposed Rule in the manner described:

  • Certain provisions of the Proposed Rule may conflict with rules applicable to non-US attorneys in foreign jurisdictions. Although the "up the ladder" reporting requirements seem to present few such conflicts, as described further in Annex A to this letter, the "noisy withdrawal" and disaffirmation requirements of the Proposed Rule will potentially conflict with confidentiality and attorney-client privilege provisions in a number of countries. We propose several alternative exemptions that would provide relief to non-US attorneys where conflicts exist in order to mitigate this problem.

  • Non-US attorneys may be unable to adequately identify evidence of a material violation of US law, and thus whether they have an obligation to report under the Proposed Rule. We suggest a safe harbor for such attorneys who report such evidence to appropriate US attorneys.

  • The definition of appearing and practicing before the Commission is too broad insofar as it would capture activities of attorneys who may have only a tangential or incidental involvement in the preparation of documents filed with or submitted to the Commission. We suggest the express exclusion of such tangential or incidental activities from the scope of the definition.

  • The Proposed Rule should include a safe harbor protecting attorneys from certain third party actions arising out of their conduct under the Proposed Rule.

A. Potential conflicts between the Proposed Rule and local regulations

    1. Exclusion of non-US attorneys from the Proposed Rule to extent of conflict

Non-US attorneys are already licensed and regulated by authorities in their jurisdictions of qualification. Portions of the Proposed Rule potentially conflict with attorneys' legal or professional obligations under the laws of a number of these foreign jurisdictions. A summary of some of the principal requirements of the Proposed Rule, and how those requirements might be analysed under, and in some cases may conflict with, the ethical rules and other regulations in a number of major commercial foreign jurisdictions, is attached as Annex A.

Section 205.1 indicates that the Proposed Rule will pre-empt conflicting state regulation in the United States. As the Commission lacks the power to pre-empt foreign law, an alternative solution would be required for conflicts facing non-US attorneys. We therefore propose that the Commission consider adopting an exemption or safe harbor relieving non-US attorneys from the application of Part 205 to the extent that it conflicts with legal or professional conduct or similar rules or regulations in those attorneys' respective jurisdictions of qualification.

    2. Request for exemption from "noisy withdrawal" and disaffirmation requirement

If the Commission determines not to exempt non-US attorneys to the extent there are conflicts with local regulations (as discussed in A.1 above), we request that the Commission exempt non-US attorneys from the "noisy withdrawal" and disaffirmation obligations.

As noted in Annex A, a noisy withdrawal will potentially conflict with the rules of attorney conduct governing an attorney's duty to protect privileged client information or the general duty of confidentiality in a number of jurisdictions, exposing the attorney to civil liability. In some cases, a noisy withdrawal could result in criminal liability. Similar problems under foreign laws may arise when non-US attorneys disaffirm filings or documents under Section 205.3(d). There are also particular problems for attorneys who may be subject to the Proposed Rule but whose professional obligations are owed to an affiliate of the issuer rather than to the issuer itself.

For the foregoing reasons, we request that the Commission consider a specific exemption for non-US attorneys from the noisy withdrawal and disaffirmation requirements of Section 205.3(d).3

    3. Request for conflict of law clause

If the Commission declines to adopt the exclusions for non-US attorneys discussed above, we suggest that the inclusion of a conflict of law clause to Part 205 could alleviate the problem of conflicts somewhat while achieving the objectives of the Act. Such an approach would also be more consistent with principles of international comity.

The American Bar Association recently adopted amendments to its Model Rules of Professional Conduct, including changes to the choice of law provisions in Model Rule 8.5. The revised rule now specifies that it applies to lawyers in trans-national practices, unless international law, treaties or other agreements between regulatory authorities in the affected jurisdictions provide otherwise. A change to Model Rule 8.5(a) in 2002 specifically contemplates that a lawyer not admitted to practice in one jurisdiction is nevertheless subject to the disciplinary authority of that jurisdiction if the lawyer provides or offers to provide any legal services in the jurisdiction. A change to Model Rule 8.5(b)(2) states that the relevant disciplinary rules to be applied are those of the jurisdiction in which the conduct occurred, or, if the "predominant effect" is in a different jurisdiction, the laws of that jurisdiction shall be applied. Also under Rule 8.5(b)(2), a lawyer is not subject to discipline if he acts reasonably in the face of uncertainty about which jurisdiction's rules apply.

In our view the objectives of Section 307 of the Act would be satisfied and compliance improved by including a conflict of law rule similar to that which now appears in ABA Model Rule 8.5, to limit the application of Part 205 to circumstances in which the work of both US and non-US attorneys has its "predominant effect" in the United States.

B. Proposed safe harbor for non-US attorneys

In addition to the problem of conflicts with foreign law discussed above, we believe that a critical flaw in the Proposed Rule as applied to non-US attorneys is that such attorneys, not being qualified or experienced US lawyers, will be unable to recognize evidence of a material violation with sufficient certainty to act appropriately under Section 205.3. Non-US attorneys should be permitted to satisfy their Section 205.3 obligations by reporting to an appropriate US attorney. We propose that the Commission consider adopting a safe harbor to proposed Section 205.3's reporting obligations, modelled on Section 205.5.

C. Definition of "appearing and practicing"

The definition of "appearing and practicing" before the Commission in the Proposed Rule has an unduly broad scope, with potentially significant consequences for non-US attorneys. It would, for example, cover non-US attorneys who participate in the drafting of documents for transactions that are entirely foreign and are governed by foreign law, if the document is included as an exhibit to a Commission filing. We strongly believe that attorneys whose only role in Commission matters is purely tangential or incidental should not be covered by the Proposed Rule. We request the Commission exclude activities such as (i) the preparation and negotiation of contracts that are required to be filed as exhibits to Commission filings, (ii) participation in the preparation of press releases and other documents subsequently furnished to the Commission under cover of Form 6-K, (iii) the preparation of other documents required by foreign law that are subsequently furnished to the Commission and (iv) other activities which could be considered tangential or incidental to the activities described under the definition of "appearing and practicing." In this regard, we note that even if such tangential or incidental activities were excluded from the definition of "appearing and practicing," non-US attorneys would still be subject to Commission regulation to the extent their activities constituted "practicing before the Commission" as defined in Rule 102(f).

D. Safe harbor from third party litigation

Attorneys may face a significant risk of civil litigation from third parties based on the contents of reports or other disclosures to the Commission made pursuant to the Proposed Rule. For example, an attorney who makes a "noisy withdrawal" and disaffirmation could be subject to claims of defamation by the issuer. We therefore request, in response to the Commission's request for comment, that the Commission include a safe harbor for an attorney who follows the provisions of the Proposed Rule, similar to the safe harbor for auditors under Section 10A(c) of the Exchange Act.

It is worth noting, however, that even if this kind of safe harbor were established, it would not protect an attorney (including a US attorney) who makes a "noisy withdrawal" and disaffirmation under the Proposed Rule and subsequently faces civil liability in jurisdictions outside of the United States.

E. General comments on definitions

    1. Definition of "evidence of a material violation"

"Evidence of a material violation" is defined in the Proposed Rule to mean information that "would lead an attorney reasonably to believe" that a material violation has occurred, is occurring or is about to occur. In response to the Commission's request for comment as to whether the standard should be subjective rather than objective, we believe that an objective standard is inappropriate in the context of a rule on professional ethics that has such potentially serious consequences for the attorney covered by the rule. We believe that it would be inappropriate to hold an attorney responsible for not reporting evidence of a material violation in circumstances where that attorney did not actually believe that a material violation had occurred, was occurring or was about to occur. The decision whether to report should not arise unless the attorney actually believes that there has been a material violation, and it should not constitute a material violation when an attorney reaches a conclusion as to a matter (such as disclosure) about which reasonable minds can differ.

We therefore request that the Commission adopt a subjective standard based on whether an attorney becomes aware of evidence that causes that attorney to believe that a material violation has occurred, is occurring or is about to occur. We believe that revising the rule to incorporate a subjective standard is supported by the Commission's statement in the Proposing Release that "the attorney's reporting obligation is not triggered until the attorney can be sure that the officer or employee will actually pursue an illegal course of action." This standard is lower than the "actual knowledge" standard rejected by the Commission in the Proposing Release on the basis that it would not do enough to protect the public interest and investors, but high enough to avoid the potentially unjust outcome of a lawyer being disciplined under a professional ethics rule for getting a judgment call wrong.

    2. Definition of "issuer"

The definition of "issuer" in the Proposed Rule on its face could include foreign governments that have securities registered in the United States. However, foreign governments are unlikely to have the same corporate organization as publicly held companies, making adherence to the "up the ladder" reporting obligations difficult, if not impossible, for reporting attorneys. We therefore request, in response to the Commission's request for comment, that the Commission amend the definition of issuer in Section 205.2(g) to include a statement that foreign governments will not be considered "issuers" by the rule or, alternatively, amend the Proposed Rule to provide attorneys with guidance on how to comply with their reporting obligations when representing foreign government issuers.

    3. Definitions of "material violation" and "breach of fiduciary duty"

It is unclear whether the definitions of "material violation" and "breach of fiduciary duty" in the Proposed Rule include foreign laws within their scope, although the Commission in the Proposing Release indicates that the term "violation of securities law" covers violations of US federal and state securities laws. We therefore request that the Commission clarify that the definitions of "material violation" and "breach of fiduciary duty" are limited to violations of US law.

    4. Definitions of "reasonable" and "reasonably"

Because "reasonable" and "reasonably" color the application of the Proposed Rule in many Sections, we request that the Commission amend the definition in Section 205.2(k) to specifically state what the Proposing Release indicates, namely that an attorney's training, experience, position and seniority will be considered when determining whether his or her actions were "reasonable." We further request that the jurisdiction of the attorney's qualification also be considered together with the aforementioned factors.

F. General comments on other provisions

    1. Attribution of knowledge

We request that the Commission revise Section 205.3 to clarify that the knowledge of a material violation of one attorney within a firm will not be attributed to all other attorneys at the firm. For purposes of US rules governing professional conduct, the knowledge of attorneys who are not working on a client matter is generally not attributed to others who are. See American Law Institute, Restatement of the Law, Third, The Law Governing Lawyers, Section 123, comment a (1998). Only if the facts of the situation warrant such a conclusion (for example, if the attorneys are working together on a project or if an attorney is regularly consulted about a matter) may the knowledge of one attorney be attributed to others. See id. at Section 94, comment g. The Commission should make clear in the Proposed Rule that these same standards apply, with respect to both partners and associates within firms.

    2. Reliance of non-US chief legal officer on US attorneys

In addition to the reporting obligations to which other non-US attorneys who appear and practice before the Commission would be subject under the Proposed Rule, the CLO of a foreign issuer would have a duty under Section 205.3(b)(3) to investigate reports of any material violations and impose remedial measures on the issuer, tasks for which a CLO who is not a US attorney may be poorly equipped. As a result, we believe that CLOs who are not US attorneys should be explicitly entitled to rely on the advice of US attorneys in fulfilling their investigating and other duties under Section 205.3(b)(3).

    3. Availability of qualified legal compliance committee to all foreign issuers

The creation of a qualified legal compliance committee (QLCC) complying with the requirements of the Proposed Rule would not be possible for foreign issuers who do not have an audit committee, as Section 205.2(j)(1) requires that the QLCC be composed of "at least one member of the issuer's audit committee." We request that the Proposed Rule be modified to reflect that the QLCC may be comprised solely of independent directors and the alternative reporting procedure can be used even if the issuer has no audit committee, in which case the audit committee member's place could be taken by another independent director.

In the context of foreign issuers that have a management board and a separate supervisory board, such as in Germany and the Netherlands, we request that the Commission clarify how the QLCC provisions should be applied to such issuers.

    4. Supervisory and subordinate attorneys

The proposed definitions of "supervisory attorney" and "subordinate attorney" in Sections 205.4 and 205.5, respectively, create a risk that senior attorneys could be held responsible for the acts of junior attorneys with respect to matters of which the senior attorneys have no knowledge. The Commission indicates in the Proposing Release that the use of the words "directing" and "supervisory authority" in Section 205.4(a) was to "clarify that individuals who may exercise authority over subordinate attorneys for a particular matter, but who do not routinely supervise that attorney, are supervisory attorneys." We therefore request that the Commission revise Sections 205.4 and 205.5 to clarify that these sections only cover attorneys who are working together on a particular matter, in order to more clearly reflect the intent of the rule.

Section 205.4(d) currently requires a supervisory attorney who reasonably believes that the information reported to him or her by a subordinate attorney is not evidence of a material violation to document the basis for his or her belief. We believe that this provision, as drafted, overreaches by encouraging supervisory attorneys to document ordinary discussions with subordinate attorneys in order to avoid violating the rules and could lead to an undesirable chilling effect on communications between supervisory and subordinate attorneys. We therefore request that the Commission consider revising the provision to avoid such an outcome.

    5. No private right of action

Although the Commission noted in the Proposing Release that none of the obligations under the Proposed Rule was meant to create a private right of action against attorneys, the Proposed Rule does not explicitly state this. We request the Commission make it clear that no such private right of action is created by Part 205.

IV. Conclusion

The Proposed Rule raises many serious and complicated issues with respect to the regulation of attorneys. We expect that the Commission will receive an abundance of comments from practitioners and professional organizations concerning just the application of the Proposed Rule within the United States. However, as the Commission acknowledges in the Proposing Release, many additional problems arise from the application of the Proposed Rule to non-US attorneys and attorneys practicing in multi-jurisdictional law firms. In fact, many of the potential problems for non-US attorneys stem from the "noisy withdrawal" and disaffirmation requirements. Although we have proposed a number of possible solutions to help mitigate the effects of these problems, we believe that it will not be possible to fully resolve all of these issues by the statutory deadline for adoption of the final rules. Therefore, we reiterate our request that the Commission defer coverage of non-US attorneys from the application of the Proposed Rule and the implementation of the proposed "noisy withdrawal" and disaffirmation provisions, pending further consultation, in order to allow the Commission and all interested parties to have more time to resolve these problems satisfactorily.

* * *

We appreciate this opportunity to comment on the Commission's proposal, and we would be happy to discuss any questions the Commission or its staff may have with respect to this letter. Questions may be addressed to any of the following:

Allen & Overy : Thomas Werlen
Freshfields Bruckhaus Deringer : Thomas Joyce
Herbert Smith : Alex Bafi
Linklaters : Larry Vranka
Lovells : Robert Ripin
Norton Rose : Thomas Vita

Very truly yours,




This survey provides an overview of the laws of certain non-US jurisdictions as they relate to the obligations that would be imposed on non-US attorneys by the Proposed Rule, specifically, the obligation to report "up the ladder" and to undertake a "noisy withdrawal." This survey also summarizes certain exceptions to non-US attorneys' duty to keep client confidences secret (which for the sake of convenience should be read to include exceptions to attorney-client privilege, where applicable).


This survey assumes that the non-US attorney is retained by a corporate client and is not separately representing (with or without, where permissible, informed consent) any stakeholder in that corporate client (e.g., shareholders or directors). Furthermore, this survey assumes that all references to the "client" or the "company" are references to the corporate entity which is the client of the non-US attorney for this purpose and would not necessarily include affiliated or group companies such as a parent company, unless those companies are also clearly the client of the non-US attorney for the purposes of the retainer.

Any reference to "noisy withdrawal" in this annex includes all three requirements contemplated by the Proposed Rule, including (1) the obligation on an outside attorney to withdraw from representing his client; (2) the requirement to notify the Commission of that withdrawal and (3) the requirement to disaffirm a former client's filings with the Commission as materially false or misleading.

England No conflict. Upward disclosure within the company, such as to the chief executive officer, as envisaged by the Proposed Rule would not constitute a breach of rules set out in the Guide to the Professional Conduct of Solicitors, as the company itself is the client of the solicitor, not the individual point of contact. "A solicitor is usually under a duty to pass on to the client and use all information which is material to the client's business regardless of the source of that information. There are, however, exceptional circumstances where this duty does not apply." These exceptional circumstances relate to money laundering, state security and intelligence or where the information will affect the client's physical or mental condition. Chapter 16.06. Potential conflict. Prima facie a "noisy withdrawal" would constitute a breach, even if the solicitor ceases to act. "A solicitor is under a duty to keep confidential to his or her firm the affairs of clients and to ensure that the staff do the same." Chapter 16.01. Penalties: Civil penalties and professional disciplinary proceedings. Exceptions to the duty include: 1. the solicitor is being: "used by the client to facilitate the commission of a crime or fraud, because that is not within the scope of a professional retainer." 16.02.01. If the material violation were a crime or fraud by the company, this exception would usually not apply to allow disclosure under the Proposed Rule given that the solicitor himself would not usually be used to facilitate the crime but would only become aware of the crime in the course of his acting on an independent matter. 2. the client has given his express consent to the disclosure. 3. the disclosure is necessary to prevent the client or a third party committing a criminal act that the solicitor believes on reasonable grounds is likely to result in serious bodily harm. 4. there are exceptional circumstances involving children, including physical abuse. 5. the disclosure relates to an act of terrorism. 6. a court order is made for disclosure of the information. 7. under Chapter 16.02.12: "A solicitor may reveal confidential information concerning a client to the extent that it is reasonably necessary to establish a defence to a criminal charge or civil claim by the client against the solicitor, or where the solicitor's conduct is under investigation by the Office for the Supervision of Solicitors, or under consideration by the Solicitors Disciplinary Tribunal." 8. Under legislation relating to money laundering, a solicitor would have immunity for reporting known or suspected money laundering to law enforcement agencies. Chapter 16.07.4.
Germany No conflict. Reporting evidence of possible misconduct within the client's organization does not affect the attorney-client-privilege under German law. It is the corporate entity itself that is the client, not any persons acting on behalf of such entity. Potential conflict. If an attorney learns of material misconduct within the client's organization which is not properly addressed by the respective officers he will have to withdraw from representation, if continuance of representation might result in assisting the client or even participating in unlawful conduct. The termination of the client relationship leaves the duty to maintain confidentiality unaffected. The duty to report the termination to the Commission may be regarded as a breach of confidentiality, if the Commission had previously not been informed that the attorney had been retained by the issuer, since the mere retainer of an attorney is already subject to confidentiality. Furthermore, if a lawyer declared that certain filings made on behalf of the client were false or materially misleading this would inevitably imply that the lawyer discloses confidential information. Thus an attorney is not authorized to repeal his or her previous statements without the client's consent regardless whether representation has been terminated or not. (e.g. if during a client-attorney-relationship a client prevents an attorney from correcting false statements previously made, the attorney would withdraw from representation). Penalties: Criminal: imprisonment for not more than one year or a fine of no more than e1,800,000. Sec. 203 of the German Criminal Code Strafgesetzbuch (StGB) "The attorney may disclose confidential information (i) in case this is deemed inevitable to enforce a claim for fees, (ii) for the purpose of defense against a claim brought by the client, (iii) for the purpose of self-defense (against criminal actions or actions alleging professional misconduct) or (iv) to prevent the commission of a very serious crime as defined in sec. 138 Criminal Code Strafgesetzbuch (StGB) and according to money laundering laws." Section 2(3) Berufsordnung fuer Rechtsanwaelte (BORA).
France No conflict. We are not aware of any direct conflict under French rules with the "up the ladder" reporting requirements, assuming that the persons a French lawyer would speak with in reporting up the ladder are authorized to represent the company, i.e. that such persons are corporate officers or duly empowered persons. However, if the by-laws or a statutory regulation designate a specific body of the company as the competent body to report to, the French lawyer should then refer to that body. If such a body does not react, it is not up to the lawyer to go a further step up the ladder. Potential conflict. There are serious problems with disclosure of confidential client information - currently, it is both a criminal violation and a failure of professional obligations for a lawyer to breach the duty of client confidentiality. This would include discussing aspects of the attorney-client relationship, such as withdrawal of representation, with a third party. Penalties: Criminal: one year imprisonment and a e15,000 fine. Article L.226-13 of the French Criminal Code. It is clear that under current rules of the bar and French law, there is only one exception to the rule of client confidentiality: a disciplinary hearing in which the avocat is called upon to defend his actions before a disciplinary committee composed exclusively of avocats. There is no other exception since the rule of client confidentiality is a rule of public order (ordre public) (i.e. even if the client waives the confidentiality owed to him by the lawyer, the lawyer is still prohibited from disclosing client confidences).
Italy No conflict. Under Italian law, there is no specific rule in this regard. It can be assumed that the corporation, not the officers or the directors, is the client. As a general rule under the current "Codice Deontologico Forense" ("CDF"), the Italian professional code of conduct, attorneys are required to fulfill their professional obligations with "due care" and "in the best possible way," in compliance with the law and their ethical duties. They should refrain from suggesting any illegal or fraudulent action and should clearly notify their client of the actions that are necessary to prevent a prejudice being suffered by the client. Given the broad scope of these professional rules, it might be argued that attorneys are allowed to report to the company's authorized representatives or competent corporate bodies, in order to fulfill "in the best possible way" their ethical obligations. Potential conflict. According to the CDF, attorneys must refuse to represent a client where they can infer, from the information that they have, that their legal assistance will be used to carry out illegal activity (CDF Art. 36). Furthermore, as a general rule, Italian attorneys may always terminate the attorney-client relationship provided that they give the client a reasonable notice and furnish the client with all necessary information in order to not jeopardize their legal defense (CDF Art. 47). However, the obligation to report the withdrawal to the Commission might be deemed a breach of the attorney's duty to preserve confidences and secrets, as the scope of the confidentiality duty imposed by the CDF is very broad. One of the exceptions to this obligation concerns the case in which the disclosure of confidential information is necessary to prevent the client from committing an "extremely serious crime." Yet, there may be situations in which an Italian attorney's obligations under the Proposed Rule are incompatible with the attorney's obligations under the Italian CDF to the extent a "material violation" of the US securities laws is not deemed to constitute an "extremely serious crime" under Italian laws. Arguably, in the case of termination of an attorney's assistance, the report of such termination to the Commission might be deemed a violation of the attorney's duty of fìdelity ("dovere di fedeltà" in art. 7 of the CDF) which prohibits actions which are "contrary to the interests of the client." Penalties: According to the CDF, sanctions shall be those applied by the disciplinary bodies after assessing the materiality of the violation of the professional rules and all the circumstances that caused the violation itself. The general duty to keep client confidences is subject to only four exceptions: 1. when disclosure is required to provide the legal assistance, 2. to prevent the client from committing an extremely serious crime, 3. to allege facts in an attorney-client controversy, or 4. in a proceeding concerning the performance of the legal defense. However, confidential information should be revealed to the extent it is strictly necessary to accomplish the above-mentioned goals. CDF, Article 9.
The Netherlands No conflict. There is no Dutch rule prohibiting an attorney from referring a difference of opinion with his primary contact to a higher level if he feels his primary contact is taking a decision in violation of the law. Nor is there currently a specific written rule that would require the attorney to do so. On the contrary, it may well be argued that an attorney would be required under Dutch bar rules to bring such issues to the attention of higher ranked officials or board members as a part of his general obligation to diligently execute his duties. Therefore, there seems to be no direct conflict between the "up the ladder" reporting requirements and Dutch regulation of the legal profession. Potential conflict. "Whenever an advocate decides to resign from an engagement entrusted to him/her, he/she should do so in a careful manner and see to it that the client experiences as few drawbacks as possible." Rule 9(3) of the Dutch code of conduct for attorneys (Gedragsregels). "A lawyer shall not be entitled to exercise his right to withdraw from a case in such a way or in such circumstances that the client may be unable to find other legal assistance in time to prevent prejudice being suffered by the client." European bar rules (rule 3.1.4). The "noisy withdrawal" conflicts directly with the requirement to terminate the engagement "carefully." Also, the "noisy withdrawal" requirement to alert the authorities and the investors to an alleged violation of the issuer, aims to achieve the opposite of the bar rules quoted above, which is to minimize the drawbacks or prejudice to the issuer. Penalties: Civil liability, professional sanctions (including warning, suspension, disbarment), and criminal sanctions (maximum detention of one year or a monetary penalty of e11,800). One exception is where the client has consented to the disclosure and disclosure is in the best interests of the client (or, as the bar rules put it, "called for in the proper performance of the task"). Otherwise an attorney could not use the information provided by his client, e.g. when representing him in court. A client, however, cannot waive confidentiality. Another exception is where it concerns a conflict between the client and the attorney. The attorney would not be able to defend himself against charges brought by the client concerning his services if his client insisted on him maintaining confidentiality. If a client of a Dutch attorney files a complaint with the bar association, the attorney would have to disclose the relevant information to the disciplinary tribunal. Rule 37 - Gedragsregels. Under Dutch law a company has interests of its own, which must be distinguished from the interests of the shareholders. Therefore, the latter exception cannot be extended to or for the benefit of shareholders.
Hong Kong No conflict. The "up the ladder" reporting obligation is neither in conflict with nor specifically provided for under Hong Kong law and professional rules. Potential conflict. A solicitor qualified to practice Hong Kong law has a legal and ethical duty to keep confidential all information concerning the business and affairs of his client acquired in the course of the professional relationship. He must not divulge such information unless disclosure is expressly or impliedly authorized by the client or required by law or unless the client has expressly or impliedly waived the duty. The requirement for an attorney to disaffirm a submission to the Commission which the attorney believes has been tainted by a material violation which is ongoing or prospective, as well as the sharing of confidential information with the Commission, appear to go against the solicitor's duty of confidentiality. Penalties: Civil penalties and professional disciplinary proceedings (possible orders include striking off, suspension from practice and payment of penalties). Hong Kong professional rules provide that a solicitor may in exceptional circumstances breach the duty of confidentiality to the extent of revealing information he believes necessary to prevent a client or another person from committing or continuing a criminal act that he believes on reasonable grounds does involve or is likely to result in the abduction of or serious violence to a person (including child abuse). In such a case, a solicitor must exercise his professional judgment and decide whether there are any other means of preventing the crime and, if not, whether the public interest in protecting persons at risk from serious harm outweighs his duty to his client. Disclosure of confidential information may also be justified in order to recover costs from a client, or in defense of any allegation of malpractice or misconduct, but only to the extent reasonably necessary for such purpose. A solicitor may reveal information which would otherwise be confidential to the extent that it is reasonably necessary to establish a defense to a criminal charge or civil claim against him or his firm or where the solicitor's conduct is under investigation by the Law Society or the Solicitors Disciplinary Tribunal. Please also note that communications made by a client to his solicitor before the commission of a crime or during the commission of a continuing crime for the purpose of being guided or helped in the commission of it are not within the scope of the professional retainer and hence do not fall within the duty of confidentiality.
Singapore No conflict. There is no breach of duty on the part of a Singapore lawyer reporting "up the ladder" where the reporting is internal to the lawyer's client and made to a director or officer of sufficient seniority within the organization, such as a Chief Legal Officer. Potential conflict. Rule 24 of the Legal Profession Professional Conduct Rules prohibits disclosures outside the client unless required by law or court order. "Law" here must mean Singapore law, and there is no requirement in Singapore law for any "noisy withdrawal". Therefore, "noisy withdrawal" would prima facie be a breach of Rule 24 and the ethical duties of confidence imposed by Singapore law. Penalties: Rule 42 permits a lawyer to withdraw from representing a client where "good cause" exists. In addition, Rule 42 obliges an withdrawing lawyer to take reasonable care to avoid foreseeable harm to the client by reason of his withdrawal. Therefore, a lawyer who makes a "noisy withdrawal" in compliance with the Proposed Rule in good faith but negligently and thereby causes harm to the client runs the risk of professional sanction under Rule 42 and perhaps even civil liability. There are provisions of Singapore law which require reporting of certain criminal offences, but those are confined principally to offences of violence and it is unlikely that any of the conduct covered by the Proposed Rule would fall within that obligation.
Brazil No conflict. The main rule governing attorneys' conduct is the Code of Ethics and Discipline (CED) enacted by the Brazilian Bar Association (BBA), which provides for very broad ethical guidelines applicable to lawyers admitted to the BBA. There is a broad ethical duty imposed by the CED to the effect that lawyers should notify the client, in a "clear and unequivocal manner," of the risks involved in the actions taken by such client. Thus, assuming that the client is the corporation, it may be argued that a Brazilian lawyer would have an ethical duty to report his or her suspicions of management malfeasance "up the ladder" to the highest corporate body (in Brazil, the Board of Directors or, in some instances, a Shareholders' Meeting). Potential conflict. The CED requires Brazilian lawyers to keep in confidence all information received by the clients. There are very few exceptions to this rule, and the list of exceptions does not include corporate or management malfeasance. In principle, a Brazilian lawyer's "noisy withdrawal" from a company -- which would in effect be a red flag to a government regulatory body advising of possible misconduct at a regulated entity, and based ultimately on the lawyer's point of view of the situation -- could be considered a breach of the lawyer's confidentiality obligations. Penalties: Civil liability to the client and professional liability in disciplinary proceedings (including warning, suspension, disbarment, sanctions, etc.). "Confidentiality is inherent to the lawyer's profession and shall always be observed, except in cases of severe threats to life and to honor or when the lawyer, after accusations made by his/her own client, needs to disclose confidential information for self-defense purposes, but only to the extent necessary to the defense." Article 25, Chapter 3 of the CED. Note that "life-threatening" and "honor-threatening" situations are terms of art and refer to violent crimes, including manslaughter, murder, inducement to suicide and crimes such as defamation, libel or slander. Fraud, conspiracy, white-collar crimes and securities violations are not included in the list of crimes against the life or honor, and thus should not be deemed exceptions to lawyers' confidentiality duties.

1 The phrase "jurisdiction of qualification," when used in this letter, should also be read to include jurisdiction of practice, on the basis that some attorneys practice in a different jurisdiction than that in which they are qualified and may therefore be subject to the rules of both jurisdictions.
2 We also note that, to the extent US attorneys practice in certain jurisdictions outside the United States, they may face similar conflict positions as a result of the Proposed Rule.
3 As an alternative to exempting non-US attorneys from the "noisy withdrawal" and disaffirmation requirements, the Commission could, consistent with the approach set forth in A.1 above, exempt non-US attorneys from such requirements to the extent such requirements conflict with the requirements of the non-US attorney's jurisdiction of qualification.