December 17, 2002
Via E-Mail: firstname.lastname@example.org
Johnathon G. Katz, Secretary
Re: Limited, but absolutely necessary comments
Dear Mr. Katz:
We are most interested in the development of the new, proposed rules, as they progress to establish new norms of conduct in a very complex arena, that is also part of a very litigious, contentious and "in your face" environment.
Section 307 of the Sarbanes-Oxley Act directs the Commission to establish minimum standards of professional conduct for attorneys appearing and practicing before the Commission in any way in the representation of issuers, which require attorneys to report material violations of the securities laws, breaches of fiduciary duties, or the like to (1) the client's chief legal officer or its CEO, and (2) if appropriate responses do not occur, requiring the attorney to report the evidence to the audit committee or the board.
It appears the Commission has strayed from the mandate, leaving itself open to future attack, by attempting to continue to promulgate rules that are broader, more harsh, and different than the enabling statute permits. Aaron v. SEC. Moreover, many of the provisions of the proposed rule are too broad, contain undefined terms, and fail to differentiate between the very different types of attorney-practitioners it is intended to cover.
In our zeal to be expansive, creative and responsive matinely manner, we had best collectively "stop, look and listen," with our "thinking caps on," before we create an environment that makes the attorney/gatekeeper provisions so unworkable that the entire corporate governance apparatus is mired in lawsuits, bar complaints, and Rule 102 (e) proceedings. In our humble view, as former Enforcement staff attorneys and trial counsel, and practitioners in this field every day for the past five to thirty-five years, we believe the following two items must be further addressed, defined, and otherwise re-thought and re-engineered:
Until the basic problems are unraveled, identified, defined, and evaluated in the separate contexts in which future fact-patterns will arise, the current proposed rule is fatally flawed, and has the potential for creating chaos, not consumer confidence.
The ultimate responsibility for SEC compliance has to stay at, and continue to be the responsibility of the public company issuer and its designated officers, directors and committees. Special rules for other, or outside professionals must, first, recognize that basic tenant. Thereafter, we must carefully dissect the duties and responsibilities of lawyers, as a segment of these "gatekeepers, professionals," in the context of their particular employment duties to their clients.