The Law Society of England and Wales

Your ref: S7-45-02

Jonathan G.Katz
US Securities and Exchange Commission
450 Fifth Street NW
Washington DC

7 April 2003

Dear Mr Katz

File No: S7-45-02: Comments on Alternative Proposal of Part 205.3(d)

The Law Society of England and Wales (`The Law Society') is grateful to the Securities and Exchange Commission (SEC) for giving it the opportunity to comment on the alternative proposal to the `Noisy Withdrawal' provisions. As set out in our previous correspondence, the Law Society is approaching the SEC's proposed rulemaking from its position as a professional body, responsible for the regulation of over 85,000 English and Welsh solicitors.

I would first like to record our thanks to the SEC for inviting the Law Society to the hearing on the attorney conduct rule in December and for taking on board the points that we and others made both at this meeting and in our written correspondence (my letter to you of 12 December).

Secondly, I would like to emphasise our full support for the objectives underlying the Sarbanes-Oxley Act and for the SEC's role in translating this Act into practice. The Law Society is committed to sound corporate governance and to the protection of the consumer/investor and the wider public interest.

I would like to record the Law Society's support for the alternative proposal to `noisy withdrawal' on which the SEC is currently consulting. We have already put on record our concerns with the original proposal, which I will not reiterate here.

On the alternative proposal, I would simply wish to record the following points:

We have no objection to the proposal that an English solicitor should withdraw from representing an issuer that has committed a violation under SEC rules and failed to respond appropriately when this has been drawn to its attention. As we set out in our previous response, the Law Society's rules of professional conduct would require an English Solicitor to withdraw if he believed his client was in danger of committing an illegal course of action and if he had failed to prevent his client from doing so. There is nothing in our rules or in statutory provisions governing lawyers in England and Wales that would create difficulties if an issuer were required to notify the SEC that their lawyer had withdrawn.

We are also satisfied that, under our rules, an in-house lawyer has fulfilled his or her duty by first drawing to the attention of his or her employer the possibility of a material violation in securities law and then, if necessary, ceasing to act in the matter. In British corporate governance rules, responsibility for the conduct of a company is ultimately vested in the Board of Directors and this is where we would like to see responsibility lie both for outward and `up-the-ladder' reporting of possible violations. Further developments in UK corporate governance are likely to lay event greater weight in future on the independent oversight function of the Board and of non-executive directors in particular. We strongly believe that improving internal governance through a more independent Board is the most effective way to ensure investor protection, rather than by creating a stronger policing function for lawyers, which may perversely simply reduce the level of communication between lawyers and their clients. We would therefore support the suggestion that the Board must take the ultimate decision on whether and when it is necessary to notify the SEC of an attorney's withdrawal if it has taken remedial action to correct the violation.

Lastly, on a small point, the proposal that issuers should disclose an attorney's written notice of withdrawal within two business days of that notice through amendments to forms 8-K, 20-F and 40-F seems to us to be an unrealistically tight deadline. We would question whether this is the appropriate use of a form like a 20-F, although it is largely for those who complete these forms to comment on this aspect of the proposal.

I would like to thank you again for giving us the opportunity to comment on this revised proposal. Finally, I would like to inform you that the Law Society of England and Wales intends to issue guidance to solicitors in due course to assist them in applying the SEC's rules on attorney conduct. We will send a copy of this guidance to you when it is ready.

Yours sincerely,

Carolyn Kirby
President of the Law Society