The Law Society of British Columbia
Reply to: Howard R. Berge, Q.C.
Re: Proposed Rules of the US Securities & Exchange Commission:
File No. S7-45-02
The Law Society of British Columbia is the governing body of lawyers in the Province of British Columbia, Canada. It is an institution whose origin dates back to 1869, and which has most recently been continued under the Legal Profession Act, S.B.C. 1998 c. 9. Its membership comprises all persons called to the Bar in British Columbia who remain in good standing pursuant to the Legal Profession Act, and its applicable Rules. The Law Society is governed by the Benchers, being twenty-five members elected by the membership, together with up to six persons who are not members of the Law Society, appointed by the Lieutenant Governor in Council, as well as the Attorney General of the Province as an ex-officio Bencher. Every member of the Law Society is an officer of all Courts in the Province.
The Legal Profession Act requires the Benchers to govern and administer the affairs of the Society and provides that the object and duties of the Society are to uphold and protect the public interest in the administration of justice by, inter alia, preserving and protecting the rights and freedoms of all persons and ensuring the independence, integrity, and honour of its members.
The Law Society is a member of the Federation of Law Societies of Canada (the "Federation"), which is the co-ordinating body of the 14 governing bodies of the legal profession in Canada.
The Law Society is pleased to provide its comments on the US Securities & Exchange Commission (the "Commission") Proposed Rule: Implementation of Professional Standards of Conduct for Attorneys 17 CFR Part 205, 240 and 249 (the "proposed rule") in response to the Commission's invitation for comments. This letter is meant to follow the Federation letter to the Commission dated December 16, 2002, in which the Federation provided its comments on the earlier proposed Rules on the same subject. The Law Society participated in the preparation of and adopted the comments contained in that letter.
1. The Proposed Alternative to the "Noisy Withdrawal" Rule
The alternative to the "noisy withdrawal" rule proposed by the Commission places the burden on the issuer (rather than on a lawyer) to publicly disclose a lawyer's withdrawal or to give written notice that the lawyer did not receive an appropriate response to a report of a material violation. Therefore, while a lawyer may still be required to terminate a retainer, there is no obligation on that lawyer to notify the Commission of the withdrawal nor must the lawyer disaffirm any submission made by the lawyer to the Commission which may be tainted by the violation. This obviates any concern that the lawyer would be required to disclose information to the Commission which would otherwise be protected by solicitor-client privilege or confidentiality.
However, the Law Society is concerned that the alternative proposed by the Commission may still negatively affect the relationship between the lawyer and the client. A requirement on an issuer to notify its regulatory authority that a lawyer has withdrawn for professional reasons may still make the issuer reluctant to confide in its lawyer, or present its lawyer with the full facts of a particular matter, because of the fear of the possible reporting requirement should the lawyer feel compelled to withdraw. To avoid such public disclosure, issuers may be inclined to simply not seek advice from counsel on difficult matters.
Subject to the foregoing, the Law Society favours the alternative to the "noisy withdrawal" rule described by the Commission.
2. The Independence of the Legal Profession
The Law Society still has concerns about the effect of the rules promulgated by the Commission on the independence of the legal profession. As stated in the Federation's letter of December 16, 2002, this is a principle that raises a serious constitutional question in Canada.
It is not clear from the alternative to the "noisy withdrawal" requirement proposed by the Commission whether the Commission believes it should regulate the professional standards which the rules would impose on lawyers. If the Commission means only to regulate issuers who fail to make public disclosure of a lawyer's withdrawal, but will leave it to State Bar Associations (or foreign lawyer regulatory bodies) to investigate and, where appropriate, discipline lawyers whose conduct fails to measure with the standards required, then the independence of the bar is better preserved. If, however, the Commission proposes also to investigate and discipline lawyers who "appear and practise before the Commission" who fail to abide by the standards set by the Commission, then the independence of the bar is substantially compromised.
Despite the fact that the rules purport to exclude many non-U.S. lawyers from the application of the rule, not all such lawyers are excluded from the rule. A number of Canadian lawyers will not fall within the definition of "non-appearing foreign attorney", and such lawyers will still be conducting activities that constitute "appearing and practising before the Commission".
The Law Society believes that the public interest in the administration of the justice system is best protected through a legal system that is independent of the State. The independence of the legal profession is best ensured by having the local regulatory body of the lawyer investigate and, if necessary, sanction the lawyer for unethical or unbecoming activities, rather than leaving such investigation and sanction to a foreign regulatory body whose regulatory expertise is with respect to matters other than the practice of law.
The Law Society would be willing to discuss with the Commission the issues raised in this letter, and would be prepared to discuss the possibility of cooperative efforts to address lawyer misconduct related to the proposed and final rules.