Illinois State Bar Association
December 18, 2002
Mr. Jonathan G. Katz, Secretary
Re: Illinois State Bar Association Position on Proposed changes to 17 CFR Part 205
Dear Mr. Katz:
The Illinois State Bar Association opposes adoption of Proposed Part 205 as an overbroad interpretation of the mandate from Congress in Section 307 of the Sarbanes-Oxley Act of 2002 (15 USC 7201, et seq.). While there are many objectionable aspects of the proposed rule, ISBA will limit its comments to the overreaching. The Rule as proposed is unresponsive to the directive in that it expands the jurisdiction of the Securities and Exchange Commission (SEC) beyond "attorneys appearing and practicing before the Commission."
ISBA acknowledges the authority of the SEC to discipline attorneys who appear and practice before it and the concomitant ability to make rules regulating such practice. However, neither the SEC nor Congress has the authority to regulate the conduct of attorneys outside the context of the SEC. Rather, the SEC is not the exclusive player in the field of attorney discipline. If an attorney with a license from Illinois is believed to have participated in any misconduct---regardless of whether the attorney appears and practices before the SEC-- the attorney may be subject to discipline by the Illinois Supreme Court. The United States Supreme Court still recognizes the states as the primary authority in attorney licensure and discipline. While the SEC sanction may limit an attorney's career, the Illinois Supreme Court may end it.
It is in the definition of "appearing and practicing before" that the Commission exceeds any rational authority. The release's characterization of the definition as "broad" is an understatement. Under this definition--particularly where it relates to preparation or drafting of documents for signatures of others and for transactions that may not, on their face or at the time of preparation be connection to subsequent SEC-related matters, attorneys in non-SEC disciplines, or junior attorneys uninvolved in the broader transaction, could easily be swept into this broad definitional net. When one considers that most of the attorneys involved in any of the corporate incidents that prompted the Act were directly appearing or practicing, as it would be normally defined, such breadth appears altogether unnecessary. The Commission's prosecutorial time would be best spent with those who actually and clearly appear and practice before the Commission while leaving the discipline of other attorneys properly with the state disciplinary agencies. The release fails to cite any examples where misconduct by an attorney at the outer reaches of this broad definition of "appearing and practicing" resulted in any consumer injury.
Cc: Robert E. Craghead