Swiss Bankers Association
Jonathan G. Katz
Basel, 18 December 2002
Proposed Rule on Implementation of Standards of Professional Conduct for
Dear Mr. Katz The Swiss Bankers Association ("SBA") is the leading association of banks in Switzerland. The SBA was founded in 1912 in Basel and today has a membership of just under 400 banks. The Association's membership is comprised of Swiss based institutions as well as non-Swiss institutions that have operations in Switzerland. The SBA functions as both a self-regulatory organization and as a trade association; as such a principle mission of the SBA is to serve in a supervisory role, implementing a system of self regulation among member institutions. In connection with the above referenced proposal, the SBA is aware of the extensive analysis that has been commissioned by the London Investment Banking Association ("LIBA") and aligns itself with the conclusions contained therein. The Security and Exchange Commission's ("SEC")proposal, especially rule 205.3(d), as presently drafted is likely to present irreconcilable conflicts for Swiss Counsel who either practice in-house or for private firms. Swiss in-house counsels are obligated by Art. 319 et seq. of the Swiss Code of Obligations to carefully perform the work assigned to them and loyally safeguard the employer's legitimate interests. The employer may establish general directives and give specific instructions about the execution of the work and the conduct of employees in the company. The employed counsel must in good faith observe such general directives and specific instructions so given to him/her. Furthermore the employee of a bank has to act in compliance with stringent confidentiality rules. If the employee breaches any of his/her employment or confidentiality obligations, he/her can be liable to dismissal, disciplinary proceedings and a claim in damages. Unlike in most other countries, violation of the confidentiality rules constitutes a criminal offence. Prosecution will go against the employee individually and not against the bank as a legal entity and is initiated automatically without formal request by the client. Under Art. 398 of the Swiss Code of Obligations and Art. 12 of the Swiss Attorney Law, Swiss outside counsels are obligated to perform their mandate carefully and faithfully. A Swiss counsel must act in the best interest of his/her client. Art. 13 of the Swiss Attorney Law requires that all information entrusted to the counsel by his/her client must be treated as confidential. According to Art. 321 of the Swiss Penal Code it is a criminal offence to disclose any confidential information. Breaching these rules can lead to disbarment, suspension and fines. The proposed reporting procedures do not provide alternatives for non-US counsels practicing outside the US who are prevented by local law from disclosing confidential information. Even Section 205.3(e), which sets out specific circumstances under which a counsel may be authorized to disclose confidential information, provides no relief because it has no bearing on obligations arising under Swiss law. In its present form, the proposal will result in an extra-territorial application of U.S. law that conflicts with the principle that a state should refrain from demanding obedience to its sovereign authority by foreigners with regard to conduct outside its jurisdiction. The Swiss legal requirements described above, which are substantially the same as those that apply in the U.K. make it unfeasible for any Swiss lawyer to comply with the above referenced proposal. The potential conflicts between the proposed rules and Swiss law are substantial. If the proposed requirements were put into effect, Swiss lawyers would be placed in the untenable position of having to choose between complying with Swiss or U.S. law. Because of the similar legal situation in Switzerland we strongly support the position taken by LIBA and respectfully recommend that the proposed rules not be applied to counsel, particularly Swiss counsel, outside of the U.S. who are, subject to Swiss contracts of employment and rigorous standards of professional conduct. Sincerely, Swiss Bankers Association
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