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| 2002 News and Press Releases |
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HEADLINE ARCHIVED:
SEC's Rules on Up-the-Ladder And Outward Reporting
By: Audrey Strauss
New York Law Journal, Volume 229. January 2, 2003
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EXCERPT: Section 307 of the Sarbanes-Oxley Act created a requirement that the Securities and Exchange Commission promulgate standards of professional conduct for lawyers appearing before the commission, including a rule that lawyers representing public companies must report "up-the-ladder" evidence of material violations of law. [FN1] On Nov. 21, the SEC presented its proposed rule in a 93-page release. [FN2] Public comments on the rule were solicited and due by Dec. 18. The SEC must adopt the final rule by Jan. 26 to meet the deadline set by Sarbanes-Oxley.
Sarbanes-Oxley had specifically required the SEC to promulgate a rule prescribing up-the-ladder reporting, but through the use of the word "including," § 307 had provided room for the SEC to promulgate other standards of professional conduct for lawyers practicing before the commission. The SEC is now proposing to use that room by including in the proposed regulation not only detailed requirements for up-the-ladder reporting, but also requirements under which lawyers would, under certain circumstances, be required to effect "noisy withdrawals" from their representation of public companies by providing notice of their withdrawal to the SEC and by disaffirming documents which they had prepared. This article will briefly review the proposed provisions for noisy withdrawal, summarize comments received on the noisy withdrawal issue and highlight some concerns created by that proposal for lawyers who conduct internal investigations, defend against commission investigations, or litigate on behalf of public companies against the Commission.
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