ÿWPCí* îwž/ÖhºÚª@ã"¨ÁÆìaøª¯üãç¹›kªöÙ@`0–Š.Mö¦×A}$"Ó®ìkmd„@©urÖ˃á¬÷Þìð¶YË„õƒßÔ”_J9èþZxþôdÒY ôÛ:óðs‘ÛaÚ±¦…pÜP¿õ9×óÕPï o…2’A eáòÝ>*v•<Í2*W` l*l eƒôáá/Ósgºó¢Î¶#¡¼ßS…áñį}Qéù™]^™:NyÊ÷±Œ‰W!þ[*6©Àt4ðl ¢»v)jÖ´÷Yi„¡Ëú …ÄË4¥i²ôíûß4¤„5GŠì‘Ü£š¤õkojmôëGd\O»*Ýkº–µij šÒÿWBäåüâ€Û¤#lª¬r_&ke‡¤”Þ»+6T¾Ø䃴/ýîX¿ìú‹²p6§†­îx´W ºqfö¡„}-„P{v‡ž·m@KõMåÐH²1Þ õàÉ9û§a7H¢ɦH÷qÛÿ"îùMÈhI§_¸ÚÝ-AÓ¦áJ íº²ä¢F½Çù>7$ù@ ÎÇsý4KýU4¡§†rS8üâHÌn²ýZó$×n¼òÅäú$Vû¥âé„*U(EX#ÁÐU%@‘ %Ñ 0~×^ U wa 4e y ˆ mŠ Ø¡ 0 Ây 0 D;ýá|Ú]Ï7INO 0NQQQ.Ÿ Íjí xW$W$W$W$W$W$W$W$W$W$W$Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï)Ï) BÐ*˜HP LaserJet 2100 Series PCL 60)#Iì Z‹(CG Times Regular»(V¬µ$¡¡Ñ  ÑÓ  ÓÔ€»°ó»»»ÔÔ€¼°ó»»»°óÔ¢Ž˜- j„-YFILESLi†3|x ÿU‹ÿÀÀÀ ÎÝ ƒ ¹3$ÝÓ  ÓÔ€»Îé»»»ÔÔ€¼Îé»»»ÎéÔà  àòòÚ  Ú1Ú  ÚóóÝ  ÝÔ_ÔÔ‡X¸’X»¼ÎéÔòòCfóó.€The€ð ðÔ_ÔMcDadeÔ_Ô€Act,ðð€28€U.S.C.€ðð€530B€(ð ðan€attorney€for€the€Government€shall€beÐ ° Ðsubject€to€State€laws€and€rules,€and€local€Federal€court€rules,€governing€attorneys€in€each€stateÐ  ð Ðwhere€such€attorney€engages€in€that€attorneyððs€duties,€to€the€same€extent€and€in€the€same€mannerÐ à Ðas€other€attorneys€in€that€Stateðð);€òòU.S.€ex€rel.€Ô_ÔOððKeefeÔ_Ô€v.€McDonnell€Douglas€Corp.óó,€132€F.3dÐ €Ð Ð1252,€1257€(8òòthóó€Cir.€1998)€(invalidating€a€regulation€of€the€United€States€Attorney€GeneralÐ pÀ Ðpurporting€to€preempt€state€ethics€rules€for€government€lawyers€in€certain€situations,€holding€thatÐ ` ° Ðnothing€in€the€federal€statutes€ð ðexpressly€or€impliedly€gives€the€Attorney€General€the€authority€toÐ P   Ðexempt€lawyers€representing€the€United€States€from€the€local€rules€of€ethics€which€bind€all€otherÐ @  Ðlawyers...ðð).(r(3¹3$¤¤Ý ƒ¬µ!ÝÑ  ÑÓ  ÓÔ€»GÚ»»»ÔÔ€¼GÚ»»»GÚÔÝ  Ýà  àòòÚ  Ú0Ú  Úóó(#Ã$òòÚ  Ú0Ú  Úóó óÝ ƒ ¹3$ÝÓ  ÓÔ€»Îé»»»ÔÔ€¼Îé»»»ÎéÔà  àòòÚ  Ú2Ú  ÚóóÝ  ÝÔ_ÔÔ‡X¸’X»¼ÎéÔ17€Ô_ÔC.F.R.Ô_Ô€ðð€201.102. ×Ý ƒ ¹3$ÝÓ  ÓÔ€»Îé»»»ÔÔ€¼Îé»»»ÎéÔà  àòòÚ  Ú3Ú  ÚóóÝ  ÝÔ_ÔÔ‡X¸’X»¼ÎéÔU.S.€Const.€art.€VI,€cl.€2. ÐÝ ƒ ¹3$ÝÓ  ÓÔ€»Îé»»»ÔÔ€¼Îé»»»ÎéÔà  àòòÚ  Ú4Ú  ÚóóÝ  ÝÔ_ÔÔ‡X¸’X»¼ÎéÔ15€U.S.C.€ðð€7245. ÅÝ ƒ ¹3$ÝÓ  ÓÔ€»Îé»»»ÔÔ€¼Îé»»»ÎéÔà  àòòÚ  Ú5Ú  ÚóóÝ  ÝÔ_ÔòòÔ‡X¸’X»¼ÎéÔId.óó ?Ý ƒ ¹3$ÝÓ  ÓÔ€»Îé»»»ÔÔ€¼Îé»»»ÎéÔà  àòòÚ  Ú6Ú  ÚóóÝ  ÝÔ_ÔÔ‡X¸’X»¼ÎéÔSee€the€following€exchange€in€the€floor€debate:Ð ° ÐÌà8  à€€€€€Mr.€Ô_ÔSARBANESÔ_Ô.€...€It€is€my€understanding€that€this€amendment,€which€placesÐ à Ðresponsibility€upon€the€lawyer€for€the€corporation€to€report€up€the€ladder,€onlyÐ €Ð Ðinvolves€going€up€within€the€corporate€structure.€€He€doesnððt€go€outside€of€theÐ pÀ Ðcorporate€structure.€€So€the€lawyer€would€first€go€to€the€chief€legal€officer,€or€theÐ ` ° Ðchief€executive€officer,€and€if€he€didnððt€get€an€appropriate€response,€he€would€goÐ P   Ðto€the€board€of€directors.€€Is€that€correct?à8@3Ð Ð àÐ @  ÐÌà8  à€€€€€Mr.€EDWARDS.€€Mr.€President,€my€response€to€the€question€is€the€onlyÐ  p  Ðobligation€that€this€amendment€creates€is€the€obligation€to€report€to€the€client,Ð `  Ðwhich€begins€with€the€chief€legal€officer,€and,€if€that€is€unsuccessful,€then€to€theÐ P  Ðboard€of€the€corporation.€€òòThere€is€no€obligation€to€report€anything€outside€theÐ ð@  Ðclientð!ðthe€corporation.óóÐà0 Ð Ð  ÐÌà8  à€€€€€Mr.€Ô_ÔSARBANESÔ_Ô.€€I€think€that€is€an€important€point.€€I€simply€asked€theÐ À Ðquestion€in€order€to€stress€the€fact€that€Ô_ÔthatÔ_Ô€is€the€way€this€amendment€works.€€ThisÐ ° Ðhas€been€a€very€carefully€worked€out€amendment.€...РðÐ Ð  ÐÐ à  ÐÓÓSee€148€Cong.€Rec.€S6524„02€(daily€ed.€July€10,€2002)€(emphasis€added).(ÍO$——ÔÿÔòòóóÔÿÔ $Ñ  ÑÑ  ÑÑ ° Ñ Ý ƒ ¹3$ÝÓ  ÓÔ€»Îé»»»ÔÔ€¼Îé»»»ÎéÔà  àòòÚ  Ú8Ú  ÚóóÝ  ÝÔ_ÔÔ‡X¸’X»¼ÎéÔSee€Model€Rules€of€Ô_ÔProfððlÔ_Ô€Conduct€R.€1.6€Ô_ÔcmtÔ_Ô.€[14]:Ð ° Ðà0  à€€€€€If€the€lawyerððs€services€will€be€used€by€the€client€in€materially€furthering€a€course€ofÐ  ð Ðcriminal€or€fraudulent€conduct,€the€lawyer€must€withdraw,€as€stated€in€Rule€1.16(a)(1).€Ð à ÐAfter€withdrawal€the€lawyer€is€required€to€refrain€from€making€disclosure€of€the€clientððsÐ €Ð Ðconfidences,€except€as€otherwise€permitted€by€Rule€1.6.€€òòNeither€this€Rule€nor€Rule€1.8(b)Ð pÀ Ðnor€Rule€1.16(d)€prevents€the€lawyer€from€giving€notice€of€the€fact€of€withdrawal,€and€theÐ ` ° Ðlawyer€may€also€withdraw€or€Ô_ÔdisaffirmÔ_Ô€any€opinion,€document,€affirmation,€or€the€like.óó€Ð P   ÐWhere€the€client€is€an€organization,€the€lawyer€may€be€in€doubt€whether€contemplatedÐ @  Ðconduct€will€actually€be€carried€out€by€the€organization.€€Where€necessary€to€guide€conductÐ 0 € Ðin€connection€with€this€Rule,€the€lawyer€may€make€inquiry€within€the€organization€asÐ  p  Ðindicated€in€Rule€1.13(b).Ð` (#(# Ð(Emphasis€supplied).€€See€also€€R.€1.2€Ô_ÔcmtÔ_Ô.€[10]€and€R.€4.1€Ô_ÔcmtÔ_Ô.€[3]. `Ý ƒ ¹3$ÝÓ  ÓÔ€»Îé»»»ÔÔ€¼Îé»»»ÎéÔà  àòòÚ  Ú9Ú  ÚóóÝ  ÝÔ_ÔÔ€X¸’X»¼ÎéÔWe€also€note€that€the€proposed€rules€cover€other€areas€traditionally€provided€forÐ ° Ðadequately€in€the€Model€Rules€and€in€state€ethics€rules.€€For€example,€the€subject€matter€of€theÐ  ð ÐCommissionððs€proposed€Rule€205.4€(Responsibilities€of€Supervisory€Attorneys)€and€Rule€205.5Ð à Ð(Responsibilities€of€a€Subordinate€Attorney)€is€covered€by€Model€Rules€5.1€(Responsibilities€ofÐ €Ð ÐPartners,€Managers,€and€Supervisory€Lawyers)€€and€5.2€(Responsibilities€of€a€SubordinateÐ pÀ ÐLawyer)€respectively.€€Accordingly,€Commission€action€on€these€rules€should€likewise€beÐ ` ° Ðdeferred. nÝ ƒ ¹3$ÝÓ  ÓÔ€»Îé»»»ÔÔ€¼Îé»»»ÎéÔà  àòòÚ  Ú10Ú  ÚóóÝ  ÝÔ_ÔÔ‡X¸’X»¼ÎéÔòòSeeóó€ð ðDisciplinary€Proceedings€Involving€Professionals€Appearing€or€Practicing€BeforeÐ ° Ðthe€Commission,ðð€Release€No.€33„6783,€53€Fed.€Reg.€26427„01€at€26431€n.30,€1988€WL€278442Ð  ð Ðat€*13€(F.R.)€(July€13,€1988):€ð ðWith€respect€to€attorneys,€the€Commission€generally€has€notÐ à Ðsought€to€develop€or€apply€independent€standards€of€professional€conduct.€€The€great€majority€ofÐ €Ð ÐRule€2(e)€proceedings€against€attorneys€involve€allegations€of€violations€of€the€law€(not€ofÐ pÀ Ðprofessional€standards);€thus,€the€Commission,€as€a€matter€of€policy,€generally€refrains€from€usingÐ ` ° Ðits€administrative€forum€to€conduct€de€novo€determinations€of€the€professional€obligations€ofÐ P   Ðattorneys.ðð€€òòSee€alsoóó€speech€to€the€New€York€County€Lawyersðð€Ô_ÔAssnððnÔ_Ô€by€SEC€General€CounselÐ @  ÐEdward€F.€Greene,€ð ðLawyer€Disciplinary€Proceedings€before€the€Securities€and€ExchangeÐ 0 € ÐCommissionðð€(Jan.€18,€1982),€[1981„1982€Transfer€Binder]€Fed.€Sec.€L.€Rep.€(Ô_ÔCCHÔ_Ô)€ðð€83,089. ÷Ý ƒ ¹3$ÝÓ  ÓÔ€»Îé»»»ÔÔ€¼Îé»»»ÎéÔà  àòòÚ  Ú7Ú  ÚóóÝ  ÝÔ_ÔÔ‡X¸’X»¼ÎéÔ17€Ô_ÔC.F.R.Ô_Ô€ðð€205.2(a)(4). dÝ ƒ¬µ!ÝÑ  ÑÓ  ÓÔ€»Îé»»»ÔÔ€¼Îé»»»ÎéÔÝ  ÝÔ_ÔÑ€Ò ÑÑ8€Îé»ddÈ8ÑÑ  ÑÔ_ÔÔ_ÔÔ_ÔÔ_ÔÐ ° ÐÌÌà@AA"ìàDecember€13,€2002ˆÐ øH ÐÌÌÌÌJonathan€G.€Katz,€SecretaryÐ p À ÐSecurities€and€Exchange€CommissionÐ ˆØ  Ð450€Fifth€Street,€NWÐ  ð  ÐWashington,€DC€20549„0609Ð ¸  ÐÌà  àRE:à0 ` àFile€No.€33„8150.wpÐè8 ` (#` (# ÐÌDear€Mr.€Katz:Ð h ÐÌÓÓà  àThe€Conference€of€Chief€Justices€respectfully€submits€for€consideration€of€theÐ H˜ ÐSecurities€and€Exchange€Commission€these€comments€on€the€proposed€rulesÐ xÈ Ðimplementing€Section€307€of€the€Ô_ÔSarbanesÔ_Ô„Ô_ÔOxleyÔ_Ô€Act.€€The€Conference€isÐ ¨ø Ðtransmitting€these€comments€by€hard€copy€and€electronically.€€The€positions€takenÐ Ø( Ðby€the€Conference€are€solely€those€of€the€Conference€and€are€independent€of€thoseÐ  X Ðof€any€òòóóother€person€or€entity.€€Ð 8"ˆ Ðà@KKìàò òòòPrinciples€of€Federalismóóó óˆÐ h$¸ Ðà  àThe€positions€of€the€Conference€begin€with€the€premise€that€state€supremeÐ ˜&è! Ðâ âcourts€are€traditionally€the€ultimate€authority€for€the€promulgation€and€òòóóenforcementÐ È($!¾ ÐÔ_Ôof€the€regulation€of€lawyers€on€a€day„to„day€basis.׃ ×Ý ƒ #ÃÝòòÚ  Ú1Ú  ÚóóÝ  Ý×  ×€€€The€Conference€recognizes,€ofÐ ° Ðâ âcourse,€that€federal€courts€and€other€tribunals€may€impose€further€requirements€onÐ à0 Ðlawyers€in€their€practice€before€those€tribunals.€€The€Rules€for€Appearance€andÐ  ` ÐPractice€before€the€Commission€are€long„standing€examples.׃ ×Ý ƒ #ÃÝòòÚ  Ú2Ú  ÚóóÝ  Ý×  ×€€The€Conference€alsoÐ @  Ðrecognizes€that€an€Act€of€Congress€expressly€preempting€state€law€is€presumptivelyÐ p À Ðvalid€under€the€Supremacy€Clause׃¸ ×Ý ƒ #ÃÝòòÚ  Ú3Ú  ÚóóÝ  Ý×  ×€within€the€valid€confines€of€the€preemptingÐ  ð  Ðlegislation.Ð Ð  Ðà  àIn€keeping€with€the€principles€that€balance€supremacy€and€federalism,€weÐ P Ðassume€for€present€purposes€the€validity€and€the€underlying€public€interest€of€SectionÐ 0€ Ð307€of€the€Sarbanes„Oxley€Act.׃p ×Ý ƒ #ÃÝòòÚ  Ú4Ú  ÚóóÝ  Ý×  ×€€That€Act€requires€the€Commission€to€adopt€rulesÐ `° Ðð ðsetting€forth€minimum€standards€of€professional€conduct€for€attorneys€appearingÐ à Ðand€practicing€before€the€Commission€in€any€way€in€the€representation€of€issuers,Ð À Ðincluding€a€ruleð"ð(1)€requiring€an€attorney€to€report€evidence€of€a€material€violationÐ ° Ðof€securities€law€or€breach€of€fiduciary€duty€or€similar€violation€by€the€company€orÐ à0 Ðany€agent€thereofðð€within€the€corporation€ð ðup€the€ladder,ðð€as€specified€in€the€Act.׃×Ý ƒ #ÃÝòòÚ  Ú5Ú  ÚóóÝ  Ý×  ׀Р ` ÐÌà@¬ ¬ ìàò òòòAn€ð ðUp€the€Ladderðð€Rule€is€Required€by€the€Actóóó óˆà x àÐ p À Ðà  àThe€ð ðup€the€ladderðð€rule€contemplated€by€the€Act€would€be€a€mandatory€ruleÐ  ð  Ðthat€is€similar,€but€not€identical,€to€Model€Rule€1.13€of€the€Model€Rules€ofÐ Ð  ÐProfessional€Conduct,€versions€of€which€have€been€adopted€by€many€state€supremeÐ P Ðcourts€to€apply€to€lawyers€licensed€to€practice€by€the€respective€states.€€Model€RuleòòÐ 0€ Ðóó1.13€requires,€as€a€matter€of€state€ethics€rules,€that€a€lawyer€for€the€corporationòòÐ `° Ðóóreport€serious€law€violations€ð ðup€the€ladderðð€within€the€corporation.€€Whether€or€notÐ à Ða€mandatory€federal€version€of€Model€Rule€1.13€as€prescribed€by€the€Act€isÐ À Ðnecessary€or€consistent€with€principles€of€federalism€is€not€the€issue.€€Congress€hasÐ ð@ Ðdeemed€such€a€rule€to€be€in€the€public€interest€in€this€limited€area,€and€theÐ  !p ÐConference€does€not€contend€for€purposes€of€these€comments€that€such€aÐ P#  Ðâ âCongressional€policy€determination€is€beyond€the€power€of€the€Congress.Ð €%Ð  Ðà  àWe€submit,€however,€that€the€Act€should€be€read€to€be€òòóóconsistent€withÐ ° Ðâ âprinciples€of€federalism€insofar€as€it€extends€into€the€area€òòóóof€traditional€state€ethicsÐ à0 Ðrules€and€enforcement.€€It€appears€from€the€floor€debate€òòóóin€the€Senate€that€theÐ  ` Ðdrafters€were€targeting€the€need€for€clear€and€mandatory€internaòòóól€reporting€ð ðup€theÐ @  Ðladderðð€within€the€corporation.€€In€the€floor€debate€in€the€Senate,€Senator€SarbanesÐ p À Ðinquired€of€Senator€Edwards,€the€sponsor€of€the€bill€known€as€the€ð ðEdwardsÐ  ð  ÐAmendment,ðð€whether€the€provision€was€limited€to€reporting€within€the€corporation,Ð Ð  Ðand€not€outside.€€Senator€Edwards€confirmed€that€his€amendment,€which€ultimatelyÐ P Ðbecame€Section€307,€applies€only€to€internal€reporting€within€the€corporation€andÐ 0€ Ðdoes€not€require€outside€reporting.׃×Ý ƒ #ÃÝòòÚ  Ú6Ú  ÚóóÝ  Ý×  ×€€Therefore,€the€Conference€has€concluded€thatÐ `° Ðthe€Commission€rules€to€be€promulgated€under€Section€307€should€relate€solely€toÐ ° Ðinternal€reporting€within€the€corporation,€notwithstanding€some€arguably€broaderÐ à0 Ðlanguage€in€the€Act.Ð  ` Ðà@ìàò òòòBreadth€of€the€Proposed€Rulesóóó óˆÐ @  Ðòòà  àóóWe€have€examined€the€proposed€rules€and€comment€that€were€posted€on€theòòÐ p À ÐóóCommissionððs€website€on€November€21,€2002.€€Focusing€on€proposed€Rule€205.3,òòÐ  ð  ÐóóIssuer€as€Client,€we€have€significant€federalism€concerns€with€the€breadth€of€theÐ Ð  Ðproposed€rules.€€These€concerns€are€reinforced€by€the€proposeòòóód€application€toÐ P Ðattorneys€ð ðappearing€and€practicing€before€the€Commissionðð€aòòóós€defined€in€RuleÐ 0€ Ð205.2(a).€€As€we€read€that€definition,€the€reach€of€the€proposed€rules€would€go€wellÐ `° Ðbeyond€actual€appearance€and€practice€before€the€Commission€and€would€includeÐ à Ðlawyers€ð ðparticipating€in€the€process€of€preparingðð€any€writing€that€the€lawyer€hasÐ À Ðreason€to€believe€will€be€ð ðincorporated€into€any€...€document€filed€with€or€submittedÐ ð@ Ðto€the€...€Commission,€or€its€staff....ðð׃%€×Ý ƒ #ÃÝòòÚ  Ú7Ú  ÚóóÝ  Ý×  ×€€The€rule,€therefore,€would€seem€to€coverÐ  !p Ðmany€transactional€lawyers€who€are€also€subject€to€state€ethics€rules.€Ð P#  Ðà  àBecause€of€the€breadth€of€the€proposed€rules,€there€are€federalism€concernsÐ €%Ð  Ðand€concerns€that€lawyers€may€be€subject€to€inconsistent€regulations€at€the€state€andÐ °'#  Ðfederal€levels.€€Moreover,€the€traditional€role€of€the€states€regulators€of€as€lawyerÐ ° Ðethics€is€based€largely€on€the€enforcement€capabilities€of€state€supreme€courts€andÐ à0 Ðtheir€permanent,€professional€disciplinary€counsel.€€Historically,€each€state€has€itsÐ  ` Ðtime„tested€enforcement€apparatus€to€bring€down€wrongdoing€in€thousands€of€casesÐ @  Ðevery€year.€€Effective€regulation€of€lawyer€ethics€requires€the€resources€and€specialÐ p À Ðexpertise€of€state€supreme€courts€and€state€disciplinary€counsel,€which€is€vastlyÐ  ð  Ðdifferent€from€the€securities€market€expertise€and€resources€of€the€Commission.€€ItÐ Ð  Ðwill€be€impracticable,€in€our€view,€to€replicate€this€lawyer€regulatory€regime€of€theÐ P Ðstates€at€the€federal€level.Ð 0€ Ðà@ª ª ìàò òòòProposed€Rules€205.3€(d)€and€(e)óóó óˆÐ `° Ðòòà  àóóWith€respect€to€proposed€Rule€205.3(b),€we€recognize€that€this€rule€isòòÐ à Ðóódesigned€to€implement€the€ð ðup€the€ladderðð€requirement€of€Section€307€of€the€Act.€òòÐ À ÐóóWe€also€recognize€that€proposed€Rule€205.3(c),€providing€the€alternative€internalòòÐ ð@ Ðóóreporting€procedure€through€a€qualified€legal€compliance€committee,€is€a€logicalÐ  !p Ðextension€of€the€mandate€of€Section€307€of€the€Act€to€deal€with€internal€reporting.Ð P#  Ðà  àOur€concerns€center€primarily€on€proposed€Rules€205.3(d)€(the€so„calledÐ €%Ð  Ðmandatory€ð ðnoisy€withdrawalðð€provision)€and€205.3(e)€(the€so„called€permissiveÐ °'#  Ðð ðreporting€outðð€provision).€€The€Conference€does€not€object€to€Ô_ÔcarefullyÐ à)0%" Ðcircumscribed€rules€permitting€ð ðnoisy€withdrawalðð€or€disclosure€of€clientÐ ° Ðinformation€outside€the€corporation€if€implemented€by€state€supreme€court€ethicsÐ à0 Ðrules.€€In€this€comment€letter€we€will€address€first€the€ð ðreporting€outðð€provision€andÐ  ` Ðsecond€the€ð ðnoisy€withdrawalðð€provision.€€Ð @  Ðà  àThe€Conference€has€endorsed€a€proposed€Model€Rule€that€had€beenÐ p À Ðrecommended€by€the€ABA€Ethics€2000€Commission€to€the€ABA€House€of€Delegates,Ð  ð  Ðwhich€recommendation€the€ABA€House€had€rejected€in€August€2001.€€The€EthicsÐ Ð  Ð2000€Commission€proposed€Model€Rules€1.6(b)(2)€and€(3)€that€would€permitð"ðbutÐ P Ðnot€requireð"ða€lawyer€to€disclose€client€information€outside€the€company€ifÐ 0€ Ðdisclosure€is€reasonably€necessary€to€prevent,€mitigate€or€rectify€the€perpetration€ofÐ `° Ða€fraud€or€crime€that€is€reasonably€certain€to€cause€substantial€financial€injury€andÐ à Ðin€furtherance€of€which€the€perpetrator€is€using€the€lawyerððs€services.€€As€set€forthÐ À Ðin€the€following€Resolution,€unanimously€adopted€by€the€Conference€at€its€regularÐ ð@ Ðbusiness€meeting€on€August€1,€2002,€the€Conference€is€squarely€on€record€asÐ  !p Ðadopting€a€more€aggressive€approach€than€the€ABA€House€of€Delegates.€€Thus,€theÐ P#  ÐConference€has€endorsed€a€policy€that€would€permit€the€lawyerð"ðas€a€matter€of€stateÐ €%Ð  Ðethics€rulesð"ðto€disclose€a€clientððs€confidence€under€the€circumstances€stated€in€theÐ °'#  ÐEthics€2000€proposal.Ð à)0%" ÐÓÓà@} } ìàCONFERENCE€OF€CHIEF€JUSTICESˆÐ ° Ðà@``$ìàResolution€35ˆÐ È Ðà@D D ìàIn€Support€of€Rule€1.6(b)(2)€and€1.6(b)(3)€of€Ethics€2000ˆÐ à0 ÐÌà8  àWHEREAS,€there€is€national€concern€for€the€need€to€incorporateÐ  ` Ðintegrity,€public€trust€and€responsibility€in€the€conduct€of€agents€andÐ ( x Ðadvisors€of€corporations€and€other€organizations€in€the€light€of€theÐ @  Ðunexpected€and€traumatic€failures€in€recent€months€of€several€largeÐ X ¨ ÐAmerican€corporations;€and€Ðp ÀÐ Ð  ÐÌà8  àWHEREAS,€the€adoption€by€state€courts€and€by€the€American€BarÐ  ð  ÐAssociation€(ABA)€of€clear€and€firm€ethical€principles€and€Model€RolesÐ ¸  Ðof€Professional€Conduct€governing€the€role€of€lawyers€as€advisors€toÐ Ð  Ðcorporations€will€strengthen€the€publicððs€confidence€in€corporateÐ è8  Ðintegrity;ÐPÐ Ð  ÐÌà8  àNOW,€THEREFORE,€BE€IT€RESOLVED€that€the€Conference€ofÐ 0€ ÐChief€Justices€expresses€its€support€of€the€recommendation€of€the€ABAÐ H˜ ÐCommission€on€Evaluation€of€the€Model€Rules€of€Professional€ConductÐ `° Ð(Ethics€2000)€in€its€Report€401€submitted€to€the€ABA€House€ofÐ xÈ ÐDelegates€with€respect€to€Rule€1.6(b)(2)€rejected€by€the€ABA€House€inÐ à ÐAugust€2001,€that€would€permit€the€lawyer€to€reveal€ð ðinformationÐ ¨ø Ðrelating€to€the€representation€of€a€client€to€the€extent€the€lawyerÐ À Ðreasonably€believes€necessary€to€prevent€the€client€from€committing€aÐ Ø( Ðcrime€or€fraud€that€is€reasonably€certain€to€result€in€substantial€injuryÐ ð@ Ðto€the€financial€interests€or€property€of€another€and€in€furtherance€ofÐ  X Ðwhich€the€client€has€used€or€is€using€the€lawyers€services;ðð€and€Ð !pÐ Ð  ÐÌà8  àBE€IT€FURTHER€RESOLVED€that€the€Conference€likewise€supportsÐ P#  Ðthe€recommendation€of€Ethics€2000€in€its€proposed€Rule€1.6(b)(3)€thatÐ h$¸ Ðwould€similarly€permit€the€lawyer€to€ð ðreveal€information€relating€to€theÐ €%Ð  Ðrepresentation€of€a€client€to€the€extent€the€lawyer€reasonably€believesÐ ˜&è! Ðnecessary€...€to€prevent,€mitigate€or€rectify€substantial€injury€to€theÐ °'#  Ðfinancial€interests€or€property€of€another€that€is€reasonably€certain€toÐ È($! Ðresult€or€has€resulted€from€the€clientððs€commission€of€a€crime€or€fraudÐ à)0%" Ðin€furtherance€of€which€the€client€has€used€the€lawyerððs€services.ððÐø*H&#Ð Ð  ЇÓ,,Óà  àThe€Ethics€2000€proposal,€endorsed€by€the€Conference,€is€consistent€with€theÐ ° Ðethics€rules€currently€in€force€in€41€states.€€State€supreme€courts€are€now€consideringÐ à0 Ðnew€state€ethics€rules€in€light€of€the€Ethics€2000€proposals€and€the€new€Model€RulesÐ  ` Ðadopted€by€the€ABA€House.€€The€endorsement€by€the€Conference€of€the€Ethics€2000Ð @  Ðproposed€permissive€disclosure,€while€not€inconsistent€with€the€CommissionððsÐ p À Ðproposed€rules,€relates€only€to€state€ethics€policy.€€Ð  ð  Ðà  àThe€Commissionððs€proposed€Rule€205.3(e)€would€permit€outside€disclosureÐ Ð  Ðas€a€matter€of€federal€regulation€of€lawyer€ethics.€€We€believe€that€the€outsideÐ P Ðreporting€provision€in€the€proposed€rules€goes€beyond€the€intended€scope€of€SectionÐ 0€ Ð307,€which€targets€only€ð ðup€the€ladderðð€internal€reporting.€€Accordingly,€theÐ `° Ðproposed€rule€permitting€outside€reporting€raises€serious€federalism€issues€thatÐ à Ðconcern€the€Conference.€€Ð À Ðà  àThe€Conference€respectfully€urges€that€the€Commission€defer€promulgatingÐ ð@ Ðrules€that€would€permit€outside€reporting€of€the€corporate€clientððs€confidences€as€aÐ  !p Ðmatter€of€federal€regulation,€and€await€further€developments€by€state€supreme€courtsÐ P#  Ðas€well€as€future€corporate€governance€experiences€to€determine€if€such€federal€rulesÐ €%Ð  Ðâ âare€necessary€or€desirable.Ð °'#  ÐÑÒ Ñâ âÑÑÑ  ÑÑ°°Ñâ âÑ  ÑÔ_Ôà  àThe€same€is€true€with€respect€to€the€ð ðnoisy€withdrawalðð€requirements€in€theÐ ° Ðâ âCommissionððs€proposed€Rule€205.3(d).€€The€ABA€Model€Rules€and€the€ethics€rulesÐ à0 Ðadopted€by€various€state€supreme€courts€permit€a€noisy€withdrawal.׃×Ý ƒ #ÃÝòòÚ  Ú8Ú  ÚóóÝ  Ý×  ×€€The€ruleÐ  ` Ðcurrently€proposed€by€the€Commission€would€go€well€beyond€these€state€ethics€rulesÐ @  Ðand€would€not€only€require€a€noisy€withdrawal€but€also€would€impose€such€a€ruleÐ p À Ðby€federal€regulation.€Ð  ð  Ðà  àLike€the€permissive€ð ðreporting€outðð€requirement€of€proposed€Rule€205.3(e),Ð Ð  Ðwe€respectfully€submit€that€a€mandatory,€federal€ð ðnoisy€withdrawalðð€rule,€asÐ P Ðproposed€in€Rule€205.3(d),€is€beyond€the€intended€scope€of€the€Act€and€isÐ 0€ Ðâ âinconsistent€with€principles€of€federalism.€€Accordingly,€we€urge€the€CommissionÐ `° Ðto€defer€taking€any€such€steps€on€the€proposed€ð ðnoisy€withdrawalðð€rule€as€well€as€Ð ° Ðthe€proposed€reporting€out€rule.׃×Ý ƒ #ÃÝòòÚ  Ú9Ú  ÚóóÝ  Ý×  ×Ð à0 Ðâ âà@¬¬ìàò òòòHistoric€Commission€Policyóóó óˆÐ  ` Ðà  àIn€our€view,€the€expansive€approach€now€proposed€by€the€Commission€for€theÐ @  Ðregulation€of€the€ethics€of€lawyers,€as€set€forth€in€these€proposed€rules,€is€radicallyÐ p À Ðinconsistent€not€only€with€principles€of€federalism€but€also€with€historic€CommissionÐ  ð  Ðpolicy.׃ ×Ý ƒ #ÃÝòòÚ  Ú10Ú  ÚóóÝ  Ý×  ×€€This€traditional€policy€of€the€Commission€has€not€been€overturned€by€theÐ Ð  ÐAct,€which€was€intended€to€require€only€a€mandatory€ð ðup€the€ladderðð€rule.€Ð P ÐAccordingly,€it€would€be€consistent€with€the€traditional€approach€of€the€CommissionÐ 0€ Ðto€defer€further€consideration€of€these€proposed€rules.Ð `° Їà@? ? ìàò òòòComments€on€State€Disciplinary€Enforcementóóó óˆÐ ° Ðà  àFinally,€the€Conference€is€concerned€about€suggestions€that€have€appeared€inÐ à0 Ðthe€debate€on€the€Senate€floor€on€the€Edwards€Amendment€and€in€Chairman€PittððsÐ  ` ÐAugust€12,€2002€speech€to€the€ABA€Section€of€Business€Law€to€the€effect€that€inÐ @  Ðsome€instances€state€disciplinary€enforcement€of€SEC€ethics€referrals€has€beenÐ p À Ðlacking.€€The€Conference€respectfully€requests€that€the€Commission€advise€it€of€anyÐ  ð  Ðspecific€instances€of€such€a€lack€of€enforcement.€€If€there€are€specific€instances,€theÐ Ð  ÐConference€will€immediately€urge€the€chief€justice€of€any€such€state€to€take€whateverÐ P Ðsteps€may€be€reasonably€required€in€that€state€promptly€to€investigate€and,€ifÐ 0€ Ðnecessary,€to€correct€any€such€instances.€€The€Conference€would€also€request€allÐ `° Ðchief€justices€to€ensure€that€prompt€action€is€taken€on€any€future€CommissionÐ à Ðreferrals.€Ð À Ðà  àThe€Conference€appreciates€the€opportunity€to€comment€on€the€proposed€rulesÐ ð@ Ðand€we€stand€ready€to€follow€up€or€to€answer€any€questions.Ð  !p Ðà  àà ` àà ¸ àà  àà h àVery€truly€yours,Ð P#  ÐÌÓÓà  àà ` àà ¸ àà  àà h àS/Judith€S.€KayeÐ °'#  Ðà  àà ` àà ¸ àà  àà h àPresident