This article addresses the liability of inside attorneys at asset management companies— mutual fund sponsors, investment advisers, broker-dealers, life insurance companies—as gatekeepers under rules of the US Securities and Exchange Commission (Commission or SEC) regarding the conduct of attorneys “appearing” and “practicing” before the Commission within the meaning of those rules.
I. SEC’s Hands-Off Stance
The Commission reserves the right to discipline attorneys appearing and practicing before it, including attorneys acting in the role of gatekeepers. However, the Commission’s disciplining of attorneys appearing and practicing before it raises difficult policy considerations that have long been debated.
On the one hand, the Commission needs to protect its system of securities regulation from nondiligent or incompetent attorneys. Congress has recognized this by mandating the Commission to adopt minimum standards of professional conduct for attorneys. On the other hand, the Commission cannot have the authority to discipline attorneys to the extent that it would cause attorneys to temper their representation of companies.
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Republished with permission by The Investment Lawyer.
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