In-House Lawyers Settle SEC Suit for Failing to Disclose Material Info
Two in-house lawyers settled an SEC civil action claiming various violations of federal securities laws for failing to disclose material transactions in a proxy statement and insider filings. According to the SEC complaint, the lawyers, the GC and Associate GC at Enron, knew of related party transactions but did not include material disclosures in the proxy statement. The lawyers were also charged with failing to disclose insider stock sales in applicable Section 16 filings. Each lawyer agreed to pay a penalty of $25,000 and agreed to an order suspending practice before the Commission for two years.
OUR TAKE: The SEC has made the point that in-house counsel (and in some cases, outside counsel) and compliance professionals must ensure their clients’ compliance with securities laws. If not, they risk a direct lawsuit from the SEC. Where this leaves privilege for in-house lawyers is unclear.