SEC Commissioner Wants PCAOB-like Standards and Structure for Lawyers
SEC Commissioner Allison Herren Lee is advocating for the imposition of lawyer professional standards and supervision analogous to the PCAOB infrastructure for auditors.
Citing the SEC’s obligation to adopt lawyer professional standards under Section 307 of the Sarbanes-Oxley Act, Ms. Lee believes that the SEC should adopt minimum professional standards including (a) a lawyer’s obligation to the corporation and its shareholders and not just the C-suite executives, (b) specific standards for determining materiality, (c) minimum standards of competence and expertise that requires continuing education, (d) a system of firm-level quality control, (e) independence standards, (f) the obligation to investigate red flags, and (g) recordkeeping obligations. Ms. Lee argues that lawyers are overly focused on pleasing the executives that hire them rather than fulfilling their role as securities markets gatekeepers. She asserts that state standards and enforcement are too disparate, inapplicable, and insufficient to properly regulate lawyers practicing in the securities markets. She also maintains that widely applicable standards will help end the practice of lawyers competing for business by parroting what management wants to hear.
If you listen carefully, you can hear the audible gasp of securities lawyers who fear the imposition of standards and direct enforcement cases. “A Securities Lawyer Oversight Board? Preposterous!” they would say. Let’s all stop clutching our pearls and admit that Ms. Lee is right. Most credible securities lawyers do the right thing, and they hate the ambulance chasers that use zealous advocacy as a sword. The auditing standards and the PCAOB saved the accounting profession after the Enron debacle. Let’s clean up the legal profession before it faces its own existential threat.
Read speech here.