The Role of Business Counsel As Compliance Gatekeepers: Toward Understanding and Combatting Reckless Disregard for Legal and Ethical Compliance in Business Entities

22 Pages Posted: 24 Apr 2017 Last revised: 21 Jun 2017

Date Written: July 1, 2017

Abstract

Sometimes, business entity clients and their principals do not seek, accept, or heed the advice of their lawyers. In fact, sometimes, they expressly disregard a lawyer’s instructions on how to proceed. In certain cases, the client expressly rejects the lawyer’s advice. However, some business constituents who take action contrary to the advice of legal counsel may fall out of compliance incrementally over time or signal compliance and yet (paradoxically) act in a noncompliant manner. These seemingly ineffectual varieties of the lawyer/client relationship are frustrating to the lawyer.

This short article aims to explain why representatives of business entities who consider themselves law-abiding and ethical may nevertheless act in contravention of the business’s legal counsel and offers preliminary means of addressing the proffered reasons for these compliance failures. The article does not address willful noncompliance or even willful blindness. Rather, it makes observations about behavior that falls squarely into what the law typically recognizes as recklessness. An apocryphal lawyer-client story relating to insider trading compliance provides foundational context.

Keywords: lawyer-client relationship, professionalism, compliance, legal advice, lawyering, recklessness, insider trading

JEL Classification: G30, K22, K42, L20, M10

Suggested Citation

Heminway, Joan MacLeod, The Role of Business Counsel As Compliance Gatekeepers: Toward Understanding and Combatting Reckless Disregard for Legal and Ethical Compliance in Business Entities (July 1, 2017). Wayne Law Review, Vol. 62, No. 1, 2016; University of Tennessee Legal Studies Research Paper No. 321. Available at SSRN: https://ssrn.com/abstract=2957202

Joan MacLeod Heminway (Contact Author)

University of Tennessee College of Law ( email )

1505 West Cumberland Avenue
Knoxville, TN 37996
United States
865-974-3813 (Phone)
865-974-0681 (Fax)

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