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How Vigorously Will the SEC Enforce Attorney Up-the-Ladder Reporting Rules? An Analysis of Institutional Constraints, Norms, and Biases

St. John's Legal Studies Research Paper

15 Pages Posted: 27 Dec 2003  

Michael A. Perino

St. John's University School of Law

Date Written: December 1, 2003

Abstract

Section 307 of the Sarbanes-Oxley Act directs the SEC to adopt rules that require attorneys to report evidence of material violations of securities laws or breaches of fiduciary duty to the general counsel or CEO of the company. If those individuals do not respond appropriately to the evidence, the attorney must report the evidence to the audit committee or to another committee comprised solely of outside directors. The SEC adopted the required rules in February 2003. This paper, in commenting on an analysis of these new rules by Professors Susan P. Koniak, Roger C. Cramton and George M. Cohen, examines certain institutional features that may impact the SEC's willingness or ability to enforce the lawyer conduct rules vigorously in the future. This kind of institutional analysis is important because one of the primary justifications for requiring the SEC to promulgate and enforce these rules is the perceived failure of state bar authorities to discipline transactional lawyers. This comment suggests that with respect to enforcing professional responsibility rules, the SEC shares many characteristics with state bar authorities and that it is therefore reasonable to expect a very similar pattern of enforcement. In particular, the paper analyzes the SEC's budget and personnel constraints and the already enormous demands on the SEC's scarce resources. The paper then sketches the potential influence of cultural norms, constraints, and staff incentives at the SEC on future enforcement efforts in this area.

Keywords: Sarbanes-Oxley, Section 307, SEC, up-the-ladder reporting

Suggested Citation

Perino, Michael A., How Vigorously Will the SEC Enforce Attorney Up-the-Ladder Reporting Rules? An Analysis of Institutional Constraints, Norms, and Biases (December 1, 2003). St. John's Legal Studies Research Paper. Available at SSRN: https://ssrn.com/abstract=480502 or http://dx.doi.org/10.2139/ssrn.480502

Michael Perino (Contact Author)

St. John's University School of Law ( email )

8000 Utopia Parkway
Jamaica, NY 11439
United States
718-990-1928 (Phone)
718-591-1855 (Fax)

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