(BrianAJackson/ iStockphoto)

A nine-year-old Securities and Exchange Commission rule that allows—but does not compel—attorneys to share confidential client information with the agency has troubled some lawyers since it was adopted. But Keith Paul Bishop, a partner at Allen Matkins Leck Gamble Mallory & Natsis, says a single line contained in a recent SEC court filing may make those lawyers feel better.

The SEC filed an amicus brief last week in a whistleblower case, Liu Meng-Lin v. Siemens AG, in which it argued that public companies should report material violations of securities laws or any breach of fiduciary duty. But Bishop points to the agency’s acknowledgement that voluntary reporting to the SEC may be precluded by attorneys’ “ethical obligations to their clients.”

Although the 2003 SEC rule in question technically permits but does not require disclosure, major conflicts have arisen at the state level, where state ethics codes call for strict confidentiality. In California, for example, California Business and Professions Code calls on attorneys “to maintain inviolate the confidence, and at every peril to himself or herself preserve the secrets, of his or her client,” clearly conflicting with the immunity afforded attorneys by the SEC rules, as Bishop writes in Allen Matkins’ California corporate and securities law blog.

The SEC has all along maintained that its rules should take precedence over conflicting state laws, which makes the line in last week’s amicus brief all the more noteworthy, according to Bishop.