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In the ongoing stream of high-profile enforcement actions, the Securities and Exchange Commission’s increased focus on lawyers was the most surprising securities law development in 2004. The SEC charged lawyers for rendering inappropriate disclosure advice, failing to tell audit committees or auditors important information, rendering “false and misleading” legal opinions, and, in one instance, coaching witnesses to answer government questions without disclosing particular facts. The SEC also fined companies sums ranging from $7.5 million to $25 million for “failure to cooperate” with SEC investigations — for example, by not making complete and timely document productions, not preserving documents subject to subpoena, reporting incorrectly to the SEC staff the status of the production and availability of certain documents, and engaging in “dilatory tactics.” And the SEC’s director of enforcement has publicly foreshadowed additional enforcement action against individual lawyers involved in internal investigations. In “the old days,” if a lawyer was “acting as a lawyer” and rendering legal advice to his or her client, the SEC generally focused on the decisions made by the client after receiving that advice. The lawyer usually came under scrutiny only if the client asserted a reliance-on-counsel defense. Also in “the old days,” conduct during an investigation would be viewed with a mindful eye toward the defense lawyer’s ethical obligation to zealously assert the client’s position under the rules of the adversary system. If there was obstruction of justice, then, of course, a criminal referral would be made. But missed deadlines and failed good-faith efforts to search for documents were not the subject of public criticism and monetary penalties, even in extreme cases. The SEC has made it clear that these are not “the old days.” Dixie L. Johnson is a partner at Fried, Frank, Harris, Shriver & Jacobson.

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