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Now that a massive restructuring of the accounting industry is at hand, Securities and Exchange Commission Chairman Harvey Pitt served notice Monday to lawyers that they’re next on the agency’s agenda when it comes to closer scrutiny of corporate misconduct. Speaking before the American Bar Association, Pitt challenged lawyers to step up their roles as management watchdogs working on behalf of shareholders. “The crises we’ve been confronting offer unique opportunities as well as difficult responsibilities for corporate lawyers,” Pitt said. “Lawyers for public companies represent the company as a whole and its shareholder-owners, not the managers who hire and fire them. Attorneys must be vigilant in protecting the interests of their true clients.” The SEC, courtesy of recent corporate reform laws embodied in the Sarbanes-Oxley Act that was signed into law by President Bush in July, made explicit the agency’s obligation to regulate lawyers, including promulgating rules for attorney conduct. Principally concerned about an unwelcome infringement on attorney-client privilege, lawyers balk at their new corporate watchdog role. Much like accountants used to, attorneys rely on self-regulation to discipline bad members within their profession. But Pitt said he hasn’t been “impressed or pleased” by the effectiveness of state bar committees when the SEC refers possible disciplinary proceedings to them. Under the new Sarbanes-Oxley Act — named for Senate Banking Committee Chairman Paul Sarbanes, D-Md., and House Financial Services Committee Chairman Michael Oxley, R-Ohio — the SEC must enact requirements that attorneys report evidence of material misconduct to either the appropriate corporate officials, a company’s audit committee or to another independent board group, if not the entire board. “This is uncharted territory for the SEC,” Pitt said. The newly elected president of the American Bar Association, Alfred P. Carlton Jr., agrees. “For the last 200 years, the regulation of lawyers have taken place at the state level. We are obviously in different times now, but I believe it has worked very well,” Carlton told reporters after Pitt’s remarks. “The essence of professionalism is something we’re all concerned about,” Carlton said. “We will study what [Pitt] is proposing.” Copyright �2002 TDD, LLC. All rights reserved.

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