The Securities and Exchange Commission has recently reiterated that a key priority remains enforcement actions against attorneys. Historically, such actions were limited to situations in which the attorneys were active participants in corporate fraud. But in an effort to prevent a repeat of the massive frauds that came to light in recent years, the SEC since 2001 has signaled its intention to focus on so-called “gatekeepers,” including investment bankers, outside auditors, underwriters and attorneys.
The SEC believes that in-house lawyers occupy a unique position that allows them to prevent fraud. For that reason, in-house lawyers who know, or should know, that clients are about to engage in fraud have an obligation to prevent that from happening or resign. Accordingly, enforcement actions against attorneys have risen dramatically. Between 1998 and 2001, the SEC initiated only 12 enforcement actions against inside counsel. In 2004-05, it initiated more than 30.
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