SOX (not socks)

[baltassoc]

Has anyone else had the begeezus scared out of them by the upcoming impementation of Sarbanes-Oxley Section 307?

307.
Not later than 180 days after the date of enactment of this
Act, the Commission shall issue rules, in the public interest and
for the protection of investors, setting forth minimum standards
of professional conduct for attorneys appearing and practicing before
the Commission in any way in the representation of issuers,
including a rule—
(1) requiring an attorney to report evidence of a material
violation of securities law or breach of fiduciary duty or similar
violation by the company or any agent thereof, to the chief
legal counsel or the chief executive officer of the company
(or the equivalent thereof); and
(2) if the counsel or officer does not appropriately respond
to the evidence (adopting, as necessary, appropriate remedial
measures or sanctions with respect to the violation), requiring
the attorney to report the evidence to the audit committee
of the board of directors of the issuer or to another committee
of the board of directors comprised solely of directors not
employed directly or indirectly by the issuer, or to the board
of directors.

Has anyone looked into the potential of getting insurance coverage similar to D&O insurance? Any luck?

[taxwonk]

At WEsayso, we set up an Ethics hotline which acts as an ombudsman for any SOX (or any other) ethical issues which come up. We also have an express HR policy which states that retaliation for an ethics inquiry will result in immediate termination of the supervisor/officer. All the same, I'm glad my gig gets me nowhere near an SEC filing.

[purse junkie]

The American Corporate Counsel Association (www.acca.com) has some good materials on Sarbox compliance. And for the excessive "covering my ass"es among you, there are a million seminars around on this lately.

Don't even work for a public company, but figure anal retentive preemptive action never hurts so I've been paying attention.

[baltassoc]

Thanks for the ACCA reference. I was aware of the organization but hadn't thought to look there for information.

Here's a link to the Commissions regulations for reference:

http://www.sec.gov/rules/final/33-8185.htm

What worries me is that civil penalties are impose directly on the attorney for failing to comply, and such investigations are always done with perfect hindsight. If I make a decision as to whether something is okay that the SEC disagrees with, does anyone think the SEC is going to admit my position was nonetheless reasonable?

Fortunately, I rarely do anything that touches an SEC filing either, but one never knows. It seems to be an open question whether it is sufficient to have worked on a part of a document to be responsible for the entire document (for example, drafting a summary of a piece of litigation one is supervising to be included in a 10-Q). Even if one were to prevail on the questions, the attorneys fees alone to mount a defense would be ruinous if they had to be paid for out of the attorney-defendant's pocket. Hence the question about insurance and/or indemnification. I think insurance makes more sense, because the SEC (or a subsequent board) may take the position that indemnification is not allowed.

Wonk: assuming you do such work, or might in that future, how comfortable are you answering securitieswonk's questions about the structure of deals you've reviewed?

Just some thoughts.

[taxwonk]

Originally posted by baltassoc
Thanks for the ACCA reference. I was aware of the organization but hadn't thought to look there for information.

Here's a link to the Commissions regulations for reference:

http://www.sec.gov/rules/final/33-8185.htm

What worries me is that civil penalties are impose directly on the attorney for failing to comply, and such investigations are always done with perfect hindsight. If I make a decision as to whether something is okay that the SEC disagrees with, does anyone think the SEC is going to admit my position was nonetheless reasonable?

Fortunately, I rarely do anything that touches an SEC filing either, but one never knows. It seems to be an open question whether it is sufficient to have worked on a part of a document to be responsible for the entire document (for example, drafting a summary of a piece of litigation one is supervising to be included in a 10-Q). Even if one were to prevail on the questions, the attorneys fees alone to mount a defense would be ruinous if they had to be paid for out of the attorney-defendant's pocket. Hence the question about insurance and/or indemnification. I think insurance makes more sense, because the SEC (or a subsequent board) may take the position that indemnification is not allowed.

Wonk: assuming you do such work, or might in that future, how comfortable are you answering securitieswonk's questions about the structure of deals you've reviewed?

Just some thoughts.

I tend to be pretty tough in reviewing things, and I've turned more conservative over the years as the tax shelter issue has gotten more attention. I guess I'm fairly comfortable, because we have pretty conservative standards.

[purse junkie]

Originally posted by baltassoc
What worries me is that civil penalties are impose directly on the attorney for failing to comply, and such investigations are always done with perfect hindsight. If I make a decision as to whether something is okay that the SEC disagrees with, does anyone think the SEC is going to admit my position was nonetheless reasonable?

Speaking of which, any word on the insurance implications--will existing companies' (or outside counsel firms' ) policies cover these problems if they arise, will companies start making standard Sarbox exclusions and then charge insanely for coverage, or is every counsel seriously in danger of personally getting jacked?

[Penske_Account]

Originally posted by purse junkie
Speaking of which, any word on the insurance implications--will existing companies' (or outside counsel firms' ) policies cover these problems if they arise, will companies start making standard Sarbox exclusions and then charge insanely for coverage, or is every counsel seriously in danger of personally getting jacked?

PJ,

Are you ever going to unretire? [sniff]

[LessinSF]

Originally posted by purse junkie
Speaking of which, any word on the insurance implications ...

As an insurance lawyer, I read the quoted act to mean that a laywer has to report "evidence of a material
violation of securities law or breach of fiduciary duty" to the client or the issuer, with no distinction as to whether that evidence was material or not.

Preliminarily, I am not sure that this will stand judicial scrutiny. Does an attorney have to report every crackpot theory she may hear? That said, I understand that the question relates to the atty's insurance, and:

1) It should be insurable, being that negligent (as opposed to intentional) failures to report such "evidence" appears to be a violation;

(2) As such, a standard E&O polcy (not D&O, unless the attorney is an officer or director, as opposed to outside counsel) should cover it;

(3) Will carriers create exclusions, and then offer an amendatory rider granting limited coverage back?

(4) yes, if they are smart, given the exposure arising out of, um, shall we say, marginally ethical attorneys involved in the corporate scandals of the last 10 years; but

(5) insurance company's aren't generally pre-emptively smart in that way. They will have to get burned first.

LessinDublin

[Hank Chinaski]

Originally Posted by LessinSF

As an insurance lawyer, I read the quoted act to mean that a laywer has to report "evidence of a material
violation of securities law or breach of fiduciary duty" to the client or the issuer, with no distinction as to whether that evidence was material or not.

Preliminarily, I am not sure that this will stand judicial scrutiny. Does an attorney have to report every crackpot theory she may hear? That said, I understand that the question relates to the atty's insurance, and:

1) It should be insurable, being that negligent (as opposed to intentional) failures to report such "evidence" appears to be a violation;

(2) As such, a standard E&O polcy (not D&O, unless the attorney is an officer or director, as opposed to outside counsel) should cover it;

(3) Will carriers create exclusions, and then offer an amendatory rider granting limited coverage back?

(4) yes, if they are smart, given the exposure arising out of, um, shall we say, marginally ethical attorneys involved in the corporate scandals of the last 10 years; but

(5) insurance company's aren't generally pre-emptively smart in that way. They will have to get burned first.

LessinDublin

i took insurance law but haven’t really worked in it- jobs?

[Icky Thump]

Originally Posted by Hank Chinaski

i took insurance law but haven’t really worked in it- jobs?

In response to a years-old neighborhood thread on City-Data, some schmuck posted white supremacist garbage. I reported em. City-data's response? It banned me!.