The Isolated Offering, Vol 11, Issue 5
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The Isolated Offering
A Newsletter of The Lebrecht Group, APLC
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| June 15, 2011 |
Volume 11, Number 5
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In This Issue Ethical Standards for Transactional Lawyers
Direct IPO v. Reverse Merger: A Detailed Examination Proposed U.S. Labor Department Rule Would Broaden the Definition of “Fiduciary” Broker-Dealer Know-Your-Customer and Suitability Obligations At-The-Market Offerings: A Flexible and Cost-Effective Way for Listed Companies to Raise Capital Cost Basis – What Does it Mean, and What Do I Have to Do? Is $92 Billion a Year in Stock Trading an “Established Public Market”? Broker-Dealer Due Diligence Responsibilities in Regulation D Offerings
View LinkedIn Profile for Brian A. Lebrecht, Esq. Archived Newsletters 9900 Research Drive 406 W. South Jordan Parkway
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Ethical Standards for Transactional LawyersCompetence, Confidentiality, Privilege, and Work Product Rules of Professional Conduct Any analysis of ethics, confidentiality, and the attorney-client privilege should begin in the applicable rules of professional conduct (the “Rules”). For purposes of this article, I will review the applicable sections of the Utah Rules of Professional Conduct. Lawyers in other jurisdictions should do a similar analysis of their rules. Rule 1.1 – Competence, states that “[a] lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.” The practice of law is increasingly one of specialization, and while I think most of us understand what this means in our core areas of practice, we are often asked to assist a client with something that is slightly outside our area of expertise. The Rules don’t require that a lawyer have special training or prior experience to handle a particular matter, including one with which the lawyer is unfamiliar. The Rules recognize that the required level of competence can be achieved by preparation, study, and/or associating with another lawyer who has the necessary experience. But can a non-tax lawyer competently advise a client on the tax code? Can a lawyer competently prepare a tax return for a client? Can a lawyer with no accounting background advise a client on its revenue recognition policies? The answer, of course, depends on the particular facts and circumstances of the situation. Rule 1.6 - Confidentiality of Information, states that “(a) [a] lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation or the disclosure is permitted by paragraph (b).” (emphasis added). Paragraph (b) lists exceptions to the rule of non-disclosure, including when the lawyer reasonably believes it is necessary to “prevent, mitigate or rectify substantial injury to the financial interests or property of another that is reasonably certain to result or has resulted from the client’s commission of a crime or fraud and in furtherance of which the client has used the lawyer’s services.” I want to first highlight that confidentiality applies to information “relating to the representation of a client.” Is an employment litigation lawyer, hired to defend a wrongful termination lawsuit, obligated to keep confidential information he obtains that is not related to that lawsuit, such as whether or not the client timely filed its corporate tax returns? Second, what is a lawyers obligation if, for example, he is asked to review loan documents on behalf of a client and notices that the client has grossly overstated his income in order to get the loan? Will the financial interests of the lender be harmed, because of a fraud committed by the client, such that the exception to confidentiality described above applies? Other Rules that may apply are Rule 1.7 – Conflict of Interest: Current Clients, Rule 1.8 – Conflict of Interest: Current Clients: Specific Rules, and Rule 1.9 – Duties to Former Client. The full text of these rules is attached. Protecting Privilege When Working with Accountants and Tax Advisors There is a fundamental incompatibility between a lawyer’s duty of confidentiality, and an accountant’s duty of disclosure. [more]
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