December 5, 2021

Volume XI, Number 339

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December 03, 2021

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December 02, 2021

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Magistrate Judge Rules SEC’s Attorney-Conduct Rules Preempt State Law

Last December, Chief Magistrate Judge Joseph C. Spero ruled that the SEC’s attorney-conduct rules preempt California’s statutory and professional rules requiring attorneys to maintain inviolate the confidences.  Wadler v. Bio-Rad Laboratories, Inc., 2016 U.S. Dist. LEXIS 176166  (N.D. Cal. Dec. 20, 2016).  This is a topic that I and other members of the Corporations Committee of the California State Bar tackled 13 years ago in a law review article – Conflicting Currents: The Obligation to Maintain Inviolate Client Confidences and the New SEC Attorney Conduct Rules.  The article emphasizes California’s strong commitment to the principle that lawyers should not reveal their client confidences:

California attorneys have an obligation to maintain their clients’ secrets. This obligation springs from several independent sources: the State Bar Act, the California Evidence Code, and the California Rules of Professional Conduct as approved by the California Supreme Court.  The State Bar Act requires attorneys “[t]o maintain inviolate the confidence[s], and at every peril . . . to preserve the secrets, of his or her client[s].” [Cal. Bus. & Prof. Code § 6068(e)]  Similarly, the Evidence Code requires an attorney to assert the attorney-client privilege whenever a party seeks disclosure of a privileged communication.  [Cal. Evid. Code § 955]  The obligation to maintain client confidences and preserve client secrets embedded in these statutes reflects the long-standing recognition that society benefits when clients receive advice informed by full and frank communication with their legal counsel. The obligation also reflects a policy that attorneys should avoid conflicts of interest with their clients.

(footnotes omitted).  As Congress revisits the Sarbanes-Oxley Act, it should clarify that undermining the effective representation of clients was never its intent.

Some readers may recall that I previously disagreed with Magistrate Judge Spero’s ruling that directors are agents. 

© 2010-2021 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume VII, Number 39
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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
Partner

Keith Bishop works with privately held and publicly traded companies on federal and state corporate and securities transactions, compliance, and governance matters. He is highly-regarded for his in-depth knowledge of the distinctive corporate and regulatory requirements faced by corporations in the state of California.

While many law firms have a great deal of expertise in federal or Delaware corporate law, Keith’s specific focus on California corporate and securities law is uncommon. A former California state regulator of securities and financial institutions, Keith has decades of...

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