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In their paper and in their earlier comments to the SEC on the proposed attorney reporting rules, Professors Cramton, Cohen and Koniak do an excellent job recounting the genesis of the attorney reporting requirements in the Sarbanes-Oxley Act, describing the SEC's proposed and final rules and critiquing the rule's triggering mechanism and now apparently shelved noisy withdrawal requirement. Their case study of the recent Spiegel, Inc. independent examiner's report is a particularly useful vehicle for examining the practical implications of the SEC's policy and drafting choices. Although I was a member of a committee that submitted comments opposed to noisy withdrawal, there is much in their paper with which I agree. Specifically, given that the corporation is the client, it is hard to argue against up-the-ladder reporting. I would also agree that the triggering mechanism as adopted is difficult to apply; although, as I explain later, I think there may be a rational explanation for why the SEC chose that particular articulation. While I disagree with Professors Cramton, Cohen and Koniak on the wisdom of mandating noisy withdrawal, there is little to be gained from rehashing the already copious arguments against that provision.

Instead, I want to follow in the tradition of many symposium comments, which effectively say, "the principal paper was interesting, but this is what I really want to talk about." What I really want to talk about is the SEC as an institution. What institutional features may impact the SEC's willingness or ability to enforce these lawyer conduct rules vigorously in the future? This kind of institutional analysis is important because one of the primary justifications for requiring the SEC to promulgate and enforce these reporting rules is the perceived failure of state bar authorities to discipline transactional lawyers. This Comment suggests, however, that with respect to enforcing professional responsibility rules the SEC shares many characteristics with state bar authorities and that it is therefore reasonable to expect a very similar pattern of enforcement.

This prediction is not meant to suggest that Section 307 is unlikely to yield any benefits. Indeed, the SEC's new reporting rules seem to have had a salutary effect already because they appear to have substantially influenced the ABA's amendments to Model Rules 1.6 and 1.13.8 The mere presence of these lawyer reporting rules-especially in a post-Enron environment where courts and regulators may be less willing to believe that lawyers were simply innocent bystanders-will likely cause more lawyers to report illegal acts up the ladder, even if the prospect for a disciplinary proceeding is remote. If such an increase in up-the-ladder reporting occurs, it may lessen the impact of financial wrongdoing at publicly traded companies. Thus, Section 307 may have important benefits even in a low enforcement environment.

This Comment proceeds as follows. Part I takes an agency-wide perspective and focuses on the SEC's budget and personnel constraints and the already enormous demands on the SEC's scarce resources. Part II sketches the potential influence of cultural norms, constraints and staff incentives on future enforcement efforts in this area. Brief concluding remarks follow.



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