Fight for client confidentiality over cash awards

Last week's Securities and Exchange Commission decision not to encourage lawyers to divulge confidential client information is "a welcome recognition of the critical importance of the attorney-client privilege and client confidentiality," said Stephen N. Zack, president of the 400,000-member American Bar Association.

Under the new rule, issued under the Dodd-Frank Act, whistleblowers who voluntarily provide the SEC with original information regarding violations of the federal securities laws may be entitled to receive substantial cash awards. But the final version of the rule makes it clear that lawyers will not be eligible to receive such payments if they have divulged privileged or confidential information they obtained from clients during the course of their professional representation in violation of the lawyer's ethical obligations.

The attorney-client privilege enables both individual and corporate clients to communicate with their lawyers in confidence, and encourages clients to seek out and obtain informed guidance regarding compliance with the law. The privilege also encourages candid communications between corporate clients and their lawyers in connection with internal investigations designed to identify and remedy possible violations of law, to the benefit of corporate institutions, the investing public and society-at-large.

"The integrity of the lawyer-client relationship is sacred," Zack said. "The erosion of a lawyer's duty of confidentiality, either by weakening its provisions or by creating incentives for lawyers to disregard their professional obligations, would undermine the quality of the lawyer-client relationship and the effectiveness of the privilege, deny the client its right to effective counsel, and reduce, rather than increase, compliance with the law."

Published: Mon, May 30, 2011