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Sarbanes-Oxley News & Developments
You Have the Right to an AttorneySigning off on the company financial results is one good reason that CFOs might seek advise of counsel.
> > A new SEC rule governing conduct puts a strain on relations between finance executives and corporate counsel.
Under a SEC rule that went into effect August 5th the relationship between CFOs and attorneys may have gotten a whole lot icier. If an attorney representing a public company comes across evidence of such things as a material violation of federal or state securities law or a breach of fiduciary duty, he or she must report the misstep up the chain of command.
That means either the chief legal officer or the CFO, according to the SEC rule, which was mandated under Section 307 of the Sarbanes-Oxley Act (SOX). If the officers do not respond appropriately lawyers must take the matter to the AUDIT COMMITTEE, another committee of independent directors, or the full board.
An even worse worry is the possibility that a misinterpreted question to an attorney might land a finance executive before the SEC. That could make CFOs wary of sharing information with corporate counsel or seeking advise from them on tough reporting decisions.
The SEC rule upsets a firmly held belief among CFOs and CEOs that the corporate lawyers are their lawyers. Indeed, the rule enforces the principle that the first priority of the attorney is to the company, not to the executives.
The increased independence that the new rule seems to confer on attorneys, however, could be a boon to some CFOs. These rules should strengthen relationships between the CEO and CFO and General Counsel for those companies that react in a constructive way.
Source: CFO article
Published:2003-08-21
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