Abstract:
This article examines the extent to which lawyers advising on the disclosure documents of their clients issued to the securities markets should be responsible for their clients’ disclosure failures. It identifies the following problems with the current framework. First, there is a lack of objective due diligence standards which lawyers are expected to meet when they are advising on public disclosure documents. Second, except for takeovers, public enforcement actions against lawyers are inadequate even if they have not acted with due care and diligence in ensuring that their clients comply with their disclosure obligations. Third, private enforcement actions against lawyers are weak or non-existent. Fourth, the lack of clarity on the reporting obligation of lawyers, who suspect securities fraud committed by, or on behalf of, their corporate clients, to report up the ladder and the lack of obligation to report externally to a regulator, do not encourage lawyers to make the relevant inquiries. This article argues that the solution has to lie in imposing public oversight over the lawyers advising their clients on public disclosure documents. This is already the position taken for takeovers and there is no reason why such oversight should not be extended to all disclosure documents.