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The Changing Ethical and Practical Environment Mandated by Sarbanes-Oxley on Natural Resources Companies and Their Counsel

Theodore Sonde, Bridget E. Littlefield, Proceedings of 49th Annual Rocky Mountain Mineral Law Institute (2003)

Over the past 30 years the legal profession has nearly uniformly, and somewhat successfully, disavowed its responsibility for the fraudulent or criminal conduct of its clients. The profession has also disputed the authority of the Securities and Exchange Commission (SEC or the Commission) to discipline attorneys for their, or their clients', role in alleged violations of the securities laws. Everything changed, however, in the wake of financial scandals involving Enron, WorldCom, and several other large publicly-held companies. Faced with public outrage concerning the extent of these corporations' financial mis-statements, and the perceived lack of accountability on the part of corporate officers-many of whom escaped the tremendous financial losses felt by ordinary investors and creditors-Congress responded quickly to these unprecedented scandals by passing the Sarbanes-Oxley Act (Sarbanes-Oxley).1

In Sarbanes-Oxley, Congress made clear that the SEC has the power and duty to regulate lawyers and accountants that practice before it. Specifically, Sarbanes-Oxley mandates a new set of professional ethics for lawyers who practice before the Commission, including a new reporting requirement for corporate counsel, inside or outside, who have knowledge of evidence of a material violation of the securities laws or a material breach of fiduciary duty possibly committed by their