- The Sanctions Provision
The proposed rules provide, in part, that "with respect to attorneys appearing and practicing before the Commission on behalf of an issuer, ’improper professional conduct’ includes…[r]epeated instances of unreasonable conduct, each resulting in a violation of a provision of this part." Proposed Part 205.6(b)(2)((ii).First, the term "on behalf of an issuer" is undefined. If this term is intended to be narrower than the definition of "in the representation of an issuer," then the rules should define the term to clarify the distinction. If this term is intended to mean "in the representation of the issuer" then the term should be replaced by "in the representation of the issuer." 16
Second, the appropriate culpability standard turns on the standard chosen as triggering the various reporting requirements in the rule. If, the Commission chooses a relatively low standard as triggering the reporting requirements, then an attorney practicing before the Commission will routinely encounter numerous instances that trigger the reporting requirement, and the standard of culpability should be relatively high (conduct that is intentional or extremely reckless). If, as we recommend, the Commission chooses a relatively high standard (reasonably certain) as triggering the reporting requirements, then a lower standard of culpability might be appropriate. In addition, if, contrary to our recommendation, the Commission retains the noisy withdrawal provisions, the Commission should limit sanctions for failure to make a noisy withdrawal to conduct that is intentional or extremely reckless.
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