The Commission does not directly regulate the practice of law or the structure of law firms, as it does for broker-dealers and other regulated entities. It is surprising, therefore, that 205.4(b) imposes an affirmative supervisory duty on lawyers that the SEC does not place on broker-dealers, where the duty to supervise is an affirmative defense rather than an affirmative obligation. It is also worth noting that registered entities' supervisory obligations extend to supervising with a view toward preventing violations of the federal securities laws, rather than the arguably more stringent duty to ensure "compl[iance] with the statutes and other rules administered by the Commission" of 205.4(b). We are concerned that this requirement will evolve into a requirement that law firms and legal departments develop and maintain the costly supervision and compliance structures that the SEC currently requires of broker-dealers. 14

We believe that the definition of "supervisory attorney" needs to be refined. At many law firms, attorneys are supervised by a number of other attorneys. For example, an associate in the Washington, D.C. office of a national law firm might, in a sense, be supervised by the managing partner of the firm, the managing partner of the Washington, D.C. office, the partners in charge of the associate's department(s) and/or practice group(s), and the attorneys supervising the attorney on the particular engagement and/or task at issue. We do not believe that it is appropriate or meaningful to provide that the managing partner of the firm, the managing partner of the Washington, D.C. office, the partner in charge of the associate's department(s) and/or practice group(s) appear and practice before the Commission "[t]o the extent that a subordinate attorney appears and practices before the Commission on behalf of an issuer." We suggest that it would be more appropriate to limit the definition of "supervisory attorney" to the attorney(s) supervising the subordinate attorney on the particular engagement(s) or task(s) in the course of which the attorney became aware of the "evidence of a material violation."

It is in the public interest for an attorney appearing and practicing before the Commission in the representation of an issuer to feel free to consult within the firm regarding the attorney's responsibilities under Part 205. The proposed rules recognize this public interest with respect to an attorney consulting with a supervisory attorney. We believe that the proposed rules should be modified to encourage such consultations with attorneys who are not supervisory attorneys within the meaning of Part 205.4. For example, the proposed rule should encourage a law firm attorney to consult with a securities expert or the firm's general counsel. Similarly, the proposed rule should encourage a legal department attorney to consult with a colleague or with outside counsel with special expertise. As currently drafted, however, the proposed rules discourage such consultations by creating a substantial risk that the reporting obligations of Part 205 would then be imposed on the consulted attorney. This risk serves no public interest and chills consultations that are in the public interest. Accordingly, we recommend that the Commission adopt a provision to the following effect:

For the purpose of Part 205.3, to the extent that an attorney (the consulting attorney) consults with another attorney (the consulted attorney) regarding the obligations of the consulting attorney under Part 205, information of which the consulted attorney becomes aware solely as a result of that consultation shall not be considered information of which the consulted attorney became aware in appearing and practicing before the Commission in the representation of the issuer.