December 19, 2019 Articles

Critical Steps in Protecting the Attorney-Client Privilege While Interfacing with Compliance Consultants in SEC Investigations and Litigation

The commission and the courts have been clear that the defense of reliance on advice of counsel is of great importance to facilitating compliance efforts. They have not been as clear when it comes to reliance on consultants.

By Brent R. Baker and Joseph D. Watkins

The infamous remark by Dick the butcher, the “plotter of treachery” in Shakespeare’s King Henry VI—“The first thing we do, let’s kill all the lawyers”—was a message from Shakespeare that really means don’t kill the lawyers; they may be our last line of defense. The same idea holds true for broker-dealers and investment advisors seeking to avoid overbearing regulatory oversight by seeking advice from third-party compliance consultants (CCs) rather than traditional legal counsel: Do not get rid of the lawyer; the lawyer may be your last line of defense. This article acknowledges the utility of CCs to create economic efficiencies for financial services firms (FSFs) but suggests that careful adherence to the traditional elements of the attorney-client privilege are still required to preserve important client protections and defenses.

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