Reporting up‐the‐ladder and the double negative: Applying the new standards of attorney conduct under the Sarbanes‐Oxley Act

On January 23, 2003, the Securities and Exchange Commission (SEC) adopted final rules to implement Section 307 of the Sarbanes‐Oxley Act. Section 307 required the SEC to establish “standards of professional conduct for attorneys appearing and practicing before the Commission in any way in the representation of issuers”. The new regulations establish standards for when an attorney is required to report a material securities law violation “up the ladder” of a public corporation as well as providing criteria for a “noisy withdrawal” by a corporation’s attorney. We begin by reviewing the new regulations under Section 307. We then explore the nature of the “double‐negative” within the new regulations and their practical impact. Last we discuss some practical issues associated with “noisy” and “quiet” withdrawals.