The Division of Enforcement of the Securities and Exchange Commission is scrutinizing the practices of defense counsel in preparing witnesses for testimony. An Enforcement Staff perception that a witness testified falsely will have a profound negative impact on the staff’s view of the merits of the client’s defenses. Similarly, a staff view that an attorney improperly “coached” a witness will undermine the lawyer’s reputation and his ability to convince the staff of the bona fides of the client’s legal or factual arguments. And, in extreme cases, the staff may even recommend that the SEC bar an attorney from practicing before it for obstructionist conduct.
Scrutiny of Lawyers’ Conduct
In a 2011 speech, Robert Khuzami, then director of SEC Enforcement, highlighted “episodes of questionable tactics by defense counsel in SEC investigations.” He stressed that “the lack of recollection by witnesses in SEC testimony is a significant issue” and ruminated that “one is left to wonder whether witnesses are under instructions only to testify about those events that they recall with near certainty, even in response to questions inviting the witness to qualify the answer with whatever level of recollection the witness possesses.”1 He predicted that such practices could increase referrals to the SEC’s Office of the General Counsel (OGC) for obstructionist conduct.
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