Recent Developments
Over the last few years, there has not been much change in the law of corporations. There have been significant changes, however, in the federal securities laws, and there has been a decided shift in emphasis and orientation. Congress has involved itself in areas that traditionally have been the province of state legislatures and state courts, or federal courts applying state laws. We have yet to see the full results of the recent activity.
The SEC has had a tremendous increase in its budget resources in the last six months, allowing it to be much more active in the enforcement area than it has been in the past. Regrettably, the SEC will also probably be more subject to political pressure. The SEC has traditionally been one of the least political agencies in the federal government. It will likely be more difficult for the SEC to exercise the kind of balanced judgment about corporate and securities law issues that it has in the past because of congressional pressure, which unfortunately is not always characterized by balanced judgment. For example, when the SEC attempted to balance the difficult competing policy considerations involved in its historic first significant effort to adopt professional responsibility rules governing lawyers practicing before it, it was loudly criticized by influential members of Congress, because it was not being sufficiently absolutist.
The SEC has recently adopted new regulatory changes mandated by the Sarbanes-Oxley Act. Those regulations in general are intended to enhance director and audit committee independence, improve and accelerate public company disclosure, increase management accountability, and otherwise address many of the abuses that were revealed during 2001 and 2002. The accounting profession will be subjected to a new regulatory regime under the supervision of a new regulatory agency, and the stock exchanges will be imposing similar reforms upon listed companies.
Banking legislation that was passed several years ago imposed a requirement regarding privacy. There is also substantial concern about Internet privacy, and correspondingly there have been legislative and administrative developments in that area. That is not exactly a corporate law issue, but it affects corporations in a significant way by imposing upon them requirements that they notify their customers of various privacy policies. Ironically, that legislation also affects corporate lawyers (and all other lawyers) by virtue of an ill-advised decision by the Federal Trade Commission subjecting lawyers to its terms. Lawyers were already subject to confidentiality requirements that are far more stringent than those imposed by the legislation, and the application to lawyers of rules intended for financial institutions is confusing to clients. That decision is now being challenged in the courts.