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Harry Cassin
Publisher and Editor

Andy Spalding
Senior Editor

Jessica Tillipman
Senior Editor

Bill Steinman
Senior Editor

Richard L. Cassin
Editor at Large

Elizabeth K. Spahn
Editor Emeritus

Cody Worthington
Contributing Editor

Julie DiMauro
Contributing Editor

Thomas Fox
Contributing Editor

Marc Alain Bohn
Contributing Editor

Bill Waite
Contributing Editor

Shruti J. Shah
Contributing Editor

Russell A. Stamets
Contributing Editor

Richard Bistrong
Contributing Editor

Eric Carlson
Contributing Editor

Feds to in-housers: Keep the rest of us in line

As we said a couple of days ago, the traditional ancient duty of lawyers was advocacy, not enforcement. Asking lawyers to be the hall monitors for corporate America and beyond isn’t an advocacy role. In fact, it conflicts with advocacy and, as we said yesterday, puts in-housers at risk.

But in-house lawyers are being given police powers, whether they want them or not. Last year, newly arrived SEC chair Mary Jo White said the SEC has tremendous respect for compliance officers and “will do everything we can to help empower you so you can do your jobs even more effectively.”

The “job” she was talking about wasn’t advocacy but ethics and compliance. That, White said, serves the public good. It protects every employee, the investors and other stakeholders, and the integrity of the markets.

“It is, in short, you who set the bar, provide the expert guidance, and serve as the example for everyone,” White said. “So for us at the SEC, the question is not, ‘Who do we rely on most heavily to ensure compliance with the rules?’ Because we know it is you.”

By no coincidence, the SEC last year brought the first-ever prosecution of an investment company principal for obstructing its compliance officer.

In the Johns case, the SEC sanctioned a former portfolio manager for forging documents and misleading the firm’s chief compliance officer to conceal his failure to report personal trades. It was more than a slap on the wrist. To settle the case, Carl Johns agreed to pay the SEC more than $350,000 and be barred from the securities industry for at least five years.

(Congress too has been doing its part to lift all employees who practice ethics and compliance onto a higher perch. The Dodd-Frank whistleblower reward program, administered by the SEC, allows whistleblowers to reap up to 30 percent of the penalties assessed in securities law enforcement actions, including FCPA cases. And some whistleblowers have protection against retaliation after they’ve blown the whistle.)

Instead of a golden age for in-housers, these are dangerous times.

All the special attention heaped on ethics and compliance has managed to shrink the advocacy role. That may be good for the feds but how does it help in-house lawyers? With more protection from the SEC and Congress  comes more responsibility.

Through Mary Jo White’s words and the SEC’s action in the Johns case, expectations have never been higher that at crunch time (a phrase invented by Winston Churchill), the in-house lawyer’s ancient duty of advocacy will always give way to ethics and compliance.

There’s no evil plot or conspiracy at work. It’s the SEC’s job to protect the markets. If it helps the SEC to pump up the ethics and compliance role and shield in-housers from abuse when they do it, then you’d expect the SEC to be there. 

What it all means for in-house lawyers is that change is here.


Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

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  1. maybe it's the changing definition of advocacy that is causing discomfort

  2. What happens to the stock prices of telephone companies when Ms. White cracks down on their gambling crime, or will she ever? All these years the illegal offshore sports bookmakers have enjoyed toll-free, '888' type telephone service into the United States. Will both the offshore bookies and the offending telephone companies forever be allowed to flout the law?

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