A Regulator Threatens Client Confidentiality and a Law Firm Fights Back


The Point

1. An attorney’s duty to maintain client communications as confidential is one of the central pillars of legal ethics*. For obvious reasons, this is vital to the well being of a business enterprise.

2. Based on my years as a practicing lawyer — and at other times as a business executive — I believe that government agencies sometimes threaten this important value.

3. It’s up to legal counsel, in law firms and in-house, to zealously defend a corporation’s right to confidentiality.

This Matters to Your Business

Last month, the Securities and Exchange Commission filed a lawsuit to enforce a subpoena the SEC had issued to a law firm, Covington & Burling.

The SEC’s action came in response to a November 2020 cyberattack directed at the law firm’s electronic files by parties believed to be affiliated with the Chinese government.

By subpoena, the SEC demanded that the law firm provide it with, “the names of any clients regulated by the Commission whose information had been viewed, copied, modified or exfiltrated during the attack on Covington.”

The SEC argues that it has a legal right to compel the law firm to provide this otherwise confidential client information:

“As a large law firm with hundreds of public company clients, Covington is regularly in possession of [material non-public information], theft of which puts investors at significant risk. Neither Covington’s position as a victim of a cyberattack nor the fact that it is a law firm, insulate it from the commission’s legitimate investigative responsibilities.”

Covington & Burling replies:

“We regard the SEC’s action as an unwarranted attempt to intrude on client confidences and the attorney-client privilege, the protection of which is a fundamental ethical obligation of the legal profession.”

Because …

The court system will decide whether the law firm or the regulator wins here.

My point for corporate business management is this: maintaining confidences is an enormous business value, as well as a lawyer’s ethical duty. And when a government agency appears to exceed its remit in by demanding client information that should otherwise be kept confidential between law firm and client company, the corporate enterprise should have legal counsel who represent it “zealously within the bounds of the law,” — to use the legalese.

In hiring and managing counsel I have found that a lawyer can be more intimidated by a government official’s power than he or she is zealous for the client. Regardless of how the court system comes out on this, I admire Covington & Burling’s backbone in standing up to the SEC on its clients’ behalf.


* Every U.S. jurisdiction issues its own ethical requirements that apply to lawyers licensed by, and practicing under the discipline of, that jurisdiction. For example, in Illinois, one of the states by which I am licensed and to whose authority I am accountable, provides that, “A lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent”. It lists exceptions. The official comments describe the duty this way: “[the attorney’s duty to maintain client confidences] applies not only to matters communicated in confidence but also to all information relating to the representation, whatever its source.” If a lawyer governed by this rule tells a third party that he or she has represented a named client, and that client has not given their informed consent that the lawyer do that, the lawyer violates the confidentiality rule, unless one of the specified exceptions applies.

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