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Lawyer Barred for Failing to Conduct Adequate Due Diligence

The SEC fined and barred an attorney from practicing before the Commission for failing to conduct proper due diligence as underwriter’s counsel for misleading municipal bond offerings.  According to the SEC, the lawyer prepared disclosure documents that contained erroneous statements that the issuer would comply, and had complied, with certain continuing disclosure obligations.  The SEC faults the lawyer for failing to conduct proper due diligence and relying solely on statements from the issuer.  The SEC also alleges that the lawyer ignored red flags that the disclosure was inaccurate.  The SEC separately prosecuted the issuer and the underwriter.

OUR TAKE: We have previously predicted that the SEC would target lawyers as a class of gatekeepers responsible for policing securities markets.  Counsel cannot ignore wrongdoing by claiming to have relied solely on client representations.

https://www.sec.gov/litigation/admin/2017/33-10335.pdf

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