Posted Dec 02, 2008 01:30 am CST
When Congress passes sweeping legislation, the devil often is in the details of the regulations developed by federal agencies to implement the law.
That reality of federal lawmaking is a primary factor in the creation of the ABA Task Force on Financial Markets Regulatory Reform. The Board of Governors authorized the task force on Nov. 1 at the recommendation of President H. Thomas Wells Jr.
“Although major financial reform sometimes begins with the passage of broad legislation, it is often the subsequent implementing regulations issued by federal agencies that actually govern financial institutions and markets on a practical level,” says Wells, a shareholder in Maynard Cooper & Gale in Birmingham, Ala.
“These implementing regulations—and other major agency regulations not related to new statutes—can have a significant effect on the practice of law, as we have seen in recent years.”
The new panel will receive staff support and funding from the Section of Business Law with contributions, as needed, from other ABA groups.
ABA task forces can be effective on a variety of issues. Wells cites the ABA’s ongoing effort to ensure that federal agencies investigating corporate wrongdoing recognize the attorney-client privilege, the work product doctrine and protections for corporate employees. He also cites the Gramm-Leach-Bliley Act of 1999, which loosened restrictions on banking, securities and insurance companies. Under that law, the Federal Trade Commission introduced rules that would regulate lawyers and other professionals as “financial institutions.”
The rules were struck down in 2005 by the U.S. Court of Appeals for the District of Columbia Circuit in a lawsuit filed by the ABA and the New York State Bar Association.
The newest task force, Wells says, will study the legal and regulatory implications of the recent financial crisis and coordinate the ABA’s response to proposed legislation or regulations, especially as they relate to the practice of law and representation of clients.
The new task force will be co-chaired by William F. Kroener III and Giovanni Prezioso. Kroener served as general counsel of the Federal Deposit Insurance Corp. from 1995 until 2006, when he left to become counsel at Sullivan & Cromwell. He is based in the firm’s offices in Washington, D.C., and Los Angeles. Prezioso left Cleary Gottlieb Steen & Hamilton in 2002 to become general counsel of the Securities and Exchange Commission. In 2006, he returned to the firm as a partner in its Washington, D.C., office.
The task force will focus primarily on federal agency rules implementing the Emergency Economic Stabilization Act. Although the $700 billion bailout for the U.S. financial industry began as a fairly simple piece of legislation, it grew progressively complex before it was signed by President Bush on Oct. 3.
But Wells says the task force also will track other laws and regulatory actions relating to the financial crisis. For instance, the Temporary Liquidity Guarantee Program announced recently by the FDIC will give unlimited insurance coverage for non-interest-bearing deposit accounts. Wells says the impact of the program on lawyer trust accounts needs to be clarified.
“The ABA is urging the FDIC to provide full coverage of IOLTA funds, regardless of dollar amount,” says Wells. “This is an important issue for the bar because these funds contain our clients’ money, and the interest provides crucial funding to legal services programs throughout the country.”