[Code of Federal Regulations]
[Title 17, Volume 2]
[Revised as of April 1, 2005]
From the U.S. Government Printing Office via GPO Access
[CITE: 17CFR205.2]

[Page 231-234]
 
              TITLE 17--COMMODITY AND SECURITIES EXCHANGES
 
             CHAPTER II--SECURITIES AND EXCHANGE COMMISSION
 
PART 205_STANDARDS OF PROFESSIONAL CONDUCT FOR ATTORNEYS APPEARING AND 
 
Sec. 205.2  Definitions.

    For purposes of this part, the following definitions apply:

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    (a) Appearing and practicing before the Commission:
    (1) Means:
    (i) Transacting any business with the Commission, including 
communications in any form;
    (ii) Representing an issuer in a Commission administrative 
proceeding or in connection with any Commission investigation, inquiry, 
information request, or subpoena;
    (iii) Providing advice in respect of the United States securities 
laws or the Commission's rules or regulations thereunder regarding any 
document that the attorney has notice will be filed with or submitted 
to, or incorporated into any document that will be filed with or 
submitted to, the Commission, including the provision of such advice in 
the context of preparing, or participating in the preparation of, any 
such document; or
    (iv) Advising an issuer as to whether information or a statement, 
opinion, or other writing is required under the United States securities 
laws or the Commission's rules or regulations thereunder to be filed 
with or submitted to, or incorporated into any document that will be 
filed with or submitted to, the Commission; but
    (2) Does not include an attorney who:
    (i) Conducts the activities in paragraphs (a)(1)(i) through 
(a)(1)(iv) of this section other than in the context of providing legal 
services to an issuer with whom the attorney has an attorney-client 
relationship; or
    (ii) Is a non-appearing foreign attorney.
    (b) Appropriate response means a response to an attorney regarding 
reported evidence of a material violation as a result of which the 
attorney reasonably believes:
    (1) That no material violation, as defined in paragraph (i) of this 
section, has occurred, is ongoing, or is about to occur;
    (2) That the issuer has, as necessary, adopted appropriate remedial 
measures, including appropriate steps or sanctions to stop any material 
violations that are ongoing, to prevent any material violation that has 
yet to occur, and to remedy or otherwise appropriately address any 
material violation that has already occurred and to minimize the 
likelihood of its recurrence; or
    (3) That the issuer, with the consent of the issuer's board of 
directors, a committee thereof to whom a report could be made pursuant 
to Sec. 205.3(b)(3), or a qualified legal compliance committee, has 
retained or directed an attorney to review the reported evidence of a 
material violation and either:
    (i) Has substantially implemented any remedial recommendations made 
by such attorney after a reasonable investigation and evaluation of the 
reported evidence; or
    (ii) Has been advised that such attorney may, consistent with his or 
her professional obligations, assert a colorable defense on behalf of 
the issuer (or the issuer's officer, director, employee, or agent, as 
the case may be) in any investigation or judicial or administrative 
proceeding relating to the reported evidence of a material violation.
    (c) Attorney means any person who is admitted, licensed, or 
otherwise qualified to practice law in any jurisdiction, domestic or 
foreign, or who holds himself or herself out as admitted, licensed, or 
otherwise qualified to practice law.
    (d) Breach of fiduciary duty refers to any breach of fiduciary or 
similar duty to the issuer recognized under an applicable Federal or 
State statute or at common law, including but not limited to 
misfeasance, nonfeasance, abdication of duty, abuse of trust, and 
approval of unlawful transactions.
    (e) Evidence of a material violation means credible evidence, based 
upon which it would be unreasonable, under the circumstances, for a 
prudent and competent attorney not to conclude that it is reasonably 
likely that a material violation has occurred, is ongoing, or is about 
to occur.
    (f) Foreign government issuer means a foreign issuer as defined in 
17 CFR 230.405 eligible to register securities on Schedule B of the 
Securities Act of 1933 (15 U.S.C. 77a et seq., Schedule B).
    (g) In the representation of an issuer means providing legal 
services as an attorney for an issuer, regardless of whether the 
attorney is employed or retained by the issuer.

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    (h) Issuer means an issuer (as defined in section 3 of the 
Securities Exchange Act of 1934 (15 U.S.C. 78c)), the securities of 
which are registered under section 12 of that Act (15 U.S.C. 78l), or 
that is required to file reports under section 15(d) of that Act (15 
U.S.C. 78o(d)), or that files or has filed a registration statement that 
has not yet become effective under the Securities Act of 1933 (15 U.S.C. 
77a et seq.), and that it has not withdrawn, but does not include a 
foreign government issuer. For purposes of paragraphs (a) and (g) of 
this section, the term ``issuer'' includes any person controlled by an 
issuer, where an attorney provides legal services to such person on 
behalf of, or at the behest, or for the benefit of the issuer, 
regardless of whether the attorney is employed or retained by the 
issuer.
    (i) Material violation means a material violation of an applicable 
United States federal or state securities law, a material breach of 
fiduciary duty arising under United States federal or state law, or a 
similar material violation of any United States federal or state law.
    (j) Non-appearing foreign attorney means an attorney:
    (1) Who is admitted to practice law in a jurisdiction outside the 
United States;
    (2) Who does not hold himself or herself out as practicing, and does 
not give legal advice regarding, United States federal or state 
securities or other laws (except as provided in paragraph (j)(3)(ii) of 
this section); and
    (3) Who:
    (i) Conducts activities that would constitute appearing and 
practicing before the Commission only incidentally to, and in the 
ordinary course of, the practice of law in a jurisdiction outside the 
United States; or
    (ii) Is appearing and practicing before the Commission only in 
consultation with counsel, other than a non-appearing foreign attorney, 
admitted or licensed to practice in a state or other United States 
jurisdiction.
    (k) Qualified legal compliance committee means a committee of an 
issuer (which also may be an audit or other committee of the issuer) 
that:
    (1) Consists of at least one member of the issuer's audit committee 
(or, if the issuer has no audit committee, one member from an equivalent 
committee of independent directors) and two or more members of the 
issuer's board of directors who are not employed, directly or 
indirectly, by the issuer and who are not, in the case of a registered 
investment company, ``interested persons'' as defined in section 
2(a)(19) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(19));
    (2) Has adopted written procedures for the confidential receipt, 
retention, and consideration of any report of evidence of a material 
violation under Sec. 205.3;
    (3) Has been duly established by the issuer's board of directors, 
with the authority and responsibility:
    (i) To inform the issuer's chief legal officer and chief executive 
officer (or the equivalents thereof) of any report of evidence of a 
material violation (except in the circumstances described in Sec. 
205.3(b)(4));
    (ii) To determine whether an investigation is necessary regarding 
any report of evidence of a material violation by the issuer, its 
officers, directors, employees or agents and, if it determines an 
investigation is necessary or appropriate, to:
    (A) Notify the audit committee or the full board of directors;
    (B) Initiate an investigation, which may be conducted either by the 
chief legal officer (or the equivalent thereof) or by outside attorneys; 
and
    (C) Retain such additional expert personnel as the committee deems 
necessary; and
    (iii) At the conclusion of any such investigation, to:
    (A) Recommend, by majority vote, that the issuer implement an 
appropriate response to evidence of a material violation; and
    (B) Inform the chief legal officer and the chief executive officer 
(or the equivalents thereof) and the board of directors of the results 
of any such investigation under this section and the appropriate 
remedial measures to be adopted; and
    (4) Has the authority and responsibility, acting by majority vote, 
to take all other appropriate action, including

[[Page 234]]

the authority to notify the Commission in the event that the issuer 
fails in any material respect to implement an appropriate response that 
the qualified legal compliance committee has recommended the issuer to 
take.
    (l) Reasonable or reasonably denotes, with respect to the actions of 
an attorney, conduct that would not be unreasonable for a prudent and 
competent attorney.
    (m) Reasonably believes means that an attorney believes the matter 
in question and that the circumstances are such that the belief is not 
unreasonable.
    (n) Report means to make known to directly, either in person, by 
telephone, by e-mail, electronically, or in writing.