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The Fork in the Road: The SEC and Preemption

By C. Evan Stewart

Since 2003, I have been predicting a test case/showdown between lawyers who follow the dictates of the states in which they are licensed to practice law versus the conflicting dictates of the rules and regulations promulgated by the U.S. Securities and Exchange Commission (SEC) after the Sarbanes-Oxley Act of 2002 went into effect. See, e.g., C.E. Stewart, “Sarbanes-Oxley: Panacea or Quagmire for Securities Lawyers?” N.Y.L.J. (March 21, 2003); C.E. Stewart, “This Is a Fine Mess You've Gotten Me Into: The Revolution in the Legal Profession,” NY Business L.J. (Summer 2006); C.E. Stewart, “The Pit, the Pendulum, and the Legal Profession: Where Do We Stand After Five Years of Sarbanes-Oxley?” 40 Sec. Reg. & L. Rep. (Feb. 18, 2008); C.E. Stewart, “New York, “New Ethics Rules: What You Don't Know Can Hurt You!” NY Business L.J. (Fall 2009); C.E. Stewart, “'Here's Johnny!': Carnacing the Future of the SEC's Preemption Overreach,” 46 Sec. Reg. & L. Rep. (April 28, 2014); C.E. Stewart, “Navigating State-Based Ethics Rules and Sarbanes-Oxley Requirements,” N.Y.L.J. (Sept. 21, 2015).

And while I thought I knew how such a test case/showdown would (should) end up, a recent judicial development has shaken my certitude (but only a little, because — as we will see — the ruling is wrong).

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