The Ethics of Owning Stock in a Client of the Firm
And Related Issues
By Ellen Lockwood, ACP, RP
Conflicts and insider trading issues
seem to get more complicated every
day. In addition to the usual conflicts
issues and avoiding trading on confidential
and privileged information a paralegal
may be exposed to, more and more firms
are instituting policies and procedures that
take these concerns to a higher level.
Do you or your immediate family own
stock? If so, you may want to be sure none
of the companies in which you or your
family own stock are clients of the firm for
which you work. Paralegals should also
check your firm’s policies regarding ownership
of stock in companies the firm represents.
Many firms have implemented
such policies to try to limit the potential
for conflicts and insider trading.
The potential for conflicts and insider
trading allegations may also be raised
when any employee of a firm has a family
member who works for a client of the
firm, regardless of which section of the
firm the employee works. For example, a
paralegal works in the immigration section
of a law firm and her husband works for
the XYZ Corporation, a client of the firm.
The firm doesn’t do any immigration work
for XYZ Corporation, only tax work.
Although the paralegal does not work in
the tax section of the firm, the paralegal
may learn information about the work the
firm is doing for XYZ Corporation. The
paralegal may also get information from
her husband about XYZ Corporation’s
business that, combined with information
from her job, may constitute a conflict.
While all law firm employees should be
well aware that any information to which
they are exposed through their work
should be considered confidential and
privileged, some employees may consider
discussions with their spouses either the
exception to the rule, or necessary to
ensure their spouses’ position or advantage
with the spouses’ employer.
Because of this potential problem,
paralegals should be careful not to discuss
their work with firm employees other than
those directly involved in the project.
Paralegals should also take care not to discuss
confidential or client proprietary
information where it may be overheard by
anyone, including other firm employees.
It is important to note that not everyone
associated with a particular client is
necessarily entitled to the same information.
Paralegals should ask their supervising
attorneys for a list of the people associated
with the client with whom information
may be shared. If someone other
than one of the previously identified people
contacts the paralegal for information,
the paralegal should confirm with the
supervising attorney what information
may be provided to the requester. Providing
information to the wrong person may
not only violate the attorney-client privilege,
but could provide a basis for an
opportunity for insider trading.
With so many people hoping to gain any
advantage, and clients ever more sensitive
to the implications of misappropriated
information and even the appearance of
impropriety, paralegals must be ever vigilant
to protect and preserve confidential,
proprietary, and privileged information.
Ellen Lockwood, ACP, RP, is the
Chair of the Professional
Ethics
Committee of the
Paralegal Division
and a past President
of the Division.
She is a frequent
speaker on paralegal ethics and intellectual
property and the lead author of the
Division’s Paralegal Ethics Handbook published
by West Legalworks. She may be contacted
at ethics@txpd.org.
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