ĭid the MarketCounsel Arrangement Morph into an Attorney/Client Relationship? In its view, the membership agreement disclaimers and the absence of an engagement agreement for legal services created a “strong presumption” the communications were not protected by the attorney-client privilege. The SEC disputed this contention, arguing (1) the RIA could have engaged MarketCounsel’s affiliated law firm at the higher fee structure, but opted not to do so (2) the membership agreement between the RIA and MarketCounsel disclaimed, in writing, the existence of any attorney-client relationship between the RIA and the firm and (3) the agreement further stated that any advice offered by the attorney-consultants - although informed by their legal training and experience - should not be relied upon as legal advice or viewed as part of an attorney-client relationship. To support its claim, the RIA asserted the recognized principle that a client and its attorney need not have an actual attorney-client relationship so long as the purported client had a “reasonable, good faith belief” it was seeking legal advice from an attorney acting in her capacity as an attorney. ĭid the RIA have a Reasonable, Good Faith Belief it was Seeking Legal Advice?

The RIA contended that because the MarketCounsel consultants were touted to be-and in fact were-experienced securities regulatory attorneys, an attorney-client relationship existed between the RIA and MarketCounsel, making the communications off limits. The RIA firm objected to the subpoenas, seeking to shield as attorney-client privileged over 230 communications passing between the RIA’s in-house counsel and the compliance consultant.

During that litigation, the SEC subpoenaed documents from MarketCounsel and the RIA.

The RIA was not made a party to the SEC’s lawsuit. The two IAR defendants answered that they intended to defend the Complaint though their asserted reliance on the RIA’s and its parent’s compliance and legal department. Approximately five years after the exam, the SEC sued the two IARs for the alleged § 206 violations. Upon receipt of an examination notice from the SEC, the RIA’s in-house counsel sought advice from its principal MarketCounsel consultant, an attorney, who advised the RIA throughout the exam, until receipt of a deficiency letter from the SEC. The SEC Exam and Assertion of Privilege for Subpoenaed Communications skills garnered within the securities industry.” These same licensed attorneys performed services for both MarketCounsel and its related law firm, although MarketCounsel offered “membership packages” for “compliance services” at a lower cost structure than representation by the law firm, which offered its engaged clients “legal services” under a traditional billable arrangement. MarketCounsel was the affiliate of a law firm and touted that its compliance consultants were “seasoned securities attorneys with years of experience as well as. MarketCounsel, LLC, a compliance consulting firm staffed with licensed attorneys, advised the RIA on compliance issues. The two IARs had previously worked for the RIA and invested clients into the RIA’s QROPS program, but were no longer affiliated with RIA at the time of the lawsuit filing. tax authority’s regulations as a Qualified Recognized Overseas Pension Scheme (“QROPS”). pension assets to overseas retirement plans that qualified under the U.K. In Alderson, the SEC accused two IARs of violating § 206 of the Investment Advisors Act by misrepresenting the tax consequences, failing to disclose a conflict of interest about compensation, and other acts or omissions, concerning the transfer of U.K. This ruling raises important considerations for an RIA or broker-dealer when engaging outside compliance consultants and lawyers, especially if the firm intends for certain of or all of those communications to be cloaked with privilege. As a result, the district court compelled disclosure of over 230 communications passing between the RIA’s in-house counsel and its third-party compliance firm (staffed with licensed attorneys) before and during the course of an examination of the RIA by the Securities and Exchange Commission (“SEC”). Alderson ,held that an RIA’s communications with lawyers associated with its third-party compliance consultant were not protected by the attorney-client privilege or the attorney work-product doctrine. An opinion this week from the Southern District of New York, SEC v.

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