Do Financial Institutions Have Any Attorney-Client Privilege Left?

Recent events involving the potential liability of financial consultants for their work in advising regulated institutions underscore the fact that the boundaries of the attorney-client privilege are under attack. What is needed at this point is certainty about the situations in which privilege applies. If institutions, regulators and advisors are clear on this point, they will all be to conduct themselves accordingly.

Regulators and financial institutions have debated for decades whether the regulator's examination powers trump the attorney-client privilege. Regulators routinely assert that they may demand access to privileged materials and communications between a company and its attorneys, including any financial advisors engaged by their attorneys, under their statutory right to examine the institution's books and records. The courts, however, have not so readily recognized an agency's plenary power to vitiate the attorney-client privilege.

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