Legal Professional Privilege

In response to numerous complaints on SFC's authorization of Lehman Brother Minibonds, SFC has alleged that the regulatory focus for authorizing product documentation is on disclosure rather than on the commercial merits of the investment. However, SFC would examine whether any facts, matters or circumstances that should have been disclosed to SFC were not disclosed by the Minibonds issuers and their advisers at the time the offer prospectuses and marketing materials were submitted for vetting.

Recently SFC has applied to the High Court for an order directing Lehman Brothers Asia Ltd (in liquidation) to comply with an SFC Notice to produce certain records in connection with its investigation of the offer and marketing of Minibonds. The Notice required Lehman Brothers to produce to SFC all documents relating to the assessment of Minibonds by an internal Lehman Brothers committee called the New Product Review Committee.

SFC believes the Committee oversaw or approved products including the Minibonds and that these documents are relevant to its investigation. In response to the Notice, lawyers for Lehman Brothers produced certain documents but objected to the production of 17 other documents on the grounds that these documents should not be produced because they were the subject of a claim of legal professional privilege. It appears the claim arises because a member of the Committee was an in-house lawyer at Lehman Brothers.

SFC disputes that the entire contents of these documents are necessarily the subject of a valid claim of legal professional privilege and asserts that they should be produced to SFC in compliance with the Notice. Discussions between SFC and the liquidators of Lehman Brothers and their lawyers, since December 2008, have not resolved this claim of privilege. In bringing this proceeding before the court, SFC wants to ensure there is an independent adjudication on the issue.

Legal professional privilege is an interesting subject of debate in this case. It protects communications between a lawyer in his professional capacity and his client, provided they are confidential and are for the purposes of seeking or giving legal advice. However, in general documents sent to or from an independent third party (even if created with the dominant purpose of obtaining legal advice) should not be covered by this privilege. I am interested to know what exactly the documents SFC is looking for.