In Hays v. Page Perry, LLC, No. 13-CV-3925 (N.D. Ga. Mar. 17, 2015), the receiver of an investment services firm sued the firm’s prior law firm for malpractice arising from mock SEC audits the law firm had performed for its client. At the time of the representation, the investment firm’s principal had been misappropriating client funds for years and making misrepresentations to federal and state regulators.  The law firm had found inadequacies in the investment firm’s business practices and advised that they should be corrected, including returning certain funds.  The receiver argued that the law firm should have gone further, including informing regulators of its client’s misconduct.  The court dismissed the receiver’s complaint and then denied a motion for reconsideration.  The court found no authority for imposing any duty on the law firm to report wrongdoing to authorities.  The court rejected the receiver’s arguments that Georgia Bar Rule 1.13(b), which requires a lawyer to report certain legal violations to the highest internal authority in the organization, required reporting to the SEC because the SEC could appoint a receiver to take over and liquidate the investment firm.  The court also rejected the argument that external reporting would not have violated the law firm’s duty of confidentiality.  The court expressed concern about the implications, including the chilling effect on attorney-client relationships, of imposing an obligation to report violations of law to external authorities, and concluded by observing that “Securities lawyers are not informants for the SEC.”