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MSBA Objects to Gramm-Leach-Bliley Act
By Janet Stidman Eveleth

 To exempt lawyers from federal privacy provisions targeting financial institutions, the Maryland State Bar Association (MSBA) is supporting federal legislation which will amend the 1999 Gramm-Leach-Bliley Financial Modernization Act. On November 19, MSBA's Board of Governors voted to support federal corrective legislation seeking to exempt lawyers from a Gramm-Leach-Bliley Act provision requiring them to explain their privacy policies to individual clients and how the client’s personal financial information is shared with other businesses. MSBA, agreeing with the American Bar Association (ABA), believes that privacy protections legally enforced by attorney ethics rules in each state are much stronger public protections, rendering these notices overly broad and unnecessary.

When the Gramm-Leach-Bliley Act took effect in 1999, Title V required financial institutions to provide customers with periodic notices regarding the institution's privacy protection policies. It also empowered certain federal agencies, including the Federal Trade Commission (FTC), to enforce privacy protection regimes within those institutions. As most law firms can be characterized as financial institutions under this overly broad definition, the FTC determined in June 2001 that it had the authority to regulate the ethical duty of confidentiality that lawyers owe their clients.

The American Bar Association immediately asked the FTC to exempt lawyers from the requirements of Title V. The ABA argued that attorneys and law firms in every state are bound by a duty of confidentiality that is far more sweeping and protective of consumer privacy than are the Gramm-Leach-Bliley provisions. In addition, the law was drafted to regulate how financial institutions sell financial information about their customers. Lawyers have always been precluded by state law and ethics regulations from disclosing, much less selling confidential client information to anyone without client consent. Although the FTC has the authority under the statute to grant industry exemptions, the FTC has refused to exempt lawyers.

On September 25, 2002, the ABA filed a lawsuit in the U.S. District Court for the District of Columbia asking the Court to declare a subtitle of Title V of the Gramm-Leach-Bliley Act unlawful. Another lawsuit, drafted by the New York State Bar Association and joined by five other state bar associations, has also been filed previously in federal court. Under Subtitle A, the FTC is requiring all financial institutions, including lawyers and law firms, to send notices to individual clients explaining their privacy policies. The Bar seeks an exemption for lawyers because they are already governed by strict ethical rules under each state’s Code of Professional Conduct.

On that same day, Representatives Judy Biggert (R-Ill.) and Carolyn Maloney (D-NY), working with the ABA, introduced HR 5457 to clearly exempt lawyers from Title V, Subtitle A. Known as the Judicial Code of Conduct Privacy Clarification Act, this proposed legislation clarifies that attorneys are not subject to the Gramm-Leach-Bliley Act notification provisions. The organized Bar is working toward passage of this key legislation.

Thus, the MSBA is joining the ABA in its legislative pursuit to remove lawyers from the provisions of this Act. MSBA has sent a letter to support this corrective legislation to Maryland's Representatives and Senators.