Practice alert: Law firms must send privacy notices to clients by
July 1, 2001
June 21, 2001
Provisions of a federal law enacted in late 1999 under
the "Gramm-Leach-Bliley Act" became effective on July 1, 2001. The law
requires every "financial institution" that provides certain financial
services to its individual clients to send them a notice explaining its
privacy policies by July 1, 2001.
To the surprise of many, the Federal Trade Commission (FTC), which
has the legal responsibility to enforce the Act's provisions, determined
in mid-June that law firms are "financial institutions" under the Act.
Therefore, law firms are required to send privacy notices by July 1,
2001, to individual clients who receive covered financial services from
them. Covered financial services include tax planning and
preparation, certain real estate settlement services, and other types of
financial services provided "primarily for personal, family, and
Even though professional standards of client confidentiality are more
stringent than those imposed by the Act, the Act's provisions still
Sanctions for failure to comply. According to a memo
from the Philadelphia Bar, financial institutions may be precluded from
divulging any private information if they fail to comply with the notice
rules. Since a law firm is already precluded from such actions, that
sanction would have no meaning. And while there may be issues with
respect to the agency's regulating lawyers' activities, the FTC is
empowered to require compliance and may impose a $10,000 fine per
failure to comply. The FTC also is authorized to grant exemptions to the
The ABA responds. The ABA Board of Governors passed
a resolution on June 8 calling for the FTC to issue an administrative
ruling exempting the practice of law from the statute's implementing
regulations. It is not known when the FTC will respond.
The ABA Center for Continuing Legal Education and Taxation and Tort
& Insurance Practice sections recently offered a teleseminar on the
Act, including articles to help law firms identify to whom the Act
applies and how to comply, an alert from the Philadelphia Bar with
sample model notice, and the Fair Debt Collection Practices Act. To
purchase the seminar audiotape or access an online pay per listen
version of the program, go to the ABA Web site at www.abanet.org/cle.
What to do if you missed the July 1 deadline. Law
firms should send privacy notices to individual clients as near the July
1 deadline as possible. "The notice needn't be complicated or lengthy
for most lawyers. A more difficult issue is determining to whom to send
it," says Charles Horn, partner of Mayer, Brown & Platt in the
firm's Washington, D.C. office and a panelist for the ABA's
For more information. The State Bar of Wisconsin Taxation
Law and Real
Property, Probate and Trust Law sections have developed a "Practice
Alert" that provides a synopsis of the Act and a sample privacy
The Gramm-Leach-Bliley Act of 1999 is available at www.ftc.gov/privacy/glbact/glbsub1.htm.
The FTC regulations pursuant to the Act are available at www.ftc.gov/os/2000/05/65fr33645.pdf.