The Lawyers column in the Oct. 20 edition of Washington Business, written by Jerry Knight, discussed some of the views on legal ethics of the chairman of the Securities and Exchange Commission, Harold M. Williams. Unfortunately it passes on, as gospel truth, a misconception about legal ethics that Chairman Williams shares with many members of the public, the bench and the bar.

That misconception is that the American Bar Association is the only source of ethical standards for lawyers. Coupled with it is the false implication that the current draft of a new ethics code, written by an ad hoc ABA Commission to Evaluate Professional Standards, represents the views of the ABA, let alone the views of most lawyers.

Not very long ago, the ABA was the emperor of ethics and its writ ran throughout the land. But then, in 1975, the Supreme Court held that professional associations that enforced anticompetitive codes of ethics did so in violation of the federal antitrust laws.

In 1976, the Justice Department sued the ABA for restraining competition among lawyers by promulgating and enforcing its Code of Professional Responsibility. The ABA quickly took cover, arguing that its code was merely a model published to advise the state cohurts on the standards that they, the courts, should enforce.

That theory was vindicated by the Supreme Court in 1977, but with an ironic twist. The court held that the enforcement of state codes by the courts, or by local bar associations empowered by the courts, was "state action" and thus exempt from the antitrust laws. But it also held that, as state action, the codes' provisions were subject to constitutional challenge. It threw out the most anticompetitive parts of the standard ABA code, adopted by almost all states, as contrary to the First Amendment.

The full extent of this irony emerged only last May, when the Supreme Court held that state supreme courts and bar associations, as enforcers of unconstitutional codes, were subject to federal suits to prohibit their enforcement and must pay the attorneys' fees of lawyers and consumer groups who won such suits. It thus became clear not only that the ABA had been leading the states down the garden path with its code, but that it was sticking them with the bill for its indiscretions.

State bars and courts already had become somewhat skeptical of the ABA's omniscience after the 1977 decision. Very few had adopted, as written, the ABA's replacements for the rules the court had held unconstitutional. They started to pick and choose and even to go their own ways. That skepticism -- and that healthy, independent spirit of deciding for themselves what the standards for lawyers' conduct should be -- have since been substantially enhanced by the money motive, provided by the 1980 decision.

Nothing daunted, the ABA commission has proposed a root-and-branch revision of the ABA's 1969 code, published in draft form in January. The arrogance of that action is best exemplified by the response of the commission's chairman, Robert J. Kutak of Omaha, to the news that the Association of Trial Lawyers of America was forming a similar commission. Writing a code was easy, the ABA Journal quotes him as saying: "I'm only perplexed at how they would enforce it."

Given the recent history of the ABA's own code, one must wonder how the commission is going to get its code enforced, Opposition to it has been both widespread and intense: The California State Bar recently voted overwhelmingly to reject it, and it was only the largest, not the first, state bar to do so.

Meanwhile, Kutak has refused consistently to debate the proponents of the ATLA draft code, published in June, before state bar groups. In addition, yet a third draft code now has been published, that of the National Organization of Bar Counsel. This is of the national association of disciplinary prosecutors, the lawyers charged with enforcing the present ABA code, who will be similarly responsible for any new code.

The NOBC and ATLA drafts both differ substantially from the ABA-Kutak commission draft. NOBC deletes the provision to which SEC Chairman Williams refers, which explicitly approves of a lawyer's serving on the board of directors of a company that is a client of the lawyer's firm, either with shareholder consent or without such consent "when doing so would not involve serious risk of conflictg between the lawyer's responsibilities."

ATLA's American Lawyer's Code of Conduct explicitly rejects the practice, which the Kutak commission says "is often useful." While recognizing that lawyers often do legal work for small corporations in which they are substantial investors, the ALCC proposes an absolute prohibition in the case of larger enterprises:

It states that a lawyer shall not act as officer or director of a publicly held corporation that is a client of the lawyer, of the lawyer's partner or associate, or of any firm or attorney with whom the lawyer has a counsel relationship.

No ifs, no ands, no buts. The ALCC regards such a relationship as inherently fraught with conflict of interest. The lawyer on the corporate board always has an interest that may conflict with the corporation's: keeping the corporation as a client. Such a lawyer cannot give the corporate client the dispassionate, independent advice it needs, particularly in dealing with the SEC.

That is an important principle. Indeed, it is the principle that permeates the American Lawyer's Code and is substantially compromised by the Kutak commission's draft: The principal purpose of a code of conduct for lawyers should be to further the right of every prospective client to the effective assistance of counsel.

That right, guaranteed by the Fifth and Sixth Amendments, depends upon the lawyer's ability to give good advice, both unfettered by conflict of interest and based on all information that may possibly be relevant to such advice. Clients must be able to talk to their lawyers in absolute confidence, and absolute confidentiality, or the right to counsel is meaningless.

Williams and Kutak both fail to realize how important this is. They would require lawyers to reveal clients' secrets and confidences, to serve the public interest, They do not understand that lawyers serve the public interest by serving the interests of each individual client, one at a time -- particularly when their client interests are adverse to what the SEC, or any other agency of government, may mistakenly view as the public interest.

No citizen is more in need of effective counsel than when he or she is opposed by the government.

That is why many lawyers and bar assiciations, including both ATLA and the ABA, are opposed to having new ethical standards for the legal professional developed or enforced by the SEC and other government agencies. p

Like the lawyer-director, the SEC has an inherent conflict of interest. It is a partisan in the very fray it seeks to adjudicate, because it only enforces its standards against lawyers who "interfere" with its enforcement programs.

That is why the American system has assigned the function of disciplining lawyers and of determining what the standards for lawyers' conduct should be to the courts.

It is therefore a wonderful thing that America's judges are finally awakening to the fact that they are the guardians of American liberty when they sit as the gatekeepers of the legal profession.

One would not expect Williams to understand that. He thinks that the gatekeeper function belongs to his agency or to the ABA. It is high time that he reread Article III of the United States Constitution and read the judicial articles of some state constitutions. They assign all judicial powers, including that of disciplining lawyers, to the courts, Where they ought to be.