YOU ARE A reputable lawyer representing a financial wheeler-dealer and you learn that he is about to commit a gigantic stock fraud, deceiving the public and bilking innocent investors out of millions of dollars. Another client has confided that he intends to murder his rich Uncle Humphrey at 8 o'clock next Friday night and shows you the gun he has bought to do the dirty deed. A third client is on trial for burglary, and, after testifying that he was in church the whole time the crime was being committed, confesses to you, his attorney, that his alibi was lifted from a television play he was watching while counting the loot from the burglary. What is your duty to your client, to the judicial system, to the public at large in each of these cases?

These questions of client confidentiality have occupied the American Bar Association Commission on Evaluation of Professional Standards--the Kutak Commission--for more than five years. Charged with revising the code of ethics for lawyers, the commission proposed a number of changes affecting matters ranging from relationships within law firms to the setting of legal fees. But by far its most controversial recommendations dealt with the attorney-client relationship.

To the layman, the obvious response to the situations described above would be to call the cops. But lawyers argue that if they are to do their job, they must have the confidence of their clients and that requires, to some extent, an assurance that they will not act against a client's behalf under any circumstances. The Kutak Commission weighed these conflicting values and recommended that lawyers be permitted to make disclosures--even against the interest of the client--to prevent serious harm to individuals or the public.

This week, the ABA's House of Delegates assessed the commission's report and voted to cut the heart out of it. On a vote of 207 to 129, the bar leaders conceded that while it would be all right for a lawyer to warn Uncle Humphrey that he is about to be murdered or maimed, the lawyer is forbidden to warn of imminent "injury to the financial interests or property of another." There is to be no whistle- blowing on the embezzler, the stock manipulator, the corporate officer bilking the stockholders--in short, the kind of criminal activity most likely to come to the attention of a diligent attorney. His only recourse is to resign from the case. In a concession to maintaining the integrity of the judicial system, however, the House of Delegates did accept a commission recommendation requiring lawyers to disclose a client's perjury in court.

The Kutak Commission was right in opting for protection of the public over lawyer-client confidentiality in certain grievous circumstances. The vote of the House of Delegates to reject this recommendation offends "common sense and common morality," as one lawyer put it. There will be a chance for final reconsideration of the code when the annual meeting of the ABA convenes in August. There is still time for the ABA to do the right thing and adopt a code that puts the public interest first.