Multistate Professional Responsibility Exam Practice Question
A business entity retains a lawyer to prepare an evaluation of its debt structure for review by prospective investors. The business entity wants the lawyer’s report to show confidence in its long-term financial soundness, but certain confidential data might indicate concerns about large outstanding liabilities. Which choice best reflects the lawyer’s responsibility as an evaluator?
Discuss the legal ramifications regarding misleading investors
Decline to mention any liabilities to the prospective investors to protect the entity’s reputation
Discuss the liabilities with the client and obtain approval to address them in the evaluation without misleading the investors
Refuse the engagement because confidentiality prohibits the lawyer from releasing any information to third parties
A lawyer who prepares an evaluation that a client intends to share with others must disclose relevant facts and present an objective analysis when those facts could influence the value of the evaluation. While the lawyer should respect confidentiality, obtaining appropriate client consent and conveying necessary information prevents misleading the intended audience. An answer that withholds important negative details or declines the evaluation outright ignores the possibility of balancing confidentiality with accurate disclosure. Another option that offers minimal or overly optimistic statements without addressing pending liabilities may confuse third parties and risk ethical violations, as the evaluation would not be objective.
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What does it mean to maintain client confidentiality in legal practice?
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What are the legal ramifications of misleading investors?
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