Final answer:
Under the Sarbanes-Oxley Act, an attorney must report material violations of securities law to the company's chief legal counsel or CEO and, if unaddressed, then potentially to the SEC. Thus, the correct answer to the student's question is option (C).
Step-by-step explanation:
Under the Sarbanes-Oxley Act, which was enacted in response to major accounting scandals to protect investors and enhance the accuracy of and reliability of corporate disclosures, lawyers have a duty to report evidence of a material violation of securities laws or breach of fiduciary duty by the company or any agent of the company. Specifically, the act stipulates that:
- An attorney must report such evidence to the company's chief legal counsel or chief executive officer.
- If the response from the chief legal counsel or chief executive officer is not appropriate, or they do not appropriately respond, the attorney is required to report to the audit committee, another committee of the board of directors, or the board itself.
- If the company fails to make an appropriate response, the attorney must report the violation to the Securities and Exchange Commission (SEC).
Therefore, of the options provided, (C) is accurate: if the audit committee fails to remedy any material violations of the federal securities law, the attorney must report the violation to the SEC. Options (A) and (B) are partially correct; an attorney does indeed need to report securities law violations to corporate officers but can eventually report to the SEC if necessary, and while attorneys are generally bound by confidentiality, certain exceptions apply under the Act when it comes to preventing or addressing fraud.