What potential issue exists if an issuer designates a firm to serve as underwriter's counsel?

Designating a firm to serve as underwriter's counsel can indeed raise concerns about conflicts of interest. The underwriter's counsel is typically responsible for ensuring that all legal aspects of the underwriting process are handled appropriately and that the interests of the underwriter, who is facilitating the issuance of the securities, are represented. If the firm designated as counsel has relationships or prior engagements with the issuer, there may be a perceived or actual conflict of interest. This could lead to situations where the counsel might prioritize the issuer's interests over the underwriter's, potentially compromising the objectivity and independence required in their advisory role. Conflicts of interest can undermine the underwriting process, affect due diligence, and ultimately impact the fairness and transparency of the issuance.

Other issues, such as a lack of expertise, increased costs, or miscommunication, might be relevant concerns in different contexts but do not specifically pertain to the fundamental concern that arises from the potential for conflicting loyalties in the role of underwriter's counsel. Conflicts of interest fundamentally challenge the integrity of the counsel's role in the transaction, making it the primary issue in this scenario.