Now that I reread it, my example was written in a way that may have made it unclear as to whether or not the senior associate was arguing on substantive grounds. If it helps, imagine that instead of what I wrote he or she simply said “I don’t think it needs to go in, it’s not material enough–let’s not spook investors for no reason”, but you still have a nagging feeling that it should go in. Maybe a little more reasonable-minds-can-differ that way.
And good luck trying to go over a senior associate’s head: they have 1000x the opportunity to throw you under the bus and land you the “time to move on” shpiel at your next annual review. If you escalate and threaten to quit every time you have a disagreement with those above you on a substantive issue (e.g. definition of “material” disclosure), you better not be bluffing because you’ll be looking for a job faster than you probably intended.
And I’m not sure what you mean by “doesn’t happen any more.” These types of conversations and (what I see as) the resulting ethical dilemmas happen every day at every major firm. Again, partially mitigated by the fact that counterparties are usually sophisticated (or, in the case above, the plaintiffs’ bar and the SEC always have 10b-5), but that doesn’t remove the issues entirely.