In a mixed result, the SEC met with partial success with two discovery orders from New York and Chicago courts.
In the New York matter, the federal court ordered a former investment advisor to produce to the SEC 60 e-mails that he had sent to his wife. The court held that the former investment advisor had no expectation of privacy since the e-mails were sent on the firm’s e-mail system, and, as such, were open for disclosure. The court focused on the fact that the former investment advisor was aware of the firm’s policy that these e-mails were subject to inspection and may be disclosed if the issue arose.
However, the SEC was less successful when an Illinois federal court issued a protective order that barred the SEC from disclosing certain discovery materials it had obtained. The court held that the protective order was necessary since the SEC had made very broad discovery requests and that the defendants would have to produce numerous confidential financial and business materials that would uncover various businesses strategies. The court did permit the SEC to share the material within the Commission and with other government agencies.
These two cases highlight the fact that, in federal court actions, the SEC’s tactics will not be “rubber stamped.” Consequently, those engaged in SEC litigation should take some solace that the federal courts are not letting the SEC run amok.