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SEC Publishes Contents of Its Enforcement Manual

The Securities and Exchange Commission has for the first time publicly released its enforcement manual, also known as the “Red Book.”

According to The National Law Journal, the manual, designed to provide officials with the SEC’s Enforcement Division guideline to investigate possible violations of securities laws, “directs its staff not to ask a party to waive the attorney-client or work-product privileges, but to refer all potential waiver issues to supervisory staff.”

“The manual addresses the privilege waiver issue as well as a number of areas that should aid practitioners, including the evaluation of possible investigations, issuing Wells letters, communicating with senior SEC officials, responding to document subpoenas, “witness assurance” letters and contacting current and former employees,” The National Law Journal reported. “In the privilege section, the manual contains the following statement in bold face type: “The staff should not ask a party to waive the attorney-client or work product privileges and is directed not to do so.”

“The Enforcement Division’s central concern is whether the party has disclosed all relevant facts within the party’s knowledge that are responsive to the staff’s information requests, and not whether a party has elected to assert or waive a privilege,” the manual states.

“On request, and to the extent possible, the staff should continue to work with parties to explore alternative means of obtaining factual information when it appears that disclosure of responsive documents or other evidence may otherwise result in waiver of applicable privileges.”

Stephanie Martz, director of the white-collar crime project of the National Association of Criminal Defense Lawyers, told The National Law Journal that the language used in the manual appears to be a “hybrid” of recent approaches by the Department of Justice.

“I think on the positive side, it seems to recognize there is a problem,” she said. “There is a line where staff is specifically instructed not to ask for waivers, but on the other hand, that’s followed by the statement that says supervisors can approve it.”

“The bottom line is it is another illustration why we need legislation,” said Martz of the manual. “Only legislation is going to give us consistent policy from agency to agency. We’re happy to see it and glad the SEC wrote it, but we still have the same concerns.” 

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