95-22110. Rules of Practice; Technical Amendments and Corrections  

  • [Federal Register Volume 60, Number 173 (Thursday, September 7, 1995)]
    [Rules and Regulations]
    [Pages 46498-46500]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 95-22110]
    
    
    
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    SECURITIES AND EXCHANGE COMMISSION
    
    17 CFR Part 201
    
    [Release No. 34-36174; File No. S7-40-92]
    RIN 3235-AF91
    
    
    Rules of Practice; Technical Amendments and Corrections
    
    AGENCY: Securities and Exchange Commission.
    
    ACTION: Technical amendments and corrections to final rules.
    
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    SUMMARY: This document contains technical amendments and corrected 
    comments for the Securities and Exchange Commission's Rules of Practice 
    adopted on June 9, 1995 and published Friday, June 23, 1995 (60 FR 
    32738). The Rules of Practice are the procedural rules that govern 
    Commission administrative proceedings.
    
    EFFECTIVE DATE: September 5, 1995.
    
    FOR FURTHER INFORMATION CONTACT: Andrew Z. Glickman, Office of the 
    General Counsel at (202) 942-0870; U.S. Securities and Exchange 
    Commission; 450 Fifth Street, NW., Stop 6-6; Washington, DC 20549.
    
    SUPPLEMENTARY INFORMATION:
    
    Background
    
        The Commission recently consolidated its inspection and examination 
    functions from the Divisions of Market Regulation and Investment 
    Management into a new office--the Office of Compliance Inspections and 
    Examinations. See 60 FR 39643 (Aug. 3, 1995) (establishment of office 
    and delegation of authority). This release contains technical 
    amendments to reflect these changes in the Rules of Practice and 
    corrections to the comments associated with the changed rules. This 
    release also corrects a citation error.
        Comments (a) and (b) to Rule 230 (which originally appeared in the 
    Supplementary Information section on page 32762, in the tenth line of 
    the first column) are corrected to read as follows:
        Comment (a): A respondent's right to inspect and copy documents 
    under this rule is automatic; the respondent does not need to make a 
    formal request for access through the hearing officer. Generally, the 
    rule requires that the Division of Enforcement make available for 
    inspection and copying documents obtained by the Division from persons 
    not employed by the Commission during the course of its investigation 
    prior to the institution of proceedings. 
    
    [[Page 46499]]
    Final inspection or examination reports prepared by the Office of 
    Compliance Inspections and Examinations, the Division of Market 
    Regulation or the Division of Investment Management, may be attorney 
    work product, and other privileges may apply to such reports. 
    Nonetheless, the Commission has determined as a general matter that 
    these final reports will be made available, but only to named 
    respondents in Commission-initiated adjudicative proceedings. This rule 
    does not restrict the Commission's ability to withhold these reports 
    from public disclosure in other contexts, such as pursuant to a request 
    under the Freedom of Information Act. 5 U.S.C. 552.
        Rule 230 is not the exclusive means by which a respondent may 
    obtain access to or production of documents. Production of documents 
    prepared by the staff may be required under the doctrine of Brady v. 
    Maryland, 373 U.S. 83 (1963), or pursuant to Jencks Act requirements 
    made applicable to the Commission pursuant to Rule 231, or may be 
    sought by subpoena pursuant to Rule 232 or through other procedures. 
    See, e.g., Freedom of Information Act, 5 U.S.C. 552.
        The Rule states that the Division of Enforcement shall (1) make 
    available for inspection and copying (2) documents (3) obtained by the 
    Division (4) in connection with the investigation leading to the 
    institution of proceedings.
        (1) The Division of Enforcement is required to make documents 
    available for inspection and copying. It is not required to produce a 
    copy of the documents to each respondent.
        (2) The definition of the term ``documents'' in paragraph (a) is 
    modeled on the definition of documents in Rule 34 of the Federal Rules 
    of Civil Procedure.
        (3) The Division of Enforcement's obligation under this rule 
    relates to documents obtained by the Division of Enforcement. Documents 
    located only in the files of other divisions or offices are beyond the 
    scope of the rule.
        (4) The ``investigation leading to the Division's recommendation to 
    institute proceedings'' ordinarily is delineated by the investigation 
    number or numbers under which requests for documents, testimony or 
    other information were made. When an investigation is initiated by the 
    Division of Enforcement it is assigned a number, often referred to as 
    the ``case'' or ``investigation'' number. Each request for documents, 
    testimony or other information from persons not employed by the 
    Commission specifies the investigation or preliminary investigation 
    number to which it relates. In turn, each written recommendation by the 
    Division of Enforcement to institute proceedings identifies on its 
    cover page, by investigation number, the source investigation or 
    investigations to which it relates. Accordingly, the identity and 
    content of the appropriate investigation file or files from which 
    documents must be made available can be based on objective criteria.
        Comment (b): Under paragraph (b), the Division can withhold 
    documents under four exceptions. Exception (1) shields information 
    subject to a claim of privilege. Exception (2) protects as attorney 
    work product internal documents prepared by Commission employees, which 
    will not be offered in evidence. Work product includes any notes, 
    working papers, memoranda or other similar materials, prepared by an 
    attorney in anticipation of litigation. See Hickman v. Taylor, 329 U.S. 
    495 (1947); see also Fed. R. Civ. P. 26 (b)(3) and (b)(5). Except to 
    the limited extent specifically provided in paragraph (a), documents 
    prepared by Commission staff are treated as attorney work product, and 
    do not have to be made available pursuant to this rule. Accountants, 
    paralegals and investigators who work on an investigation do so at the 
    direction of the director, an associate director, an associate regional 
    administrator or another supervisory attorney, and their work product 
    is therefore shielded by the rule. A respondent's claim that work 
    product should be turned over will necessarily be evaluated on a case-
    by-case basis.
        Exception (3) protects the identity of a confidential source. See 5 
    U.S.C. 552(b)(7) (C) and (D). Exception (4) protects any other document 
    or category of documents that the hearing officer determines may be 
    withheld as not relevant to the subject matter of the proceeding, or 
    otherwise for good cause shown. This exception provides a mechanism to 
    address a situation where a single investigation involves a discrete 
    segment or segments that are related only indirectly, or not at all, to 
    the recommendations ultimately made to the Commission with respect to 
    the particular respondents in a specific proceeding. To require that 
    documents not relevant to the subject matter of the proceeding be made 
    available, simply because they were obtained as part of a broad 
    investigation, burdens the respondent as well as the Division of 
    Enforcement with unnecessary costs and delay.
        For example, a single investigation may encompass inquiry into an 
    issuer's allegedly false accounting disclosure and an unrelated 
    manipulation of the issuer's securities by a third party. If the 
    recommendation to the Commission and resulting administrative 
    proceeding involve only the accounting disclosures, the Division could 
    seek leave to withhold trading records, transcripts and other documents 
    related to the manipulation investigation.
        Comment (a) to Rule 430 (which originally appeared in the 
    Supplementary Information section on page 32777, in the fifth line of 
    the second column) is corrected to read as follows:
        Comment (a): Congress granted the Commission explicit authority to 
    delegate certain functions to an individual commissioner, division 
    directors and others in 1962. Pub. L. No. 87-592, 76 Stat. 394. This 
    authority appears in Sections 4A and 4B of the Exchange Act, 15 U.S.C. 
    78d-1 and 78d-2, and was amended most recently in 1987. See Pub. L. No. 
    100-181, Title III, section 308(a), 101 Stat. 1254. The predecessor 
    rule to Rules 430 and 431, former Rule 26, was adopted in 1963. See 
    Securities Act Release No. 4588 (Mar. 8, 1963) (adopting release).
        Due to the different nature of matters delegated to hearing 
    officers, senior staff or the duty officer, the Commission's rules 
    provide different mechanisms for review of such actions. See Rules 410 
    and 411 (procedures relating to initial decisions by a hearing 
    officer); 17 CFR 200.42 (procedures relating to duty officer). Rule 430 
    relates to certain delegations made to staff. It applies only to review 
    of actions taken pursuant to authority delegated in 17 CFR 200.30-1 
    through 200.30-18. Authority delegated by other provisions--for 
    example, the delegation of authority to issue subpoenas pursuant to a 
    private order directing investigation (``formal order'')--is not 
    subject to the Rule.
    
    Correction of Publication
    
        Accordingly, the publication on June 23, 1995 of the final Rules of 
    Practice, which were the subject of FR Doc. 95-14750, is corrected as 
    follows:
    
    
    Sec. 201.100  [Corrected]
    
        1. On page 32797, in the eighth line of the first column, in 
    Sec. 201.100(b)(2) ``17 CFR 200.42.'' is corrected to read ``17 CFR 
    200.43.''
    
    
    Sec. 201.230  [Corrected]
    
        2. On page 32807, in the first column, in Sec. 201.230, paragraph 
    (a)(1)(vi) is corrected to read as follows:
        ``(vi) Any final examination or inspection reports prepared by the 
    Office of Compliance Inspections and Examinations, the Division of 
    Market 
    
    [[Page 46500]]
    Regulation, or the Division of Investment Management.''
    
    
    Sec. 201.430  [Corrected]
    
        3. On page 32814, in the first column, last line, in 
    Sec. 201.430(a) the reference to ``200.30-17'' is corrected to read 
    ``200.30-18''.
        4. On page 32814, in the second column, in Sec. 201.430(c) the 
    reference to ``200.30-17'' is corrected to read ``200.30-18''.
    
    
    Sec. 201.431  [Corrected]
    
        5. On page 32814, in the second column, in the sixth line of 
    Sec. 201.431(a) ``200.30-17'' is corrected to read ``200.30-18''.
    
        Dated: August 31, 1995.
    
        By the Commission.
    Margaret H. McFarland,
    Deputy Secretary.
    [FR Doc. 95-22110 Filed 9-6-95; 8:45 am]
    BILLING CODE 8010-01-P
    
    

Document Information

Effective Date:
9/5/1995
Published:
09/07/1995
Department:
Securities and Exchange Commission
Entry Type:
Rule
Action:
Technical amendments and corrections to final rules.
Document Number:
95-22110
Dates:
September 5, 1995.
Pages:
46498-46500 (3 pages)
Docket Numbers:
Release No. 34-36174, File No. S7-40-92
RINs:
3235-AF91
PDF File:
95-22110.Pdf
CFR: (7)
17 CFR 201.430(a)
17 CFR 201.431(a)
17 CFR 201.100(b)(2)
17 CFR 201.100
17 CFR 201.230
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