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SEC Changes Tune on Privilege
In enforcement manual, staff directed not to ask for attorney-client privilege waiver
The National Law Journal
October 20, 2008
The Securities and Exchange Commission, releasing its enforcement manual publicly for the first time, 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, known among practitioners as the "Red Book," has never been available to those outside of the SEC, and is designed only to provide guidance to the staff of the Enforcement Division in the investigation of potential violations of the securities laws.
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.
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."
It adds that all decisions about potential waivers are to be reviewed by the assistant supervising the matter and may involve more senior members of management.
"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.
If a party seeks cooperation credit for timely disclosure of relevant facts, the manual adds, that party must disclose all such facts within the party's knowledge. "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, said the manual language 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."
Although the manual claims the relevant inquiry is going to be whether relevant facts have been disclosed, Martz added, "It will be interesting to see how this works if you do have facts and its work product, and the government wants them."
The NACDL is a member of a coalition of business, civil rights and legal organizations that has pushed for legislation prohibiting all federal agencies from seeking privilege waivers as evidence of cooperation in corporate investigations.
"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."
