Rules of Practice; Technical Amendments and Corrections — SEC — US

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. 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.

Federal Register / Vol. 60, No. 173 / Thursday, September 7, 1995 / Rules and Regulations 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-bycase 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:
§ 201.100 [Corrected]

On page 32797, in the eighth line
of the first column, in § 201.100(b)(2) ‘‘17 CFR 200.42.’’ is corrected to read ‘‘17 CFR 200.43.’’ § 201.230 [Corrected]
On page 32807, in the first column,
in § 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

46500 Federal Register / Vol. 60, No. 173 / Thursday, September 7, 1995 / Rules and Regulations Regulation, or the Division of Investment Management.’’ § 201.430 [Corrected]
3. On page 32814, in the first column,
last line, in § 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 § 201.430(c) the reference to ‘‘200.30–17’’ is corrected to read ‘‘200.30–18’’. § 201.431 [Corrected]
5. On page 32814, in the second
column, in the sixth line of § 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