E-Discovery in SEC and FINRA Investigations

http://ow.ly/78PUy

An article by Rachel Tausend and Josh Dutill appearing on law.com and published by the Legal Intelligencer.

This article discusses eDiscovery in the context of how it applies in SEC. investigations as well as FINRA investigative proceedings.  The authors state, "The failure to know and comply with the requirements and expectations for e-discovery in these contexts can have a number of adverse consequences for both firms and their personnel, as well as potentially for their counsel. This article highlights some of the key requirements and considerations in identifying, collecting and producing ESI to the SEC or FINRA during an investigation."

The article discusses the SEC Enforcement manual, and states, "The manual includes specific guidelines for document production that should be included in a subpoena or in the cover letter accompanying a subpoena. SEC staff are encouraged to request the production of documents in electronic format, because, among other reasons, it may allow the staff to search for specific terms and to tag and review data more easily. The manual section addressing the format for electronic production of documents sets forth several detailed technical guidelines."

The article provides further discussion of SEC issues, such as Rule 83, and the treatment of certain types of documents as "Confidential".  The authors point out, "The FOIA confidential treatment procedures do not differentiate between different document types anddo not address the potential and practical complexities of requesting confidential treatment for ESI, particularly native files. Accordingly, an individual or entity producing ESI will need to consider the options for following the FOIA confidential treatment request procedures, particularly, in light of the SEC's Production Specifications, to determine the best approach in a given situation."

In addition, the article discusses the need to certify the completeness of a production to the SEC.  References for information on dealing with SEC subpoenas are also provided in the article.

Furthermore the article discusses some of the specific issues related to FINRA investigations. The article references Rule 8210 and states, "Failure to provide requested information is a violation of Rule 8210 and may result in serious sanctions. The complexities and challenges of efficiently and effectively identifying, collecting and producing ESI in private litigation and in SEC matters are also present in responding to a FINRA investigation."


The authors provide some advice on how to handle eDiscovery issues related to the SEC and FINRA, and the article also offers the following warning: "The SEC and FINRA, like many courts, have shown signs that they are increasingly impatient with a claimed lack of understanding of ESI- and e-discovery-related issues by parties and their counsel and will not hesitate to bring an action based on the failure to preserve or produce documents. Parties, including their counsel, that are not aware of the applicable e-discovery requirements and expectations in the context of SEC or FINRA investigations and fail to appropriately consider and follow them risk several potential undesirable consequences, ranging from higher-than-expected production costs or "do-overs" to serious sanctions."