Thursday, May 25, 2023

SEC Changes Introductory Disclaimer - Likely In Response to Discovery Dispute

If you regularly read speeches given by SEC Commissioners and staff, you may have noticed a change in the standard opening.  For most of my career, the remarks always began with something to this effect:

Before I begin, I must give the customary disclaimer that the views I express today are my own and do not necessarily reflect the views of my fellow commissioners or the staff.

That standard disclaimer came from Commissioner Crenshaw on March 30, 2023 in the opening to her remarks to the Fixed Income Forum.  And about a month ago, Chair Gensler's standard disclaimer on April 24, 2023 to the Annual Small Business Forum came out as:

As is customary, I would like to note that my views are my own, and I’m not speaking on behalf of the Commission or SEC staff.

But something has changed.  Chair Gensler gave the disclaimer this way on May 10, 2023 in remarks to the Municipal Securities Disclosure Conference:

My views are my own as Chair of the SEC, and I am not speaking on behalf of my fellow Commissioners or the staff (emphasis added)

This change continues forward to Chair Gensler's remarks today to to the Investment Company Institute:

As is customary, I’d like to note that my views are my own as Chair of the Securities and Exchange Commission, and I’m not speaking on behalf of my fellow Commissioners or the SEC staff (emphasis added)

It appears that the custom has changed and the introductory disclaimer now includes a note that remarks are in an official's capacity.  You can also see this in Commissioner Udeya's remarks at the MFA Global Summit on May 16.  He put it this way:

I would like to share remarks that reflect my views as an individual Commissioner of the SEC and do not necessarily reflect the views of the full Commission or my fellow Commissioners. (emphasis added)

The changed language likely results from discovery disputes in SEC vs. Ripple Labs.  Some news reports have covered the SEC being forced to turn over documents related to a 2018 Speech by William Hinman, then the SEC's Director for the Division of Corporation Finance.  

I poked around the docket in that case and found an order finding that internal discussions about the Hinman speech were discoverable and not protected by the Deliberative Process Privilege (DPP) because Hinman was communicating his own opinions and they did not "relate to some form of agency position, decision, or policy".  This is some relevant language from the opinion:

The DPP “is a form of executive privilege” that “shields from disclosure documents reflecting advisory opinions, recommendations and deliberations comprising part of a process by which governmental decisions and policies are formulated.” U.S. Fish & Wildlife Serv. v. Sierra Club, Inc., 141 S. Ct. 777, 785 (2021) (quotation marks and citation omitted).

The DPP applies to documents that are “predecisional” and “deliberative.” Id. at 785–86. Documents are “predecisional if they were generated before the agency’s final decision on the matter, and they are deliberative if they were prepared to help the agency formulate its position.” Id. at 786 (quotation marks omitted). Judge Netburn determined that the DPP does not apply to the Internal Speech Documents because those documents were intended to facilitate the communication of Hinman’s own opinions regarding the application of the securities laws to digital asset offerings and not the opinions of the SEC. Order I at 14; Order II at 5–7. The SEC argues that Judge Netburn’s conclusion constitutes an error of law because Second Circuit precedent states that “subjective documents which reflect the personal opinions of the writer rather than the policy of the agency” are protected by the DPP. See SEC Objs. at 13 (quoting Tigue v. U.S. Dep’t of Just., 312 F.3d 70, 80 (2d Cir. 2002)) (emphasis omitted). But this argument fails to recognize that documents reflecting such personal opinions are protected only when they relate to some form of agency position, decision, or policy. Cf. Sierra Club, Inc., 141 S. Ct. at 785. Because Judge Netburn determined that the Internal Speech Documents did not relate to an agency position, decision, or policy, Order I at 14; Order II at 5–6, her conclusion is not contrary to law.

To bring this full circle, this is probably the reason why the language in the disclaimer has changed to include some statement that the remarks are in their official capacity.  I don't know if other litigants will have the same success as Ripple did in getting access to internal documents, but I would expect defendants to try if they can find some hook to argue that the documents should be provided in discovery.

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