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03/07/06
SEC
will adopt new policy on media subpoenas following controversy,
chairman says
WASHINGTON (AP) -- The Securities and Exchange Commission
will adopt a new policy on subpoenaing journalists, SEC Chairman
Christopher Cox said in a move to resolve a controversy over
the agency's recent demands for reporters' records.
Cox and the other four SEC commissioners decided unanimously
at a closed-door meeting to issue "clear principles"
to guide agency attorneys on media subpoenas within the next
week or so, the chairman told reporters March 2.
On Feb. 27, after reports appeared about the matter, Cox took
the unusual step of halting the agency's pursuit of subpoenas
previously served on columnists for MarketWatch, Dow Jones
Newswires and TheStreet.com in an investigation into allegations
of stock manipulation. He suggested that SEC enforcement attorneys
should have consulted him or other agency officials before
issuing the subpoenas because of the sensitivity of ordering
journalists to hand over records.
The SEC, an independent regulatory agency with only civil
powers, rarely subpoenas journalists or news organizations.
"What didn't work in this case was that (the SEC public
affairs office) wasn't apprised," Cox said. "So
we weren't well equipped to respond."
Guidelines like those the SEC commissioners are contemplating
"can be very helpful as a statement to the troops,"
said Charles Davis, an associate professor at the Missouri
School of Journalism and executive director of its Freedom
of Information Center. "They send a very clear message
to the bureaucracy."
The new policy will lay out the circumstances under which
it is appropriate for journalists to be subpoenaed in SEC
investigations when other means of getting the information
are exhausted, Cox told reporters. It will not require agency
attorneys to get approval for individual subpoenas from the
commissioners but will call for consultation.
"This would not be Soviet Red Army rules," he said.
The two news organizations involved, Dow Jones & Co. (which
owns MarketWatch) and TheStreet.com, had objected to the subpoenas
issued in early February for telephone records, e-mails and
other material related to online retailer Overstock.com.
The company has accused the research firm Gradient Analytics
of issuing negative reports on the retailer in exchange for
payments from a hedge fund seeking to profit from a drop in
its stock price. Overstock has sued Gradient and the hedge
fund in question, Rocker Partners; they deny wrongdoing.
The three online columnists subpoenaed were Herb Greenberg
of MarketWatch, Carol Remond of Dow Jones Newswires and James
Cramer, co-founder and major shareholder of TheStreet.com,
who writes a column for the financial news Web site and is
the host of the "Mad Money" show on the CNBC cable
network. All three have written columns that were critical
of Overstock.com.
The Justice Department has guidelines that require prosecutors
to get approval for individual subpoenas to journalists from
the department's public affairs director and either the attorney
general or deputy attorney general.
Such a stricter approach also "would be appropriate"
for the SEC, said Lucy Dalglish, executive director of the
Reporters Committee for Freedom of the Press.
For the Justice Department, where the guidelines have been
in effect for several decades, they "have put the brakes
on (issuance of subpoenas) and have provided for high-level
scrutiny," Dalglish said.
On the Net:
http://www.sec.gov
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