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04/12/06
SEC
adopts new policy on media subpoenas following controversy
By MARCY GORDON
AP Business Writer
WASHINGTON (AP) -- The Securities and Exchange Commission
announced a new policy on subpoenaing journalists Wednesday,
responding to controversy over the agency's demands for records
from three online columnists.
The policy adopted by Commission Chairman Christopher Cox
and the other four SEC commissioners calls for the agency
to avoid issuing subpoenas "that might impair the news
gathering and reporting functions." Under the new guidelines,
any subpoena issued to a journalist must be approved by the
SEC's enforcement director.
On a case-by-case basis, the agency must try to strike a balance
between two public interests, the policy says: the free flow
of information and the effective enforcement of securities
laws. SEC attorneys must first try to exhaust other means
and sources of information in an investigation before turning
to media subpoenas.
The agency's attorneys should determine whether the information
from journalists is essential to successfully completing an
investigation and in some cases, should negotiate with journalists
or their lawyers to obtain the needed information from informal
means short of a subpoena, the policy says. If media subpoenas
are issued, they should be narrowly focused.
"Freedom of the press is of vital importance to the mission
of the Securities and Exchange Commission," the agency
said in a statement. "Effective journalism complements
the (SEC's) efforts to ensure that investors receive the full
and fair disclosure that the law requires, and that they deserve.
Diligent reporting is an essential means of bringing securities
law violations to light and ultimately helps to deter illegal
conduct."
At a news conference, Cox said the new policy is "completely
consistent with the norms, precedents and practices of the
Securities and Exchange Commission."
In late February, after news reports had appeared about the
SEC serving subpoenas for records on columnists in an investigation,
Cox took the unusual step of halting the agency's pursuit
of the subpoenas. He said SEC enforcement attorneys should
have consulted him because of the sensitivity of ordering
journalists to hand over records.
The subpoenas -- which went to Herb Greenberg of MarketWatch,
Carol Remond of Dow Jones Newswires and James Cramer, who
writes a column for TheStreet.com -- came at a time of acute
sensitivity over press freedom and government action against
journalists.
The SEC, an independent regulatory agency with only civil
powers, rarely subpoenas journalists or news organizations.
The three columnists were subpoenaed in early February for
telephone records, e-mails and other material related to online
retailer Overstock.com Inc. Their employers objected.
Overstock.com has accused the research firm Gradient Analytics
of issuing negative reports on the company in exchange for
payments from a hedge fund seeking to profit from a drop in
its stock price.
The SEC subpoenaed Gradient in the investigation late last
year. A second subpoena to the firm, dated March 10, sought
documents related to its contacts with journalists.
The new SEC policy differs in some respects from the one that
has been in effect at the Justice Department for several years.
That policy requires all subpoenas of journalists to be approved
by the attorney general. Under the new SEC guidelines, agency
attorneys must seek approval from the SEC enforcement director,
who will consult with the agency's general counsel. If the
enforcement director then decides to issue a media subpoena,
he or she must advise the SEC chairman of the action.
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On the Net:
Securities and Exchange Commission: http://www.sec.gov
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