One of my colleagues and I were busy the last two week defending an SEC administrative proceeding out-of-town, so I have not had much chance to blog. But…there was one development during our hearing that merits some immediate attention.

My client has been accused, essentially, of making a number of material misrepresentations and omissions in a series of Offering Memoranda. In support of its case, the Division of Enforcement put one of the investors on the stand to testify about his experience and whether one of the alleged misrepresentations was important to his investment decision. (For what it’s worth, this was over our objection, given that the standard of “materiality” is objective, not subjective, so who really cares what any particular investor has to say on this subject. The ALJ agreed with our statement of the standard; but, he felt customer testimony would help “inform” his judgment of what is reasonable under the circumstances.)

At some point, testimony was adduced from the witness that his investment has not lost any money, and has continued to pay the required return each month like clockwork. The customer was still unhappy, however, as he was, apparently, hoping to have gotten his money back sooner. To drive home how he currently feels about his investment, he asked my colleague – unbidden and unsolicited – during cross if, perhaps, she would be interested in taking his investment off his hands. She laughed. I laughed. The court reporter laughed. Most importantly, the ALJ laughed.

The Division of Enforcement, however, did not. In fact, they lodged an objection on the record, insisting that this “was not” humorous.

To his credit, the ALJ dutifully overruled the objection, and declared the statement was, in fact, funny.

So, if anyone ever tells you that in their opinion the SEC has no sense of humor, you can tell them that it’s not only true, but that they have gone so far as to object to its very existence.