During discovery in an SEC administrative and cease-and-desist proceeding instituted in December 2012 (pursuant to Sections 9(b) and 9(f) of the Investment Company Act of 1940)[1] the SEC Division of Enforcement (DOE) inadvertently produced 11 privileged e-mails to the respondents.  This is noteworthy because the production included an e-mail forwarding a whistleblower complaint from the SEC Tips, Complaints, and Referrals (TCR) system.

On January 18, 2013, the DOE was so notified by respondents’ counsel and requested identification of the potentially privileged e-mails.  On January 23, 2013, the DOE asserted “privilege as to internal e-mails among the staff, as well as any draft or final action memos.”  On January 30, 2013, the independent directors disclosed one of the privileged e-mails as an attachment to a “Supplemental Response” to the DOE’s Motion to Strike and did not file it under seal.  In response, on February 11, 2013, the DOE filed a Motion for Protective Order Sealing the Independent Directors’ Supplemental Response in Opposition to the DOE’s Motion to Strike. 

The DOE sought the following relief: a protective order; findings that the 11 e-mails are privileged, that the DOE did not waive any privilege by the inadvertent production, and that the emails are inadmissible; and that respondents return or destroy all copies of the e-mails. 

The ALJ determined that that the e-mails fell into the following categories:

  1. An e-mail forwarding a complaint from the TCR system;
  2. E-mails between SEC staff forwarding information of potential use in the investigation leading to the present matter;
  3. E-mails between SEC staff that evidence deliberations over whether to file the present matter; and
  4. An e-mail between SEC staff about a possible separate administrative proceeding against an entirely different respondent.

By order dated March 5, 2013, the ALJ found the e-mails were privileged and largely irrelevant.   The ALJ thus granted the DOE’s motion and ordered that all copies of the e-mails be returned or destroyed and that all documents referring to those e-mails be treated as confidential and be filed under seal. 

This has caught the eye of attorneys representing whistleblowers, as Dodd-Frank imposes limitations on the SEC’s ability to disclose information relating to whistleblower reports.