Reporters Committee applauds SEC for new subpoena policy

The Reporters Committee for Freedom of the Press applauded the new policy announced Wednesday by the U.S. Securities and Exchange Commission (SEC) that makes it less likely the agency will subpoena reporters for information about their stories.

SEC Chairman Christopher Cox issued the new policy statement in response to furor over several subpoenas issued by the SEC in February to two writers Dow Jones & Co. publications, Herb Greenberg of MarketWatch and Carol Remond of Dow Jones Newswires, seeking telephone records, e-mails and other documents related to stories written about Overstock.com.

The Reporters Committee wrote to Chairman Cox in February and asked him to follow the guidelines used by the Department of Justice for the issuing of subpoenas to reporters. The policy released today is very similar to the Justice Department’s standards.

The SEC’s new policy focuses on cooperation with the media and using alternate sources to obtain the needed information. The policy uses the nearly same language as the Justice Department as it seeks to “strike the proper balance between the public’s interest in the free dissemination of ideas and information and the public’s interest in effective enforcement of the federal securities laws.”

“Chairman Cox is to be commended for focusing on negotiation and the exhaustion of reasonable alternatives,” said Reporters Committee Executive Director Lucy A. Dalglish. “Along with requiring authorization from the highest levels in the agency, this should help prevent the frivolous subpoenaing of reporters while still allowing the SEC to fully complete its important investigations.”

The policy also requires SEC staff member considering a subpoena to “make all reasonable efforts to obtain the information from alternative sources” and to determine if “the information is essential to successful completion of the investigation.” If the information is essential and cannot be reasonably obtained from alternate sources, the SEC member seeking the subpoena must seek approval from the Regional Director, District Administrator, or Associate Director to negotiate with the reporter or the reporter’s lawyer for an amicable resolution to the situation.

If negotiations are unsuccessful, the SEC must again consider whether the information is essential to its investigation and have exhausted all reasonable alternative sources. If a subpoena is still considered necessary, the SEC staff member must “seek authorization for the subpoena from the Director of the Division of Enforcement. No subpoena shall be issued unless the Director, in consultation with the General Counsel, has authorized its issuance.” If a subpoena is to be issued, then the Chairman must also be notified.

The SEC policy can be found at: www.sec.gov/news/press/2006/2006-55.htm