New Federal Rule Could Help Retrieve Privileged Documents From SEC
Board IQ (04/14/09) Goodman, Julie
The new Rule 502A provides guidelines that could make it easier to retrieve privileged documents inadvertently handed over to the Securities and Exchange Commission (SEC). The federal rule addresses disclosures of privileged material made to federal agencies, stating that if the disclosure is inadvertent, then privilege is not waived. It also states that reasonable steps need to have been taken to prevent disclosure in order to qualify as “inadvertent.” The rule comes as the SEC is clamping down on incomplete or untimely document production, promising more enforcement action with failures to comply. John Walsh, associate director and chief counsel in the SEC's Office of Compliance Inspections and Examinations, said at the recent Investment Company Institute conference that the rule should help with the flow of documents to the SEC. He pointed out that in today's volatile economy, with ubiquitous mergers and acquisitions, firms may have inherited someone else's legacy system, or the person who generated all the privileged information may no longer be with the firm. While he said that the SEC is willing to work with firms that are being examined, they should nevertheless be aware they are making a privileged communication at the time they make it. “We expect that Rule 502(b) will facilitate the production of records in examinations because it will help both firms and examiners manage many of the privilege issues that can arise during the prompt production of records,” Walsh said later in a written statement.
