The SEC outlined its policy for issuing subpoenas to the media in a release issued April 12, 2006. The policy applies only to the news gathering functions and news media sources, not demands for purely commercial or financial information unrelated to the news gathering function. The release outlines a multistep process for obtaining information from the media which focuses on only issuing such a subpoena after all other alternatives are exhausted and after notice to the media and negotiations over its content. Those steps require the staff to repeatedly notify the media and negotiate the contents of the potential subpoena in a fashion which is somewhat similar to that imposed on the SEC by the Ninth Circuit in Jerry T. O’Brien, Inc. v. SEC,704 F.2d 1065 (9th Cir. 1983) which was later reversed by the Supreme Court in SEC v. Jerry T. O’Brien, Inc., 467 U.S. 735 (1984) based in part on SEC arguments that such notice was contrary to the intent of Congress and would unduly interfere with its investigations.

The steps outlined in the release include the following: 1) The staff should try and obtain the information form alternative sources; 2) An Associate Director or Regional Director can authorize the staff to contact the organization through counsel if known to discuss obtaining the information; 3) If the information is essential to the investigation and the discussions fail, the Director of the Division of Enforcement, after consultation with the General Counsel, can authorize the issuance of a subpoena. The SEC Chairman and the recipient of the subpoena must receive notice. The subpoena should be negotiated with counsel for the news media to narrow it as much as possible. Absent special circumstances the subpoena should be limited to the verification of published information and the surrounding circumstances.

The SEC took the unusual step of issuing this policy following the issuance by the staff of subpoenas to certain media outlets and the announcement by Chairman Cox on March 3, 2006 that those subpoenas would be withdrawn. The SEC policy can be found at

A recent North Carolina Ethics Opinion concluded that SEC Rule 205 preempts the state rules of professional responsibility. SEC Rule 205, enacted under Section 307 of SOX, permits a lawyer who represents a publically traded company and who appears and practices before the SEC to reveal to the SEC, without the client’s consent, confidential information under certain circumstances. Generally, that information can be revealed to prevent the issuer from committing perjury or otherwise perpetuating a fraud on the SEC, or to correct the consequences of a material violation that caused or may cause substantial financial injury to the issuer or investors where the lawyers services were used. The Rule provides that it preempts state ethics rules which are in conflict. The North Carolina panel found that state rules in conflict with the SEC rule were preempted.

Previously, the Washington State bar ethics committee concluded that a state rule bared disclosures authorized by the SEC Rule. Although the SEC has disputed this interpretation, Washington State has cautioned attorneys to wait for court rulings. Two California bar committees took similar positions.