Corrected to Conform to Federal Register Version

SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 201

[Release No. 34-78319; File No. S7-18-15]

RIN 3235-AL87

Amendments to the Commission’s Rules of Practice 

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

SUMMARY: The Securities and Exchange Commission (“Commission”) is adopting 

amendments to its Rules of Practice. These changes concern, among other things, the timing of 

hearings in administrative proceedings, depositions, summary disposition, and the contents of an 

answer.

DATES: 

Effective Date: The final rules are effective September 27, 2016. 

Applicability Dates: The applicability dates for proceedings pending as of July 13, 2016, are 

discussed in Section Q of this release. 

FOR FURTHER INFORMATION CONTACT: Adela Choi, Senior Counsel, and Sarit 

Klein, Attorney Advisor, Office of the General Counsel, (202) 551-5150, Securities and 

Exchange Commission, 100 F Street, NE, Washington, DC 20549.

SUPPLEMENTARY INFORMATION: The Commission is adopting amendments to Rules 

141, 154, 161, 180, 220, 221, 222, 230, 232, 233, 234, 235, 250, 320, 360, 410, 411, 420, 440, 

450 and 900 of its Rules of Practice [17 CFR 201.141, 201.154, 201.161, 201.180, 201.220, 

201.221, 201.222, 201.230, 201.232, 201.233, 201.234, 201.235, 201.250, 201.320, 201.360, 

201.410, 201.411, 201.420, 201.440, 201.450 and 201.900]. 
2

I. Introduction

II. Description of the Final Rules

A. Rule 360 (Initial Decision of Hearing Officer and Timing of Hearing)

1. Proposed Rule

2. Comments Received

3. Final Rule

B. Rule 233 (Depositions Upon Oral Examination)

1. Proposed Rule

2. Comments Received

3. Final Rule

C. Rule 232 (Subpoenas)

1. Proposed Rule

2. Comments Received

3. Final Rule

D. Rule 141 (Orders and Decisions; Service of Orders Instituting Proceedings and 

Other Orders and Decisions)

E. Rule 161 (Extensions of Time, Postponements and Adjournments)

F. Rule 180 (Sanctions)

G. Rule 220 (Answer to Allegations)

1. Proposed Rule

2. Comments Received

3. Final Rule

H. Rule 221 (Prehearing Conference)

I. Rule 222 (Prehearing Submissions)

1. Proposed Rule

2. Comments Received

3. Final Rule

J. Rule 230 (Enforcement and Disciplinary Proceedings: Availability of Documents for 

Inspection and Copying)

1. Proposed Rule

2. Comments Received

3. Final Rule

K. Rule 234 (Depositions Upon Written Questions)

L. Rule 235 (Introducing Prior Sworn Statements or Declarations)

1. Proposed Rule

2. Comments Received

3. Final Rule

M. Rule 250 (Dispositive Motions)

N. Rule 320 (Evidence: Admissibility)

1. Proposed Rule

2. Comments Received

3. Final Rule

O. Amendments to Appellate Procedure in Rules 410, 411, 420, 440 and 450

1. Proposed Rule

2. Comments Received
3

3. Final Rule

P. Amendments to Rule 900 Guidelines

1. Proposed Rule

2. Comments Received

3. Final Rule

Q. Effective Date, Applicability Dates and Transition Period

1. Proposed Rule

2. Comments Received

3. Final Rule

III. Economic Analysis

IV. Administrative Law Matters

V. Statutory Basis 
4

I. Introduction

On September 24, 2015, the Commission proposed for comment amendments to its Rules 

of Practice. Among other things, we proposed to update the Rules of Practice, adjust the timing 

of hearings and other deadlines in administrative proceedings, and provide parties in 

administrative proceedings with the ability to take depositions.1

 We also proposed to clarify and 

amend certain other rules, including the admissibility of hearsay and the requirements for the 

contents of an answer. In addition, we proposed amendments to certain procedures that govern 

appeals to the Commission. The proposed amendments were intended to update the Rules of 

Practice and introduce additional flexibility into administrative proceedings, while continuing to 

provide for the timely and efficient disposition of proceedings.2 

 

1 Amendments to the Commission’s Rules of Practice, Exchange Act Release No. 75976 (Sept. 

24, 2015), 80 FR 60091 (Oct. 5, 2015), available at https://www.gpo.gov/fdsys/pkg/FR-2015-10-

05/pdf/2015-24707.pdf (last visited July 8, 2016).

2 Promoting timeliness and efficiency in administrative proceedings has been a longstanding goal 

of the Commission. See Rules of Practice, Exchange Act Release No. 48018 (June 11, 2003), 68 

FR 35787 (June 17, 2003), available at https://www.gpo.gov/fdsys/pkg/FR-2003-06-17/pdf/03-

15262.pdf (last visited July 8, 2016) (“2003 Release”) (amending Rules of Practice “to improve 

the timeliness of [the Commission’s] administrative proceedings”); Rules of Practice, Exchange 

Act Release No. 35833 (June 9, 1995), 60 FR 32738 (June 23, 1995), available at

https://www.gpo.gov/fdsys/pkg/FR-1995-06-23/pdf/95-14750.pdf (“1995 Release”) (last visited 

July 8, 2016) (amending Rules of Practice to “better facilitate full, fair and efficient 

proceedings...”); see also id., 60 FR at 32753, Comment to Rule 161 (“Extensions of Time, 

Postponements and Adjournments”) (“The rule requires the hearing officer to consider explicitly 

the efficient and timely administration of justice when determining whether to grant a 

postponement, adjournment or extension of time for filing of papers. The need for delay must be 

balanced against the need to bring each case to a timely conclusion, consistent with the public 

interest.”).
5

We received 13 comment letters in response to the proposal.3

 Commenters generally 

supported the Commission’s efforts to update the rules, expand the discovery process and 

enlarge the timetables in administrative proceedings, and in some instances suggested additional 

changes. Some commenters argued that the proposed amendments were too incremental.

4

 

Others focused on the legitimacy of the Commission’s administrative forum, and in so doing 

offered suggestions that went beyond the scope of the proposed amendments.5

 After carefully 

considering the comments, we are adopting amendments to our Rules of Practice as described 

below. 

II. Description of the Final Rules

As with the proposing release, we begin with a discussion of the amendments to Rule 

360, which sets forth the framework and timing for the stages of an administrative proceeding. 

Next, we discuss Rule 233 governing depositions, followed by Rule 232, which prescribes

 

3 The comment letters are located at http://www.sec.gov/comments/s7-18-15/s71815.shtml (last 

visited July 8, 2016).

4 See, e.g., David M. Zornow, Christopher J. Gunther and Chad E. Silverman letter dated 

December 4, 2015 (“Zornow/Gunther/Silverman”).

5 These comments generally expressed opposition to the administrative forum. See, e.g., Joseph 

A. Grundfest letter dated December 4, 2015 (“Grundfest”) (recommending the adoption of a 

mechanism to allow respondents in certain cases to remove a proceeding filed administratively to 

federal court); id. (arguing that the ability to proceed in an administrative forum creates the 

possibility that the Commission will choose to shield controversial cases from the full scrutiny of 

federal district and appellate courts); Zornow/Gunther/Silverman (asserting that conflicts of 

interest preclude the Commission from being perceived as a neutral arbiter). Because these 

comments are outside the scope of the proposed amendments, we have not addressed them in the 

adopting release.
6

standards for the issuance of subpoenas and motions to quash. The remaining rule amendments

are discussed in numerical order.

A. Rule 360 (Initial Decision of Hearing Officer and Timing of Hearing)

1. Proposed Rule

Rule 3606 governs the time period for the filing of an initial decision by the hearing 

officer and establishes the timing for the stages of an administrative proceeding, which include a 

prehearing period, a hearing, a period for reviewing hearing transcripts and submitting posthearing briefs, and a deadline for the hearing officer to file an initial decision with the Office of 

the Secretary of the Commission (the “Secretary”). Rule 360(a)(2) currently designates the 

timeframes for each of these stages based on the date of service of an order instituting 

proceedings (“OIP”). Initial decisions must be filed within the number of days prescribed by the 

Commission in the OIP: 120, 210, or 300 days from the date of service of the OIP. The 

prehearing period, start date of the hearing, and period for review of the transcript and posthearing briefing are, in turn, determined by the date of the OIP and time periods corresponding to 

the applicable initial decision deadline. Should the hearing officer determine that it is not 

possible to issue the initial decision within the period specified in the OIP, the Chief 

Administrative Law Judge is authorized, under current Rule 360(a)(3), to request an extension of 

time from the Commission. 

We proposed to modify three aspects of the timing of a proceeding under Rule 360. First, 

the proposal modifies the calculation of the initial decision deadline by changing the trigger date 

for the time to file an initial decision from the OIP service date to the date of completion of post-

 

6 17 CFR 201.360.
7

hearing or dispositive motion briefing or a finding of a default. This modification divorces the 

deadline for the completion of an initial decision from other stages of the proceeding, and is 

reflected in an amendment separating current Rule 360(a)(2) into two paragraphs, proposed Rule 

360(a)(2)(i) covering the initial decision deadline and proposed Rule 360(a)(2)(ii) covering the 

prehearing period. Under proposed Rule 360(a)(2)(i), the OIP designates the time period for 

preparation of the initial decision as 30, 75 or 120 days from the completion of post-hearing or 

dispositive motion briefing or a finding of a default. 

Second, proposed Rule 360(a)(2)(ii) provides a range of time during which the hearing 

must begin. For proceedings with an initial decision deadline of 120 days, the proposal doubles

the maximum length of the prehearing period from the current approximately four months to no 

more than eight months after service of the OIP. Pursuant to the proposal, under the 75-day 

timeline, the hearing would begin approximately two and one-half months (but not more than 

six months) from the date of service of the OIP, and for 30-day proceedings, the hearing would 

begin approximately one month (but no more than four months) from the date of service of the 

OIP. Consistent with current practice, the hearing officer would issue an order setting the 

hearing dates following a prehearing conference with the parties pursuant to Rule 221. The 

proposed extensions of time were designed to accommodate deposition discovery in 120-day 

cases and generally allow for additional time for prehearing preparation and review of 

documents, while retaining an outer time limit to promote timely and efficient resolution of the 

proceedings. 

Proposed Rule 360(a)(2)(ii), like current Rule 360(a)(2), contemplated an initial schedule 

allowing approximately two months for review of transcripts and submission of post-hearing 

briefs. 
8

Third, the proposal adds a procedure for the hearing officer to extend the initial decision 

deadline. Under proposed Rule 360(a)(3)(ii), the hearing officer is permitted to certify to the 

Commission the need to extend the initial decision deadline by up to 30 days for case 

management purposes. This certification must be issued at least 30 days before the expiration of 

the initial decision deadline, and the proposed extension would take effect absent a Commission 

order to the contrary issued within 14 days after it receives the certification. 

2. Comments Received

Commenters generally supported extensions of the prehearing period under Rule 360, but 

some suggested that longer or more flexible periods be adopted. Several commenters advocated 

longer prehearing periods of, for instance, twelve months or eighteen months,7 and one 

commenter argued against any “pre-determined limit[s]” on the timing of proceedings.8

 A 

number of commenters argued that hearing officers should be given the discretion to set the 

prehearing period or to authorize extensions of the period on a case-by-case basis.9

 Several 

commenters suggested alternative methods for calculating the prehearing period, for instance, 

 

7 See, e.g., Financial Services Roundtable letter dated December 4, 2015 (“FSR”); New Jersey 

State Bar Association letter dated December 1, 2015 (“NJSBA”).

8 See Zornow/Gunther/Silverman.

9 See, e.g., Susan E. Brune letter dated November 24, 2015 (“Brune”); Grundfest; Calfee, Halter 

& Griswold, LLP letter dated November 30, 2015 (“Calfee”); Gibson, Dunn & Crutcher LLP

letter dated December 4, 2015 (“Gibson”).
9

based on the length of the Division of Enforcement (the “Division”) investigation10 or the date 

the Division completes production of the investigative file.11 

In urging longer prehearing periods, commenters argued that respondents need longer 

discovery periods to review and address evidence gathered by the Division during the 

investigation that precedes the institution of proceedings. These commenters generally cited the 

size of the Division's investigative files (including electronic document productions) to be 

reviewed by respondents during the period, the time required for respondents to receive the 

complete investigative file during the prehearing period, and the need to counter lengthy and 

extensive Division investigations.12 Commenters also offered comparisons to the length of 

discovery and flexible scheduling procedures in federal courts and in the administrative 

proceedings of some other agencies.13 

Most commenters who addressed this proposed rule focused on the maximum prehearing 

period for proceedings designated as 120-day matters. But one commenter urged further 

extensions to the prehearing period for all administrative proceedings and to other time periods 

designated under Rule 360(a)(2)(ii).14 This commenter supported the proposal to divorce the 

deadline for the initial decision from the other stages of the proceeding but argued that the 

 

10 See Stephen E. Hudson letter dated December 3, 2015 (“Hudson I”).

11 See Gibson; Calfee.

12 See, e.g., Navistar International Corporation letter dated December 3, 2015 (“Navistar”). 

13 See Brune; Gibson; Navistar.

14 NJSBA. 
10

Commission should extend the period for post-hearing briefing to three months, rather than the 

two months allocated under both the current and proposed rules. The commenter also suggested 

modifying the certification process for 30-day extensions under Rule 360 to require the hearing 

officer’s certification to be issued 45 or 60 days before the deadline, and an order from the 

Commission expressly granting or rejecting the proposed extension.15

3. Final Rule

We are adopting Rule 360(a)(2)(i) substantially as proposed, with non-substantive 

modifications intended to clarify that multiple events (i.e., completion of post-hearing briefing

where a hearing has been completed, completion of briefing on a dispositive motion where there 

is no hearing, or the determination of a default) may trigger the running of the 30, 75 or 120-day 

deadline for the initial decision.

16

In addition, we believe it is appropriate, consistent with the view of commenters 

suggesting a longer prehearing period under the 120-day timeline, to modify the proposed 

amendments to Rule 360(a)(2)(ii) to extend by an additional two months the maximum 

prehearing period for proceedings in this category. As adopted, Rule 360(a)(2)(ii) provides that 

under the 120-day timeline, the hearing officer shall issue an order scheduling the hearing to 

begin approximately four months (but no more than ten months, instead of the proposed eight) 

 

15 Id.

16 We emphasize that, as provided for in current Rule 360(a)(1), unless the Commission directs 

otherwise, the hearing officer shall prepare an initial decision in any proceeding in which the 

Commission directs a hearing officer to preside at a hearing, provided, however, that an initial 

decision may be waived by the parties with the consent of the hearing officer pursuant to Rule 

202.
11

from the date of service of the OIP.

17 The longer prehearing period is intended to provide 

parties, in appropriate cases, additional time to review the investigative record, conduct 

depositions under amended Rule 233, and prepare for a hearing.18 

While we recognize that some might view the maximum ten-month prehearing period as 

not long enough, the Commission believes that the final rule strikes the appropriate balance 

between the time needed to conduct discovery and prepare for a hearing and the Commission’s 

goal of timely and efficiently resolving administrative proceedings.

In response to commenters urging open-ended prehearing periods as determined by 

hearing officers, we note that the Commission amended Rule 360 in 2003 to impose mandatory 

deadlines for completion of initial decisions because of concerns about adherence to the Rule’s 

then-existing non-binding goals.

19 We continue to believe that timely completion of proceedings 

can be achieved more successfully with express deadlines for completion of the various steps in 

 

17 The prehearing periods in this rule do not affect the statutory hearing requirements in ceaseand-desist proceedings. In such proceedings, the Commission is required to set a hearing date 

not earlier than 30 days nor later than 60 days after service of the OIP, unless an earlier or later 

date is set by the Commission with the consent of any respondent so served. See, e.g., Securities 

Exchange Act of 1934 (“Exchange Act”) Section 21C(b), 15 U.S.C. 78u–3(b).

18 By lengthening the prehearing period, the Commission does not suggest that every 120-day 

matter will qualify for the maximum ten-month period. Proceedings designated for the 120-day 

timeline will range from routine matters involving a single violation of the securities laws to 

matters involving, for example, multiple and distinct alleged violations, a particularly 

voluminous investigative record, or a complex set of factual allegations. In setting the hearing 

date, the hearing officer should assess whether the proceeding at issue warrants the maximum 

prehearing period or whether a shorter prehearing period would provide the parties with adequate 

preparation time. In keeping with the goal of resolving administrative proceedings in an 

expeditious manner, the maximum prehearing period should be the exception rather than the 

norm. 

19 See 2003 Release, 68 FR at 35787.
12

the administrative proceeding. In designating timeframes for proceedings in the OIP, the 

Commission considers “the nature, complexity, and urgency of the subject matter,” with due 

regard for the public interest and the protection of investors.

20

We are amending Rule 360(a)(2)(ii) in one additional respect to resolve an apparent 

discrepancy with existing Rule 340, which governs the timeframes for filing post-hearing briefs. 

Specifically, we are amending Rule 360(a)(2)(ii) to remove the approximately two-month

timeframe for obtaining transcripts and submitting post-hearing briefs. The Commission 

included these internal timeframes when it amended Rule 360 in 2003 to address concerns that 

setting only an outside deadline for the issuance of an initial decision by the hearing officer could 

incentivize the hearing officer to curtail the parties’ prehearing preparation time and post-hearing 

briefing time while reserving the majority of the overall time period for the hearing officer to 

draft the initial decision.21 This should not be a concern under amended Rule 360, because under 

the amended rule the deadline for filing the initial decision is triggered not by the date of service 

of the OIP, but by the completion of post-hearing briefing (or, if there is no hearing, the

completion of briefing on a dispositive motion or the determination of a default). The 

“approximately 2-month” language contained in current and proposed Rule 360 for submission 

of post-hearing briefs also may create unnecessary ambiguity in the post-hearing briefing 

requirements set forth in Rule 340, which provides that the hearing officer shall by order set the 

 

20 17 CFR 201.360(a)(2)(i).

21 See 2003 Release, 68 FR at 35787.
13

deadlines for post-hearing briefing for a period that shall not exceed 90 days after the close of the 

hearing, unless the hearing officer, for good cause shown, permits a different period.22 

We are adopting Rule 360(a)(2)(ii) as proposed with respect to the scheduling of hearings 

in 75-day and 30-day proceedings, with a conforming change to remove the approximate 

timeframes set forth in the rule for obtaining a transcript and submitting post-hearing briefs, for 

the reasons discussed above. The final amendment provides for an outer limit of six months for 

the hearing to commence under the 75-day timeline, and an outer limit of four months for the 

hearing to commence in 30-day proceedings. Proceedings in the 75-day category typically 

involve “follow-on” proceedings following certain injunctions or criminal convictions.23 The 30-

day designation typically is reserved for proceedings under Section 12(j) of the Exchange Act.24 

We continue to believe that the proposed prehearing periods for these cases is appropriate since 

they are by their nature more routine than 120-day proceedings, and are sometimes uncontested.

We therefore believe that the prehearing periods for these cases, which we are adopting as 

 

22 We did not propose, and are not now amending, Rule 340. However, given that one of the 

overall purposes of these amendments is to promote efficiency in the adjudication of 

administrative proceedings, the “good cause” standard for granting extensions beyond the 90-day 

timeframe set forth in Rule 340 should continue to be rarely granted, limited to truly unusual 

circumstances, and not introduce undue delay in the resolution of proceedings.

23 The Commission is authorized to institute administrative proceedings following certain 

injunctions or convictions of persons associated with or seeking to associate in the securities 

industry. See, e.g., Exchange Act Section 15(b), 15 U.S.C. 78o(b); Section 203(f) of the 

Investment Advisers Act of 1940, 15 U.S.C. 80b-3(f).

24 Section 12(j) of the Exchange Act authorizes the Commission, among other things, to revoke 

the registration of a security if the issuer fails to comply with the federal securities laws. See 15 

U.S.C. 78l(j).
14

proposed, will provide adequate preparation time for the parties while balancing the need for 

efficient resolution of administrative proceedings. 

We are adopting Rule 360(a)(3) as proposed. The final rule permits the hearing officer 

presiding over the proceeding to certify to the Commission a need to extend the initial decision 

deadline by up to 30 days for case management purposes. This certification must be issued no 

later than 30 days prior to the expiration of the initial decision deadline. One commenter 

supported the proposed certification procedure but suggested requiring the certification to be 

issued 45 or 60 days prior to the expiration of the initial decision deadline. The Commission 

continues to believe that a 30-day period provides sufficient notice to the parties of the hearing 

officer’s certification. In response to the comment suggesting the Commission issue an order 

expressly granting or rejecting the hearing officer’s proposed extension, we do not believe this 

added procedure is necessary. As adopted, the rule provides that if the Commission has not 

issued an order to the contrary within 14 days after receiving the certification, the extension 

sought in the hearing officer’s certification shall take effect. In the Commission’s view, the final 

rule provides sufficient clarity on whether the proposed extension has been granted. 

B. Rule 233 (Depositions Upon Oral Examination)

1. Proposed Rule

Current Rule 233 permits any party to move for permission to take the deposition of a 

witness who likely will be unavailable to attend or testify at the hearing. We proposed to amend 

Rule 233 to permit a limited number of additional depositions. As proposed, amended Rule 233 

permits the respondent and the Division in a single-respondent proceeding designated as a 120-

day proceeding each to notice the depositions of three persons. In a multi-respondent 120-day 

proceeding, the Division is permitted to notice five depositions, and the respondents collectively 
15

can also notice five depositions. Under the proposal, the parties could also request that the 

hearing officer issue a subpoena for documents in conjunction with the deposition. Proposed 

Rule 233 also sets forth procedures for deposition practice, including a six-hour time limit for 

depositions, contents of the notice of deposition, and other matters.

2. Comments Received

Most commenters urged that the final rule provide respondents the ability to conduct 

more depositions than the Commission proposed. Commenters appeared to be animated by two 

principal concerns. First, commenters believed that the Commission’s proposal to limit parties 

to a fixed number of depositions did not accommodate respondents’ potential need for additional 

depositions depending on the facts and circumstances of the individual case, particularly in 

complex or multi-party proceedings.

25 Second, commenters argued that the Division’s 

investigation before the Commission initiates proceedings creates an information imbalance that 

warrants providing respondents with additional opportunities to conduct depositions.26

Commenters suggested a variety of possible parameters for additional depositions. Most 

commenters urged that hearing officers be granted discretion to approve requests for additional 

depositions, similar to the practice under Rule 30 of the Federal Rules of Civil Procedure.27 

 

25 Center for Capital Market Competitiveness, U.S. Chamber of Commerce letter dated 

December 4, 2015 (“CCMC”); Calfee; NJSBA; Navistar; Hudson I; Zornow/Gunther/Silverman; 

FSR; Gibson; Grundfest.

26 Aegis J. Frumento and Stephanie Korenman letter dated December 4, 2015 

(“Frumento/Korenman”); Brune; Navistar; Hudson I; Zornow/Gunther/Silverman; FSR; CCMC.

27 Brune; Calfee; NJSBA; Navistar; Hudson I; Gibson; Frumento/Korenman; CCMC. One of 

these commenters further pointed out that the adjudication rules of the Federal Trade 

Commission do not limit the number of discovery depositions. Gibson (citing 16 CFR 3.31(a)). 
16

Commenters criticized the “one size fits all” approach of the proposed rule,28 and argued that 

hearing officer discretion in the matter of depositions is necessary because each case presents 

unique facts and circumstances. Three commenters suggested guidelines for exercising such 

discretion based on limitations found in Rule 26 of the Federal Rules of Civil Procedure.29 

Commenters differed on the number of depositions they believed the rule should permit 

as a matter of right (i.e., before a party would be required to seek leave from the hearing officer

to notice the deposition). A number of commenters pointed the Commission to Rule 30(a)(2) of 

the Federal Rules of Civil Procedure as an appropriate model.30 Rule 30(a)(2) requires leave of 

court for a deposition if the deposition would result in plaintiffs as a group or defendants as a 

group taking more than ten depositions.31 Two of these commenters further urged that ten 

depositions be permitted to each party32 or each respondent,33 rather than to each side. One 

commenter suggested five depositions for each respondent in either a single-respondent or multi-

 

However, one commenter believed that a limit of ten depositions per party would be reasonable. 

FSR.

28 Stephen E. Hudson letter dated December 4, 2015 (“Hudson II”, incorporating anonymous 

blog); Zornow/Gunther/Silverman.

29 NJSBA (citing Fed.R.Civ.P. 26(b)(2)(C)); Hudson I (same); Gibson (citing Fed.R.Civ.P. 

26(b)(1)).

30 Brune; Navistar; Hudson I; FSR; CCMC.

31 Fed.R.Civ.P. 30(a)(2)(A)(i).

32 FSR.

33 CCMC.
17

respondent proceeding as an appropriate starting point, coupled with hearing officer discretion to 

enlarge the number.34 

Three commenters supported the Commission’s proposal of three depositions in a singlerespondent proceeding and five depositions in a multi-respondent proceeding, subject, again, to 

hearing officer discretion to enlarge the number, and with certain other caveats.35 One of these 

commenters suggested that the three- and five-deposition limits proposed by the Commission 

should be limited to fact witnesses, and not include experts.36 A second commenter proposed 

that hearing officers be required to grant a party in a single-respondent proceeding leave to take 

more than three depositions, and a party in a multi-respondent proceeding leave to take more 

than five depositions.37 Another of these commenters added that that the Division should not be 

permitted to notice any depositions at all.38 Two commenters urged that the rule not set any 

predetermined limits, but rather that the number of depositions be left entirely to the discretion of 

the hearing officer.39

 

34 Gibson.

35 Calfee; NJSBA; Frumento/Korenman.

36 Calfee; see also CCMC (proposing ten depositions of right for each respondent, not including 

expert depositions, which would be separately authorized by the hearing officer).

37 NJSBA.

38 Frumento/Korenman.

39 Zornow/Gunther/Silverman; Grundfest.
18

A number of commenters took issue with the Commission’s proposal that the respondents 

in a multi-respondent proceeding share a fixed number of depositions.40 These commenters 

generally argued that, because respondents may have divergent interests, each respondent should 

be entitled to take the same number of depositions.41 In addition, several commenters – citing 

the ability of the Division to develop an extensive investigative record before the initiation of the 

proceeding – argued that the Division should not be permitted to take any depositions, or that its 

right to do so should be limited in various ways.42

Finally, two commenters urged that the Commission permit seven hours for each 

deposition, consistent with the practice in federal courts, rather than the proposed six hours.43

3. Final Rule

We are adopting the proposed amendments to Rule 233 with certain modifications. The 

proposed amendments to Rule 233, in conjunction with increasing the maximum prehearing time 

period under Rule 360, were intended to provide parties with the potential benefits of deposition 

discovery without sacrificing the public interest or the Commission’s goal of resolving 

 

40 Calfee; Hudson II (incorporating anonymous blog); FSR; Gibson; CCMC.

41 FSR; CCMC.

42 Brune (Division should be permitted to depose only respondents’ experts, or fact witnesses 

with leave); Hudson I (same); FSR (Division should not be able to depose witnesses whose 

testimony was taken during the investigation); Frumento/Korenman (no depositions at all for 

Division); CCMC (Division should only be permitted to take depositions based upon proffer to 

hearing officer explaining why the staff were unable to take testimony during the investigation, 

or that the deposition is needed because of new information obtained after the completion of the 

investigation).

43 Calfee; FSR; see Fed.R.Civ.P. 30(c).
19

administrative proceedings promptly and efficiently. We have weighed commenters’ concerns 

against the need to maintain this balance. 

There are sound justifications for limiting the availability of depositions in Commission 

administrative proceedings as compared with litigation under the Federal Rules of Civil 

Procedure. Typically, in a federal civil action a complaint is filed, and, because neither party can 

compel testimony prior to the filing of the complaint, oral depositions thereafter play a critical 

role in gathering preliminary and background discovery, in addition to gathering evidence for use 

at trial. However, in a Commission enforcement action, the complaint (in a federal court action) 

or the OIP (in an administrative proceeding) is premised on an evidentiary record developed 

through the staff’s pre-filing investigation. The Division produces to respondents various 

materials from the investigative file—i.e., non-privileged documents gathered by the Division, 

transcripts of investigative testimony, and disclosure of material, exculpatory facts (Brady 

material)—that provide significant guidance to respondents in determining the most important 

witnesses to depose.44 Thus, as some commenters appeared to acknowledge, a principal goal of 

oral depositions in our administrative proceedings would be to supplement the record, not create 

it.45 Given these different starting points, the fact that rules that govern discovery in federal court 

 

44 Rule 230 requires early production by the Division of non-privileged documents and 

transcripts of testimony obtained during the investigation. Under Rule 230, which incorporates

certain criminal process rights derived from criminal cases and statutes, respondents receive 

documents that contain material exculpatory evidence under Brady v. Maryland, 373 U.S. 83, 87 

(1963). No analogous provision is present in the Federal Rules of Civil Procedure. 

45 See Brune (transcripts of investigative testimony “can reflect no meaningful exploration of 

important areas....”); Hudson I (same); FSR (“[R]espondents did not have an opportunity to ask 

[investigative] witnesses questions or to choose which witnesses to examine.”).
20

also apply to Commission federal court enforcement actions does not provide a compelling 

reason for incorporating the same deposition discovery rules into our administrative practice, in 

particular given the Commission’s strong interest in establishing a timely and efficient 

administrative forum.46 Accordingly, we do not agree with commenters who advocated further 

expanding the proposed oral deposition rights in our administrative proceedings commensurate 

with Rule 30 of the Federal Rules of Civil Procedure, including ten depositions per side (or per 

party) as of right.

At the same time we recognize, as many commenters noted, that some cases may present 

unique issues or challenges that warrant affording the parties additional opportunities to conduct 

prehearing depositions. While the Commission’s expectation is that such circumstances will 

rarely be present, we agree that our rules should be flexible enough to accommodate reasonable 

requests for a limited number of additional depositions. For this reason, the final rule includes a 

new provision, Rule 233(a)(3), that permits either side to move the hearing officer for leave to 

notice up to two additional depositions. 

Paragraphs (a)(1) and (2) of amended Rule 233 retain the proposed rule’s limitations on 

depositions as a matter of right. They provide that, in a single-respondent proceeding under the 

120-day timeframe set forth in Rule 360, the respondent and the Division may each file written 

notices to depose up to three persons; and, in a multi-respondent 120-day proceeding, the 

 

46 See supra note 2. In response to the commenter who also pointed us to the adjudication rules 

of the FTC, we note that agency practice is varied on this issue. See Gibson. A number of 

agencies do not permit prehearing discovery depositions except with respect to witnesses who 

will be unavailable at the hearing. See, e.g.,12 CFR 1081.209 and 77 FR 39057, 39073 (June 29, 

2012) (Consumer Financial Protection Bureau); 17 CFR 10.44 and 41 FR 2508, 2509 (Jan. 16, 

1976) (Commodity Futures Trading Commission); 12 CFR 308.27 (Federal Deposit Insurance 

Corporation).
21

respondents collectively may file joint written notices to depose up to five persons and the 

Division may file written notices to depose up to five persons.47 However, because we are 

persuaded that a seven-hour limit to depositions, rather than the six-hour limit we proposed, 

balances the Commission’s goal of timely and efficient administrative proceedings and the 

benefits of allowing parties more time to depose witnesses, we have revised paragraph (j)(1) of 

Rule 233 to provide for a seven-hour limit to depositions. 48 Amended paragraph (a)(5) further 

makes clear that the fact that a witness testified during an investigation does not preclude the 

deposition of that witness.

49

The final rule limits depositions to 120-day proceedings as proposed. Thus, parties will 

not be permitted to notice depositions in proceedings where the initial decision is placed on 

either the 30- or 75-day timeline under amended Rule 360. As adopted, Rule 360 provides for 

the hearing in proceedings placed on the 120-day timeline to commence between four and ten 

months from the date of service of the OIP. We anticipate that this extended period will provide 

sufficient time for parties to take the allotted number of depositions, along with any additional 

depositions that may be permitted under new paragraph (a)(3) of the Rule (discussed below), and 

to complete their other prehearing preparation. Further, as discussed below, and as reflected in 

amended Rule 221, we expect that the depositions each party plans to notice, including the 

 

47 Federal Rule of Civil Procedure 30(a)(2)(A) similarly sets a deposition limit per side, not per 

party. See 8A Charles Alan Wright, Arthur R. Miller & Richard L. Marcus, Federal Practice and 

Procedure section 2104 (3d ed.).

48 This is consistent with the Federal Rules of Civil Procedure. See Fed.R.Civ.P. 30(d)(1).

49 This provision has been renumbered from the proposed rule, where it was numbered paragraph 

(a)(4).
22

identities of the proposed deponents, will be one of the topics discussed at any initial prehearing 

conference.50

We disagree with commenters who urged that the Division not be permitted to notice 

depositions (or have its deposition rights limited) in view of the Division’s ability to take 

investigative testimony before the proceedings are instituted. Investigative testimony generally 

is directed at ascertaining facts in order for the staff to determine whether to recommend that the 

Commission authorize an action for violations of the federal securities laws. Once the 

investigative record has been sifted through and the Commission has instituted an administrative 

proceeding, issues relevant to a claim or defense may become clarified and warrant new or 

additional focus in discovery.51 Thus, the prehearing discovery context is sufficiently different 

from the investigation such that the Division should be entitled to the same discovery rights as 

respondents in order to prepare its case for the hearing.52 Moreover, information gathered from 

depositions taken by the respondents might reveal the need for the Division to depose other 

persons. Also, in some instances, witnesses decline to answer questions in investigative 

testimony based upon assertion of attorney-client privilege or the Fifth Amendment, but those 

 

50 See infra discussion at section H.

51 As just one example, the Commission’s experience has been that issues relating to possible 

reliance on professionals are not always clarified during the investigation. Today the 

Commission is also amending Rule 220 to require that respondents state in an answer whether 

they relied on professionals. This early statement will enable the Division to consider this issue 

in formulating its deposition plan.

52 See SEC v. Saul, 133 F.R.D. 115 (N.D. Ill. 1990); SEC v. Espuelas, 699 F. Supp. 2d 655 

(S.D.N.Y. 2010). “There is no authority which suggests that it is appropriate to limit the SEC’s 

right to take discovery based upon the extent of its previous investigation into the facts 

underlying the case.” SEC v. Sargent, 229 F.3d 68, 80 (1st Cir. 2000) (relying on Saul).
23

protections might no longer apply by the time of depositions in an administrative proceeding. 

Thus, many reasons support the need for the Division to have the same rights as respondents to 

conduct depositions. 

New paragraph (a)(3) of amended Rule 233 permits the hearing officer in a 120-day 

proceeding to grant either side leave to take up to two additional depositions beyond those 

permitted under paragraphs (a)(1) and (2). This means that, in proceedings involving a single 

respondent, the hearing officer may permit up to a maximum of five depositions for the 

respondent and five depositions for the Division. In proceedings involving multiple respondents, 

the hearing officer may permit up to a maximum of seven depositions for all respondents, 

collectively, and seven depositions for the Division.

Paragraph (a)(3) is intended to permit a limited number of additional depositions in 

compelling circumstances without significantly increasing the burdens for all the parties or 

undermining the goal of providing a prompt and efficient administrative forum. As discussed 

above, we have increased the prehearing period in 120-day proceedings to a maximum of ten 

months. As amended, Rule 233 will now permit parties to notice up to seven depositions of 

witnesses from among the categories set forth in amended Rule 232(e), compared with no 

depositions permitted under the current rule (except for witnesses likely to be unavailable at the 

hearing). We believe that these new deposition opportunities will afford respondents and the 

Division additional opportunities to develop the record without compromising the hearing 

schedule. 

A motion for additional depositions under paragraph (a)(3) must be filed no later than 90 

days prior to the hearing date. We anticipate that this deadline will give the parties sufficient 

time at the outset of a proceeding to identify additional witnesses they wish to depose, and to 
24

confer with other parties to determine whether they intend also to file a motion and, in a multirespondent proceeding, whether there are any common putative deponents, before moving the 

hearing officer for leave. This deadline should also enable any motions to be resolved and 

additional depositions to be taken in a timely manner, consistent with the needs of the parties to 

prepare for the hearing.

To support a prompt determination on a motion for additional depositions, paragraph 

(a)(3)(i) establishes a simplified motion practice leading to an expedited decision from the 

hearing officer. Any party opposing the motion must file its opposition, if any, within five days; 

the motion and any oppositions are each limited to seven pages; and neither separate points and 

authorities nor replies are permitted.53 The proceeding will not automatically be stayed during

the pendency of a motion. Further, under paragraph (a)(3)(iii), if the moving party proposes to 

take the additional depositions upon written questions, as provided for in Rule 234, the motion 

must state that fact, and the written questions must be submitted with the motion for additional 

depositions.

Paragraph (a)(3)(ii) establishes two requirements for a grant of additional depositions. 

First, the additional depositions must satisfy the requirements of Rule 232(e). Amended Rule 

232(e), among other things, requires the hearing officer, upon application, to quash or modify a 

deposition if the deposition would be unreasonable, oppressive, unduly burdensome, would 

unduly delay the hearing, or if the proposed deponent does not fall within one of the three 

 

53 We have made separate conforming amendments to Rule 154 (Motions), whereby the 

requirements of that rule do not apply where another rule expressly applies to a particular 

motion.
25

categories of witnesses authorized for depositions under Rule 232(e)(3). By requiring that any 

additional depositions satisfy the requirements of Rule 232(e), we intend to incorporate the 

standards under that Rule into the motion practice under paragraph (a)(3); opposing parties do 

not need to file a separate application to quash.54 However, for any depositions a party may take 

as a matter of right, the Commission or a hearing officer may quash such a deposition notice 

following the filing of a motion made pursuant to Rule 232(e).

If the requested additional depositions satisfy the threshold requirements of Rule 232(e), 

the moving side must also demonstrate that it has a compelling need to take the additional 

depositions. To make this showing the moving side must, in its motion, identify each witness 

that it intends to depose as of right and the additional witnesses that it seeks to depose; describe 

the role of each witness and each proposed additional witness; describe the matters concerning 

which each witness and each proposed additional witness is expected to be questioned and why 

each deposition is necessary to the side’s arguments, claims, or defenses; and show that the 

additional depositions requested will not be cumulative or duplicative.

Paragraph (b) of amended Rule 233 retains the existing procedure whereby a party may 

seek leave of the hearing officer to take the deposition of a witness who will likely be 

unavailable to attend or testify at the hearing. A deposition granted under paragraph (b) does not

count against the moving side’s permissible number of depositions by right or additional 

depositions under paragraph (a). Nothing in the rules as amended changes the current practices 

or standards for obtaining leave to depose individuals under paragraph (b). As before, a 

 

54 This does not preclude proposed deponents or other persons described in Rule 232(e)(1) from 

filing an application under that rule to quash or modify a notice of deposition or a subpoena.
26

deposition under Rule 233(b) is available only upon a showing that the prospective witness will 

likely give testimony that is material to the hearing; that it is likely the prospective witness will 

be unable to attend or testify at the hearing because of age, sickness, infirmity, imprisonment, 

other disability, or absence from the United States (unless it appears that absence of the witness 

was procured by the moving party); and that the taking of the deposition will serve the interests 

of justice. These standards should prevent this provision from being used as a means to 

circumvent the number of depositions allowed under Rule 233(a).

We received no comments on the remaining proposed amendments to Rule 233, with the 

exception, as noted above, of the six-hour length of depositions. The final rule changes this to 

seven hours.55

C. Amendments to Rule 232 (Subpoenas)

1. Proposed Rule

Current Rule 232 addresses the availability of, and standards for issuing, subpoenas 

requiring the attendance of witnesses at hearings and the production of documents. We proposed 

amendments to Rule 232 to correspond with the new provisions on depositions in Rule 233. As 

proposed, amended Rule 232(e)(1) permits a person who is subject to a deposition notice, or a 

party, to move to quash or modify the notice. This proposed amendment is intended to promote 

efficiency in the discovery process by allowing persons to move at the notice stage, rather than 

 

55 We note that we have made certain other minor changes to this rule from the proposed rule, 

including: (1) deleting the requirement that a notice of deposition describe the scope of the 

testimony to be taken; (2) requiring that each party bear its own transcription costs; (3) clarifying 

that the deposition officer must furnish a copy of the transcript to any party or the deponent, as 

directed by the party or person paying the charges; and (4) providing that any party may seek 

relief from the hearing officer with respect to disputes over the conduct of a deposition. These 

changes are generally intended to simplify the rule text or to clarify minor procedural matters.
27

waiting for a party to request the issuance of a subpoena to compel attendance. Proposed 

paragraphs (e)(2) and (3) of the rule establish additional standards governing the hearing 

officer’s decision on an application to quash or modify a notice of deposition or subpoena. 

Proposed paragraph (e)(2) adds undue delay of the hearing as a ground for quashing or 

modifying a deposition notice or subpoena (to the existing grounds that compliance would be 

unreasonable, oppressive, or unduly burdensome). This amendment requires the hearing officer 

or the Commission to consider the delaying effect of compliance with a subpoena or notice of 

deposition, and is intended to promote the efficient use of time for discovery during the 

prehearing period.

Proposed paragraph (e)(3) requires that the hearing officer or the Commission quash or 

modify the subpoena unless the requesting party demonstrates that the proposed deponent is a 

fact witness (except that those witnesses whose only knowledge of relevant facts arose from the 

Division’s investigation or the proceeding may not be deposed), an expert witness designated 

pursuant to Rule 222(b), or a document custodian (except those Division or Commission 

personnel who have custody of documents or data that were produced by the Division to the 

respondent), and that the notice or subpoena otherwise satisfies the requirements of Rule 233(a). 

This provision is intended to foster use of depositions where appropriate and promote 

meaningful discovery, within the limits of the number of depositions provided per side pursuant 

to proposed Rule 233(a).

Proposed Rule 232(f) requires each party to pay the fees and expenses of its own expert 

witnesses. 
28

2. Comments Received

One commenter submitted for our consideration several links to a securities blog that 

criticized many of the proposed changes to our Rules of Practice.56 With respect to Rule 232, the 

author of the blog made two principal comments. The author took issue with the requirement of 

Rule 232 that a subpoena be issued by the hearing officer, as compared with Rule 45 of the 

Federal Rules of Civil Procedure, which permits parties to issue subpoenas without the judge 

acting as a “gatekeeper.” The author asserted that hearing officers, “at the prodding of” the 

Division, permit only limited discovery in administrative proceedings, and criticized the

proposed changes to Rule 232 for not addressing this situation. The author also objected to the 

requirement of proposed Rule 232(e)(3) that a subpoena be quashed or modified unless the 

requesting party demonstrates that the proposed deponent is a fact witness, an expert witness, or 

a document custodian. The author argued that, instead, respondents should be permitted to use 

their allotted number of depositions to notice persons they deem important to their defense 

irrespective of such limitations.

3. Final Rule

We are adopting amended Rule 232 substantially as proposed, with one change to correspond 

to changes we have made to Rule 220 (“Answer to Allegations”). As is discussed below, we 

have adopted an amendment to Rule 220 that requires respondents to state in the answer whether 

they relied on professionals. In conjunction with this change, we have amended Rule 

232(e)(3)(i) to clarify that a proposed deponent may include a fact witness relative to any claim 

 

56 Hudson II.
29

of the Division, any defense, or anything else required to be included in an answer pursuant to 

Rule 220(c).

 With regard to the one comment referenced above, we note, first, that Rule 232 is based on 

Section 555(d) of the Administrative Procedure Act (“APA”),57 which does not contemplate that 

parties to agency proceedings would themselves issue subpoenas.

58 The grounds for a hearing 

officer denying a request to issue a subpoena under Rule 232 – that it is “unreasonable, 

oppressive, excessive in scope, or unduly burdensome” – are also consistent with wellestablished judicial standards,59 and we have no evidence that hearing officers are not acting 

diligently and in good faith in their consideration of current requests for subpoenas, or that they 

would not do so in implementing the standards for quashing or modifying deposition subpoenas 

set forth under the amended rule. 

Second, depositions impose costs and burdens not just on the party taking the deposition but 

on all other parties to the proceeding and upon the deponent. The proposed rule was based on 

the Commission’s experience that fact witnesses, expert witnesses, and document custodians are 

 

57 1995 Release, 60 FR at 32764.

58 5 U.S.C. 555(d); Attorney General’s Manual on the Administrative Procedure Act, section 6(c) 

(1947) (“Attorney General’s Manual”).

59 Attorney General’s Manual, section 6(c) (“[A]gencies may refuse to issue to private parties 

subpoenas which appear to be so irrelevant or unreasonable that a court would refuse to enforce 

them.”); Wiwa v. Royal Dutch Petroleum Co., 392 F.3d 812 (5th Cir. 2004) (under Federal Rule 

of Civil Procedure 45, a court has the power to quash or modify a subpoena if it is unreasonable 

and oppressive, and subjects a party to undue burden).
30

the individuals most likely to have information relevant to the issues to be decided.

60 We are not 

aware of, nor did any commenter suggest, any other categories of witnesses whose deposition 

would be necessary in administrative proceedings. If there are instances in which a party 

requires the testimony of a witness who does not fit within the three categories to testify, the 

party may seek to call that witness at the hearing, either by voluntary appearance or by subpoena 

of the witness, if otherwise permitted under the Rules.

D. Rule 141 (Orders and Decisions; Service of Orders Instituting Proceedings 

and Other Orders and Decisions)

1. Proposed Rule

Rule 141(a)(2)(iv)61 contains the requirements for serving an OIP on a person in a foreign 

country. The current rule allows for service of an OIP on persons in foreign countries by any 

method specified in the rule, or “by any other method reasonably calculated to give notice, 

provided that the method of service used is not prohibited by the law of the foreign country.” 

We proposed to amend this rule so that service reasonably calculated to give notice includes 

any method authorized by the Hague Convention on the Service Abroad of Judicial and 

Extrajudicial Documents; methods prescribed by the foreign country’s law for service in that 

country in an action in its courts of general jurisdiction; or as the foreign authority directs in 

response to a letter rogatory or letter of request. In addition, under the proposed rule, unless 

prohibited by the foreign country’s law, service can be made by delivering a copy of the OIP to 

 

60 In contrast to Federal Rule of Civil Procedure 30(b)(6), neither current Rule 232(e)(3) nor 

Rule 233 permits depositions of a public or private corporation, partnership, association, 

governmental agency, or other entity. Such depositions are not permitted under the amended 

Rules of Practice. 

61 17 CFR 201.141(a)(2)(iv).
31

the individual personally, or using any form of mail that the Secretary or the interested division 

addresses and sends to the individual and that requires a signed receipt. The proposed rule also 

allows service by any other means not prohibited by international agreement, as the Commission 

or hearing officer orders. Like the similar provision in the Federal Rules of Civil Procedure, this 

provision covers situations where existing agreements do not apply, or efforts to serve under 

such agreements are or would be unsuccessful.

We also proposed to amend Rule 141(a)(3), which requires the Secretary to maintain a 

record of service on parties, to make clear that in instances where a division of the Commission 

(rather than the Secretary) serves an OIP, the division must file with the Secretary either an 

acknowledgement of service by the person served or proof of service. 

2. Final Rule

We did not receive comments on this aspect of the proposal and are adopting the 

amendments as proposed. In addition to clarifying that proper service on persons in foreign 

countries may be made by any of the above methods, the rule provides certainty regarding 

whether service of an OIP has been effected properly and allows the Commission to rely on 

international agreements in which foreign countries have agreed to accept certain forms of 

service as valid. The final amendment provides that a division that serves an OIP must file with 

the Secretary either an acknowledgement of service by the person served or proof of service 

consisting of a statement by the person who made service certifying the date and manner of 

service; the names of the persons served; and their mail or electronic addresses, facsimile 

numbers, or the addresses of the places of delivery, as appropriate for the manner of service.
32

E. Rule 161 (Extensions of Time, Postponements and Adjournments)

Rule 16162 governs extensions of time, postponements, and adjournments requested by 

parties. Under current Rule 161(c)(2), a hearing officer may stay a proceeding pending the 

Commission’s consideration of offers of settlement under certain limited circumstances, but that 

stay does not affect any of the deadlines in Rule 360. In recognition of the important role of 

settlement in administrative proceedings, we proposed to amend Rule 161(c)(2) to allow a stay 

pending Commission consideration of settlement offers to also stay the timelines set forth in 

Rule 360.63 All the other requirements for granting a stay under the current rule would remain 

unchanged. The Commission did not receive any comments on this aspect of the proposal. We 

are adopting the amendments as proposed. 

F. Rule 180 (Sanctions)

Current Rule 180 allows the Commission or a hearing officer to exclude a person from a 

hearing or conference, or summarily suspend a person from representing others in a proceeding, 

if the person engages in contemptuous conduct before either the Commission or a hearing 

officer. The exclusion or summary suspension can last for the duration or any portion of a 

proceeding, and the person may seek review of the exclusion or suspension by filing a motion to 

vacate with the Commission. We proposed to amend Rule 180 to allow the Commission or a 

hearing officer to exclude or summarily suspend a person for any portion of a deposition, as well 

as the proceeding, a conference, or a hearing. The person would have the same right to review of 

 

62 17 CFR 201.161.

63 We are also adopting a conforming amendment to Rule 360(a)(2)(ii) to include a crossreference to amended Rule 161(c)(2).
33

the exclusion or suspension by filing a motion to vacate with the Commission. We did not 

receive any comments on this aspect of the proposal and are adopting the rule as proposed, with 

the addition of one ministerial edit to Rule 180(c). 

As currently drafted, Rule 180(c) provides that the Commission or hearing officer may 

enter a default pursuant to Rule 155, dismiss the case, decide the particular matter at issue 

against that person, or prohibit the introduction of evidence or exclude testimony concerning that 

matter if a person fails to (1) make a filing required under the Rules of Practice; or (2) cure a 

deficient filing within the time specified by the Commission or the hearing officer pursuant to 

Rule 180(b).64 We are amending the Rule to substitute the phrase “one or more claims” for the 

phrase “the case,” and to substitute the word “claim” for the word “matter.” These nonsubstantive changes are designed to more accurately reflect the terminology used in 

administrative proceedings but are not intended to, and do not, change the substance of the Rule. 

G. Rule 220 (Answer to Allegations)

1. Proposed Rule

Current Rule 220 sets forth the requirements for filing answers to allegations in an OIP.

65 

Among other things, it requires a respondent to state in the answer whether the respondent is 

asserting any defenses, including res judicata and statute of limitations.66 We proposed 

amendments to Rule 220 to emphasize that a respondent must affirmatively state in an answer 

 

64 Emphasis added.

65 17 CFR 201.220.

66 Id. 
34

whether the respondent is asserting any avoidance or affirmative defenses, including but not 

limited to res judicata, statute of limitations or reliance even if such theories are “not technically 

considered affirmative defenses.”67 Timely assertion of such theories, we explained, “would 

focus the use of prehearing discovery, foster early identification of key issues and, as a result, 

make the discovery process more effective and efficient.”68

2. Comments Received

Commenters generally opposed the proposed amendment and requested that it be 

withdrawn. Commenters’ principal contention was that “reliance on counsel is not a defense 

required to be raised in an answer, but simply goes to the evidence of whether a respondent acted 

in good faith.”69 Commenters also argued that the proposed amendment prejudices respondents, 

provides an unfair advantage to Division staff in administrative proceedings, improperly requires

respondents to disclose their trial strategy, and infringes on the attorney work-product privilege.70

 

67 80 FR at 60095. Compare Fed. R. Civ. P. 8(c) (“In responding to a pleading, a party must 

affirmatively state any avoidance or affirmative defense.”) “Generally speaking,” Federal Rule 

of Civil Procedure 8(c)’s reference to “an avoidance or affirmative defense” “encompasses two 

types of defensive allegations: those that admit the allegations of the complaint but suggest 

some other reason why there is no right of recovery, and those that concern allegations outside of 

the plaintiff’s prima facie case that the defendant therefore cannot raise by a simple denial in the 

answer.” 5 Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and 

Procedure section 1271 (3d ed.). As discussed below, in the final rule we have clarified the 

reference to “reliance” in the proposed rule.

68 80 FR at 60095.

69 NJSBA (citing Howard v. SEC, 376 F.3d 1136, 1147 (D.C. Cir. 2004) (holding that “reliance 

on the advice of counsel need not be a formal defense”)); see also Hudson II (citing anonymous 

blog post) and infra note 72. 

70 NJSBA; Hudson II.
35

3. Final Rule

We continue to believe that timely assertion of reliance would focus the use of prehearing 

discovery and foster early identification of key issues, so that they may be explored in discovery 

and depositions, and, as a result, make the discovery process more effective and efficient. We 

therefore are adopting the amended Rule substantially as proposed, with one clarifying 

modification. The final rule is not intended to change the substantive law regarding reliance or 

any of the securities laws. The Commission recognizes that, in cases involving scienter-based 

misconduct, the Division bears the burden of proof on demonstrating that the respondent acted 

with scienter. 

However, we have modified the final rule to give more content to and clarify the requirement 

that respondents disclose “reliance.” As adopted, the final rule now requires a respondent to 

state in the answer “whether the respondent relied on the advice of counsel, accountants, 

auditors, or other professionals, in connection with any claim, violation alleged, or remedy 

sought.” The reference to accountants, auditors, and other professionals reflects that, in addition 

to arguing that they relied on the advice of counsel, respondents in Commission administrative 

proceedings (and defendants in Commission civil enforcement actions) often assert that the 

respondent (or defendant) relied on such professionals in connection with the conduct alleged.71 

The amended rule therefore requires respondents to state in their answer whether they intend to 

 

71 See, e.g., Answer of Respondent Jim Hopkins at 25, ¶ 4, In re Flannery, No. 3-14081 (Oct. 26, 

2010); Answer of John Patrick (“Sean”) Flannery to Order Instituting Administrative and Ceaseand-Desist Proceedings at 12, ¶¶ 5, 6, In re Flannery, No. 3-14081 (Oct. 26, 2010); Answer of 

Defendant Samuel E. Wyly, Doc. 58 at 29, SEC v. Wyly, 10-cv-5760 (S.D.N.Y.) (Apr. 28, 2011) 

(“Plaintiff’s claims are barred in whole or in part because Defendant relied in good faith upon the 

judgment, advice, and counsel of professionals.”); see also NJSBA.
36

raise the issue of reliance on professional advice in the proceeding, whether as part of an 

assertion of a formal affirmative defense or an argument in response to the claims alleged in the 

OIP on which the Division retains the burden of proof. The amended rule provides that failure to 

do so may be deemed a waiver. 

Contrary to the comments discussed above, the Commission believes this change will not 

materially alter current practice and will not unfairly advantage the Division because, as noted, 

even in the absence of this clarification, respondents often assert reliance in their answers to 

Commission OIPs.

72 Finally, this amendment would align administrative proceedings with civil 

litigation in generally aiming to eliminate surprise and identifying the issues for the hearing.

73

H. Rule 221 (Prehearing Conference)

Rule 221 permits a hearing officer to direct the parties to meet for an initial prehearing 

conference and includes a list of subjects to be discussed.

74 We proposed amendments to Rule 

221(c) to add depositions and expert witness disclosures or reports to the list of subjects to be 

discussed at the prehearing conference. We received no comments on this aspect of the 

proposal. 

 

72 Whether, and to what extent, the assertion of reliance on advice or involvement of counsel in 

the answer to the OIP results in the waiver of the attorney-client privilege depends on the facts of 

any given proceeding. As a general matter, “the attorney-client privilege cannot at once be used 

as a shield and a sword.” United States v. Bilzerian, 926 F.2d 1285, 1292 (2d Cir. 1991). In 

determining whether the privilege is waived, hearing officers should consider how respondents 

have framed their reliance on counsel in the answer, the allegations in the OIP, and the facts and 

circumstances underlying the assertion of reliance. The parties may discuss these issues at the 

prehearing conference pursuant to Rule 221. 

73 See Pierce v. Pierce, 5 F.R.D. 125 (D.D.C. 1946); cf. Fed.R.Civ.P. 1.

74 17 CFR 201.221(b).
37

We are adopting the amendment as proposed with respect to depositions and expert 

witness disclosures. The addition of depositions to certain proceedings will potentially raise 

issues, including the identity of the persons to be deposed and the timing of any depositions, that

will benefit from early discussion between the parties and with the hearing officer. At a 

prehearing conference, the parties and the hearing officer may discuss the timing of depositions, 

the proposed deponents, whether any party will be making a motion seeking leave to conduct 

additional depositions pursuant to amended Rule 233, and any issues any party foresees arising 

in connection with the proposed depositions. 

In addition, we are modifying Rule 221(c) in two other respects. First, in response to 

comments advocating amendments that would require a date certain by which the Division 

should complete its document production under Rule 230,75 we are amending Rule 221(c) to 

include in the list of subjects to be discussed at a prehearing conference the timing for 

completion of production of documents as set forth in Rule 230. The Commission expects that 

the Division will continue its practice of timely producing documents, and any potential concerns 

surrounding the completion of document production should be discussed with the hearing officer 

at a prehearing conference.76 

 

75 See Calfee (suggesting rule should require production to be completed not later than seven 

days prior to the deadline for filing an answer); Gibson (suggesting a time period of 45 days 

from initiation of a proceeding).

76 Rule 230(d) provides, inter alia, unless otherwise ordered by the Commission or the hearing 

officer, the Division shall commence making documents available to a respondent for inspection 

and copying pursuant to the section no later than 7 days after service of the order instituting 

proceedings. 17 CFR 201.230(d). 
38

Second, we are amending Rule 221(c)(8) to clarify that the subjects to be discussed at the 

prehearing conference include the filing of any motion pursuant to Rule 250. As amended, Rule 

250 contemplates the filing of various types of dispositive motions (i.e., motion for a ruling on 

the pleadings, motion for summary disposition, and motion for a ruling as a matter of law 

following completion of a case in chief). Parties may discuss at a prehearing conference whether 

they anticipate filing any motions pursuant to amended Rule 250, and the timing of such 

motions.77

I. Rule 222 (Prehearing Submissions)

1. Proposed Rule

Rule 222(b)78 provides that a party who intends to call an expert witness shall disclose 

information related to the expert’s background, including qualifications, prior testimony, and 

publications. We proposed amendments to current Rule 222(b)’s requirement that parties submit 

a list of other proceedings in which their expert witness has given expert testimony and a list of 

publications authored or co-authored by their expert witness. As proposed, Rule 222(b) limits

the list of proceedings to the previous four years, and limits the list of publications to the 

previous ten years. 

The proposed amendment requires disclosure of a written report for a witness retained or 

specially employed to provide expert testimony in the case, or for an employee of a party whose 

duties regularly involve giving expert testimony. The proposed amendment outlines the 

elements of that written report, including a complete statement of all opinions the witness will 

 

77 See infra discussion of Rule 250 at Section M. 

78 17 CFR 201.222.
39

express and the basis and reasons for them, the facts or data considered by the witness in forming 

them, any exhibits that will be used to summarize or support them, and a statement of the 

compensation to be paid for the expert’s study and testimony in the case. 

As proposed, the amendment provides for two categories of information protected from 

discovery: (1) drafts of any report or other disclosure required to be submitted in final form; and 

(2) communications between a party’s attorney and the party’s expert witness who would be 

required to submit a report under the rules, unless the communications related to the expert’s 

compensation, or certain facts, information, or assumptions provided by the attorney to the 

expert. 

2. Comments Received

We received one comment on this aspect of the proposal. The commenter generally 

supported the amendment in light of the similarity of the proposed rule to Rule 26(b) of the 

Federal Rules of Civil Procedure but urged the Commission to adopt a rule allowing the parties 

to present direct expert testimony at all hearings.79 

3. Final Rule

We are adopting the rule substantially as proposed, with one ministerial edit. As proposed, 

the rule text provided that communications between a party’s attorney and the party’s expert 

witness who is identified under this section need not be furnished, subject to certain exceptions. 

Consistent with the requirements for expert witness disclosures and expert reports in the Federal 

Rules of Civil Procedure, and to align the rule text with the description of the amendments in the 

 

79 Gibson.
40

proposing release, we have revised the rule to clarify that the protections afforded to 

communications between a party’s attorney and the party’s expert witness under section (b)(2) 

apply to communications with experts who are required to provide a report under the rule.80

We believe the amendments to Rule 222 will promote efficiency in both prehearing 

discovery and the hearing.81 Moreover, the final rule comports with current practices of some 

hearing officers, who have required such expert reports in proceedings before them.82 

The final rule requires each party who intends to call an expert witness to submit a 

statement of the expert’s qualifications, a listing of other proceedings in which the expert has 

given expert testimony during the previous four years, and a list of publications authored or coauthored by the expert in the previous ten years. Additionally, if the witness is one retained or 

specially employed to provide expert testimony in the case or one whose duties as the party’s 

employee regularly involve giving expert testimony, then the party must include in the disclosure 

a written report—prepared and signed by the witness. The report must contain: (i) a complete 

statement of all opinions the witness will express and the basis and reasons for them; (ii) the 

facts or data considered by the witness in forming them; (iii) any exhibits that will be used to 

summarize or support them; and (iv) a statement of the compensation to be paid for the study and 

 

80 Section (b) only addresses experts whom a party intends to call at the hearing. The rule does 

not cover consulting experts, i.e., experts who have been retained or specially employed in 

anticipation of litigation or to prepare for the hearing, but who are not expected to be called as 

witnesses at the hearing.

81 See Fed.R.Civ.P. 26(b)(4), (a)(2), respectively.

82 See, e.g., ZPR Investment Management, Inc., Admin Proc. Ruling Rel. No. 775 (Aug. 6, 2013), 

available at http://www.sec.gov/alj/aljorders/2013/ap-775.pdf (last visited July 11, 2016) 

(general prehearing order stating that “expert reports should be as specific and detailed as those 

presented in federal district court pursuant to Federal Rule of Civil Procedure 26.”). 
41

testimony in the case. Consistent with the proposal, amended Rule 222 protects from disclosure 

(1) draft reports or other disclosure required to be submitted in final form, and (2) 

communications between a party’s attorney and the party’s expert witness required to provide a 

report under the rule, except if the communications relate to compensation for the expert’s study 

or testimony, identify facts or data that the party’s attorney provided and that the expert 

considered in forming the opinions to be expressed, or identify assumptions that the party’s 

attorney provided and that the expert relied on in forming the opinions to be expressed.

We disagree with the comment suggesting that the rule be altered to require that expert 

witnesses testify at the hearing in all cases. Hearing officers currently use expert reports as 

evidence and permit direct examination as necessary,

83 a practice that we understand comports 

with the practice followed by a number of district judges in federal court bench trials. We 

believe that the final rule furthers the goal of efficiency without compromising a respondent’s 

ability to present direct expert testimony.

 

83 See, e.g., Leslie A. Arouh, Admin Proc. File No. 3-10884, 2003 SEC LEXIS 3210 (Feb. 19, 

2003) (ordering production of respondent’s expert report as evidence, “to be fleshed out as 

needed by further direct testimony, and subject to cross examination.”); Reliance Financial 

Advisors, LLC, Admin Proc. Ruling Rel. No. 2627, 2015 SEC LEXIS 1703 (May 4, 2015) 

(order following prehearing conference stating that a hearing officer “will accept the Division’s 

expert report as testimony but will expect brief direct testimony by the expert during the hearing 

as well”); Ambassador Capital Management, LLC, Admin Proc. Ruling Rel. No. 1149 n.1, 2014 

SEC LEXIS 45 (Jan. 7, 2014) (order setting prehearing schedule stating, “[a]t the prehearing 

conference, it was established that any party offering expert testimony shall be prepared to 

conduct direct examination of the expert for no more than forty-five minutes at the hearing”).
42

J. Rule 230 (Enforcement and Disciplinary Proceedings: Availability of Documents 

for Inspection and Copying)

1. Proposed Rule

After the institution of proceedings, Rule 230(a)84 requires the Division to make available 

to respondents certain documents obtained by the Division in connection with an investigation. 

Rule 230(b)85 provides a list of documents that may be withheld from this production. We 

proposed to amend Rule 230(b) to provide that the Division may redact certain sensitive personal 

information from documents that will be made available, unless the information concerns the 

person to whom the documents are being produced. We also proposed to amend Rule 230(b) to 

clarify that the Division may withhold or redact documents that reflect settlement negotiations 

with persons or entities who are not respondents in the proceeding at issue. 

2. Comments Received

One commenter supported the proposal but advocated additional amendments to Rule 

230.86 The commenter argued that, in addition to the categories of documents listed in Rule 

230(a)(1)(i), the rule should require disclosure by the Division of all persons that the Division 

interviewed or took testimony from during the investigation, including a summary of the factual 

topics covered in each interview.

87 The commenter also advocated amendments to Rule 230(b) 

that would preclude Division staff from introducing, as evidence in administrative proceedings,

 

84 17 CFR 201.230(a).

85 17 CFR 201.230(b).

86 CCMC.

87 Id. 
43

any Wells submissions, pre-Wells submissions and white papers submitted by a party to the 

proceeding. This commenter argued that the same policy arguments supporting an exclusion of 

settlement negotiations from disclosure also apply to the content of Wells submissions.88 

3. Final Rule

We are adopting Rule 230 as proposed, with one ministerial change unrelated to the 

proposal.

89 The final rule permits the Division to redact an individual’s social security number, 

an individual’s date-of-birth, the name of an individual known to be a minor, or a financial 

account number, taxpayer-identification number, credit card or debit card number, passport 

number, driver’s license number, or state-issued identification number other than the last four 

digits of the number. We believe this amendment provides an important safeguard that should 

enhance the protection afforded to sensitive personal information. It is also consistent with 

privacy rules of some federal district courts.90 In addition, final Rule 230(b) provides that the 

Division may withhold or redact documents that reflect settlement negotiations with persons or 

entities who are not respondents in the proceeding at issue. As we explained in the proposal, this 

amendment is consistent with the important public policy interest in candid settlement 

negotiations,91 and we believe it will help to preserve the confidentiality of settlement 

 

88 Id.

89 Specifically, we are amending the reference in current Rule 230(a)(1)(vi) to the Division of 

Market Regulation to reflect the current name of the Division—i.e., the Division of Trading and 

Markets. 

90 See, e.g., Fed.R.Civ.P. 5.2(a); DDC Local Civ. R. 5.4(f).

91 See generally, Federal Rule of Evidence 408 (“Compromise Offers and Negotiations”), 

Advisory Committee Notes; 2 McCormick on Evid. section 266 (7th ed.). 
44

discussions and safeguard the privacy of potential respondents with whom the Division has 

negotiated. 

We decline to expand Rule 230 to require the Division to disclose all persons interviewed 

during the investigation, or to require the staff to produce summaries of all such interviews, as 

suggested by one commenter. Rule 230(a) generally requires the Division to make available for 

inspection and copying documents obtained by the Division from persons not employed by the 

Commission during the course of its investigation prior to the institution of proceedings.92 This 

includes each subpoena issued during the investigation, all other written requests to persons not 

employed by the Commission to provide documents or to be interviewed, the documents turned 

over in response to any such subpoenas or other written requests, all transcripts and transcript 

exhibits, and any other documents obtained from persons not employed by the Commission.93 

Rule 232 permits a party to request the issuance of subpoenas requiring the production of 

documents and subpoenas compelling the testimony of witnesses. The Commission believes 

that, taken together, these discovery tools will enable the parties to identify witnesses who may 

possess relevant information and to determine who should be deposed prior to the hearing.94

 

92 See 17 CFR 201.230(a). 

93 17 CFR 201.230(a)(1)(i) – (v).

94 We do not believe it is necessary or appropriate to require disclosure by the Division of every 

person interviewed or deposed during an investigation, or to require the Division to prepare 

summaries of all such interviews, as suggested by the commenter. In its fact-gathering role, 

Division staff may interview dozens of potential witnesses in the course of an investigation that 

can span many months. Such interviews often serve to narrow the scope of an investigation, and 

the persons interviewed ultimately may bear no relevance to the proceedings instituted by the 

Commission. 
45

With the exception of certain final inspection or examination reports that the Division 

intends to use at the hearing, documents prepared by Commission staff are treated as attorney 

work-product, and are not required to be produced pursuant to Rule 230.

95 The Commission 

believes it appropriate to continue the current practice of allowing the hearing officer to evaluate 

attorney work-product production disputes on a case-by-case basis.

96 This comports with federal 

district court practice for resolving discovery disputes concerning the production of attorney

work-product under Federal Rule of Civil Procedure 26(b).97 

The final rule will not, as one commenter suggested, prohibit the use of Wells 

submissions and white papers as evidence in administrative proceedings. A Wells notice 

provided to a respondent by the Division states that the Commission may use the information 

contained in such a submission as an admission, or in any other manner permitted by the Federal 

 

95 See 17 CFR 201.230 (b)(1)(ii); see also 1995 Release, 60 FR at 32762 (comments (a) and (b) 

to Rule 230). Work product includes any notes, working papers, memoranda or other similar 

materials, prepared by an attorney in anticipation of litigation. See Hickman v. Taylor, 329 U.S. 

495 (1947); see also Fed. R. Civ. P. 26(b)(3) and (b)(5).

96 Rule 230(c) authorizes the hearing officer to review any documents withheld by the Division 

pursuant to Rule 230(b)(1)(i) – (iv). See, e.g., Piper Capital Management, Inc. et al., Admin. 

Proc. Rel. No. 577, 1999 SEC LEXIS 301 at *20 (Jan. 15, 1999) (granting motion for in camera

inspection of documents comprising, reflecting or summarizing off-record interviews which 

Division conducted with one witness”); Jeffrey R. Patterson, et al. Admin. Proc. File No. 3-

10936, 2003 SEC LEXIS 3217 (finding, following in camera review, that staff’s handwritten 

notes of witness’s interview did not contain exculpatory evidence and thus were not required to 

be made available under Rule 230). 

97 See, e.g., SEC v. NIR Group, 283 F.R.D. 127; 2012 U.S. Dist. LEXIS 116062 at *21, *23 

(E.D.N.Y. Aug. 17, 2012) (denying, in part, defendant’s motion to compel following in camera

review of sample Division interview notes and memoranda relating to same); SEC v. Treadway, 

et al., 229 F.R.D. 454, 455-56, 2005 U.S. Dist. LEXIS 15167, at *4-5 (S.D.N.Y. July 26, 2005) 

(following in camera review, upholding Magistrate Judge determination that proffer session 

notes prepared by Division attorneys were protected attorney work-product).
46

Rules of Evidence, or for any of the Routine Uses of Information described in Form 1662, 

“Supplemental Information for Persons Requested to Supply Information Voluntarily or Directed 

to Supply Information Pursuant to a Commission Subpoena.”98 A respondent is therefore given 

notice prior to providing any Wells submissions of the various uses the Division may make of 

the information included therein. 

The Commission does not treat Wells submissions as settlement materials.99 The 

procedures for submitting offers of settlement to the Commission are governed by Rule 240.100

Those procedures require, among other things, an offer of settlement signed by the person 

making the offer, as well as a waiver by the person of, among other things, the right to claim bias 

or prejudgment by the Commission based on the consideration of or discussions concerning 

settlement of all or any part of the proceeding.101 In contrast, the Wells submission process is 

governed by Rule 5(c) of the Commission’s Informal and Other Procedures, which provides 

persons who become involved in preliminary or formal investigations the opportunity to 

voluntarily submit “a written statement to the Commission setting forth their interests and 

position in regard to the subject matter of the investigation.”102 

 

98 Form 1662 can be found at: http://www.sec.gov/about/forms/sec1662.pdf.

99 Cf. In re IPO Securities Litig., 2003 U.S. Dist. LEXIS 23102 at *13 (S.D.N.Y. Jan 12, 2004) 

(“Wells submissions are not in themselves settlement materials, although they may sometimes 

contain offers of settlement”). 

100 17 CFR 201.240.

101 17 CFR 201.240(b) and (c)(5).

102 17 CFR 202.5(c).
47

The Commission’s longstanding view has been that Wells submissions “will normally 

prove most useful in connection with questions of policy, and on occasion, questions of law, 

bearing upon the question of whether a proceeding should be initiated, together with 

considerations relevant to a particular prospective defendant or respondent that might not 

otherwise be brought clearly to the Commission’s attention.”103 We believe this approach 

remains sound because it furthers the Commission’s goal of having before it the position of 

persons under investigation at the time it is asked to consider initiating an enforcement action. In 

addition, we believe that the credibility of a respondent’s Wells submission could be diminished 

if the final rule restricted the use of such submissions in subsequent administrative proceedings. 

Such a rule could enable a potential respondent to freely deny, or make arguments fundamentally 

inconsistent with, statements or claims made in prior Wells submissions. We therefore believe it 

is appropriate not to treat Wells submissions as settlement materials. Rather, hearing officers 

may continue the current practice of determining whether, under the facts and circumstances, a 

Wells submission should be excluded from a proceeding.

K. Rule 234 (Depositions Upon Written Questions)

Current Rule 234 contains procedures for taking depositions through written questions. 

Under Rule 234, a party may make a motion to take a deposition on written questions by filing 

the questions with the motion. We proposed to amend the rule to provide that the moving party 

may take a deposition on written questions either by stipulation of the parties or by filing a 

motion demonstrating good cause. We did not receive any comments on this aspect of the 

 

103 See Procedures Relating to the Commencement of Enforcement Proceedings and Termination 

of Staff Investigations, Securities Act Rel. No. 5310, 1972 SEC LEXIS 238 (Sept. 27, 1972) 

(emphasis added). 
48

proposal and are adopting the amendment as proposed, with one ministerial change to paragraph 

(a), which in the proposal inadvertently referred to Rule 232 instead of Rule 233. The 

amendment is intended to provide a clear standard under which the hearing officer or 

Commission would review such a motion. The amendment replaces the standard under the 

current rule, which references current Rule 233(b)’s limit on depositions to witnesses unable to 

appear or testify at a hearing.

L. Rule 235 (Introducing Prior Sworn Statements or Declarations)

1. Proposed Rule

Current Rule 235104 allows the introduction of certain prior sworn statements into the record. 

Current Rule 235(a) sets forth the standards for persons making a motion to introduce prior 

sworn statements of non-party witnesses. We proposed to amend Rule 235(a) to include in the 

list of prior sworn statements depositions taken pursuant to Rules 233 or 234, as well as 

investigative testimony and declarations taken under penalty of perjury pursuant to 28 U.S.C. 

1746. In addition, we proposed to add new paragraph (b) to Rule 235 to permit the use of 

statements made by a party or a party’s officers, directors, or managing agents, and to clarify that 

such statements may be used by an adverse party for any purpose. Consistent with the proposed 

amendments to Rule 235(a), the amendments to new Rule 235(b) included depositions taken 

pursuant to Rules 233 or 234, as well as investigative testimony and declarations taken under 

penalty of perjury pursuant to 28 U.S.C. 1746.

 

104 17 CFR 201.235.
49

2. Comments Received

We received one comment on this aspect of the proposal. A securities blog entry cited by the 

commenter objected to the introduction of sworn statements under current Rule 235.105 The 

author of the blog asserted, without providing support, that hearing officers currently admit 

unreliable investigative testimony into the record and that the proposal endorses this practice. 

The author opposed the admission of investigative testimony and declarations and argued that 

the proposal would unfairly benefit the Division. 

3. Final Rule

We are adopting the amendments as proposed. We believe that current Rule 235 contains 

sufficient safeguards to prevent the introduction of unreliable testimony. For instance, to 

introduce a prior sworn statement under current Rule 235(a), a person must make a motion 

setting forth reasons for introducing the statement. The standard for granting such a motion 

focuses on the admissibility and relevance of the statement, the availability of the witness for the 

hearing, and the presumption favoring oral testimony of witnesses in an open hearing. The 

statements that will be admissible pursuant to amended Rule 235(a)—including statements made 

pursuant to 28 U.S.C. 1746, deposition testimony, investigative testimony, and other sworn 

statements—will be subject to these standards. 

Amended Rule 235(b) will permit an adverse party to seek the admission of statements 

made by a party or the party’s officer, director, or managing agent. A party opposing the 

 

105 See Hudson II (citing anonymous blog). 
50

introduction or use of such statements may still object to their admission under amended Rule 

320 to the extent such evidence is “irrelevant, immaterial, unduly repetitious, or unreliable.”106 

M. Rule 250 (Dispositive Motions)

Rule 250 currently provides that a party may move for summary disposition after a 

respondent’s answer is filed and documents have been made available to the respondent and sets 

forth the procedures and standards governing such a motion. If the “interested division,” e.g., the 

Division of Enforcement, has not completed its case in chief, a motion for summary disposition 

may be made only with leave of the hearing officer. Rule 250 has been used by parties in our 

proceedings in a manner analogous to the summary judgment procedure in the Federal Rules of 

Civil Procedure. It also has been used as a means of seeking a ruling on the pleadings or seeking 

dismissal as a matter of law either early in a proceeding or following the Division’s completion 

of its evidentiary presentation at the hearing. 

A principal purpose of Rule 250 is to facilitate the efficient resolution of proceedings by 

disposing of issues prior to the hearing, where appropriate, without introducing unnecessary 

delays or costs into the proceeding. As we have previously explained, the rule “balances the 

potential efficiency gained by allowing the hearing officer to eliminate unnecessary hearings in 

some cases against the costs of allowing additional motions, prehearing procedures and the 

 

106 See infra discussion at Section N.
51

attendant delay in cases where a hearing in which all evidence can be presented and witness 

demeanor can be observed is warranted.”107

We did not propose to amend Rule 250. However, one commenter suggested that the 

Commission modify the current rule to permit a respondent to challenge the Division’s “legal 

theories . . . as of right”108 prior to the hearing. As discussed below, we are amending Rule 250 

both to respond to the commenter’s suggestion and to clarify how summary disposition motions 

will operate in conjunction with the amendments to Rules 233 and 360 that permit parties to take

depositions and that provide for a longer maximum prehearing period in 120-day proceedings. 

Consistent with the Commission’s prior commentary on Rule 250, these amendments are 

intended to maintain the balance between encouraging more streamlined proceedings while 

protecting against unwarranted delays and costs.109 

Amended Rule 250 provides that three types of dispositive motions may be filed at 

different stages of an administrative proceeding and sets forth the standards and procedures 

governing each type of motion. These motions – described in paragraphs (a) – (d) of the 

amended rule – generally correspond to certain dispositive motions that may be filed in federal 

court under the Federal Rules of Civil Procedure. 

 

107 See 1995 Release, 60 FR at 32767-68; see also id. at 32767 (“Summary disposition is a 

procedure that can resolve issues prior to hearing, thereby reducing the costs of hearing and 

expediting resolution of the proceeding.”).

108 Gibson.

109 As noted supra at n.16 and pursuant to current Rule 360(a)(1), unless the Commission directs 

otherwise, the hearing officer shall prepare an initial decision in any proceeding in which the 

Commission directs a hearing officer to preside at a hearing, provided, however, that an initial 

decision may be waived by the parties with the consent of the hearing officer pursuant to Rule 

202. These amendments do not alter this requirement.
52

Paragraph (a) of amended Rule 250 governs the filing of motions for a ruling on the 

pleadings. It provides that, no later than 14 days after a respondent’s answer has been filed, any 

party may move for a ruling on the pleadings on one or more claims or defenses, asserting that, 

even accepting all of the non-movant’s factual allegations as true and drawing all reasonable 

inferences in the non-movant’s favor, it is entitled to a ruling as a matter of law. Paragraph (a) 

thus permits a respondent to seek a ruling as a matter of law based on the factual allegations in 

the OIP and permits either party to seek a ruling as a matter of law after the filing of an 

answer.110 Consistent with the commenter’s suggestion, we believe that obtaining leave of the 

hearing officer prior to filing such a motion is unnecessary; a motion under paragraph (a) is, 

therefore, available to any party as a matter of right. Additionally, paragraph (a) provides that a 

hearing officer shall promptly grant or deny the motion. This is intended to help ensure that such 

motions do not serve to delay proceedings.111 

 

110 This is analogous to Rules 12(b)(6) and 12(c) of the Federal Rules of Civil Procedure. See 

Fed.R.Civ.P. 12(b)(6) (failure to state a claim upon which relief can be granted); 12(c) (judgment 

on the pleadings). 

111 The same commenter suggested that the Commission be required to promptly hear and 

resolve all appeals from hearing officer denials of prehearing motions for summary disposition 

that attack the statutory or regulatory basis for the proceeding, or that challenge the 

constitutionality thereof. See Gibson. The Commission has not adopted this suggestion because 

we believe the existing mechanism for review is appropriate and is consistent with the overall 

goal of ensuring an efficient resolution of proceedings. See generally Gary L. McDuff, Exchange 

Act Release No. 78066, 2016 WL 3254513 (June 14, 2016). Under Rule 400(a), we “may, at 

any time, on [our] own motion, direct that any matter be submitted to [us] for review.” 

Consistent with Rule 400(a), a respondent may seek review of issues such as those raised by the 

commenter at any point in an administrative proceeding. We have likewise not adopted the 

commenter’s suggestion that we adopt a rule providing that an administrative proceeding will be 

automatically stayed pending final resolution of a respondent’s challenge to the legality of the 

proceeding. See Gibson. We decline to adopt such a blanket rule because, among other things, it 

would unduly delay proceedings where the underlying legal challenge lacks merit. Moreover, 
53

Paragraph (b) of amended Rule 250 governs the filing of motions for summary 

disposition in proceedings designated as 30- and 75-day proceedings pursuant to amended Rule 

360. It provides that after a respondent’s answer has been filed and documents have been made 

available to that respondent pursuant to Rule 230, any party may move for summary disposition

on one or more claims or defenses, asserting that the undisputed pleaded facts, declarations, 

affidavits, documentary evidence or facts officially noted pursuant to Rule 323 show (1) that 

there is no genuine issue with regard to any material fact and (2) that the movant is entitled to 

summary disposition as a matter of law.112 If it appears that a party, for good cause shown, 

cannot present prior to the hearing facts essential to oppose the motion, paragraph (b) provides 

that the hearing officer shall deny or defer the motion. Leave of the hearing officer is not 

required to file such a motion in 30- and 75-day cases. This is consistent with existing practice 

 

any respondent may seek a stay of the administrative proceeding and, where appropriate, the 

Commission in its discretion may issue such a stay.

112 This is analogous to Federal Rule of Civil Procedure 56. See Fed.R.Civ.P. 56 (summary 

judgment). To streamline amended Rule 250, we have deleted the portion of current Rule 250(a) 

that provided that, the facts of the pleadings of the party against whom the motion is made shall 

be taken as true, except as modified by stipulations or admissions made by that party, by 

uncontested affidavits, or by facts officially noted pursuant to Rule 323. This is not intended to 

be a substantive change. Consistent with current Commission opinions regarding summary 

disposition motions, the facts should be construed in the light most favorable to the non-moving 

party. See, e.g., Jay T. Comeaux, Exchange Act Release No. 72896, 2014 WL 4160054, at *2 

(Aug. 21, 2014). Importantly, a non-moving party “may not rely on bare allegations or denials 

but instead must present specific facts showing a genuine issue of material fact for resolution at a 

hearing.” Id.; see also Kornman v. SEC, 592 F.3d 173, 182 (D.C. Cir. 2010) (finding that 

summary disposition was properly granted where the respondent “proffered no evidence to 

contradict either his admissions or the Division’s evidence”); Conrad P. Seghers, Advisers Act 

Release No. 2656, 2007 WL 2790633 at *4 n.25 (Sept. 26, 2007) (“[Respondent] must set forth 

specific facts establishing a genuine issue of material fact and may not rely upon mere 

allegations in his pleadings to the law judge to create a genuine issue.”), petition denied, 548 

F.3d 129, 136 (D.C. Cir. 2008). 
54

in the proceedings we have designated for shorter timeframes—including, for example, 

proceedings pursuant to Exchange Act Section 12(j)113 as well as follow-on proceedings114—

where we have repeatedly observed that summary disposition is typically appropriate because the 

issues to be decided are narrowly focused and the facts not genuinely in dispute.

Paragraph (c) of amended Rule 250 governs the filing of motions for summary 

disposition in proceedings designated as 120-day proceedings pursuant to amended Rule 360. It 

provides that after a respondent’s answer has been filed and documents have been made 

available to that respondent pursuant to Rule 230, any party may make a motion for summary

disposition on one or more claims or defenses, asserting that the undisputed pleaded facts, 

declarations, affidavits, deposition transcripts, documentary evidence or facts officially noted 

pursuant to Rule 323 show (1) that there is no genuine issue with regard to any material fact and 

 

113 See, e.g., China Biotics, Inc., Exchange Act Release No. 70800, 2013 WL 5883342, at *16 

(Nov. 4, 2013) (explaining that summary disposition in a proceeding pursuant to Section 12(j) 

was appropriate when the respondent “still has not identified any evidence demonstrating a 

genuine issue of material fact”); Citizens Capital Corp., Exchange Act Release No. 67313, at 16 

(June 19, 2012) (“We have found that summary disposition is appropriate in proceedings like 

this one brought pursuant to Exchange Act Section 12(j), where the issuer has not disputed the 

facts that constitute the violation.”).

114 See, e.g., Jeffrey L. Gibson, Exchange Act Release No. 57266, 2008 SEC LEXIS 236, at *19-

20 (Feb. 4, 2008) (“Use of the summary disposition procedure has been repeatedly upheld in 

cases such as this one where the respondent has been enjoined or convicted, and the sole 

determination concerns the appropriate sanction.”) petition denied, 561 F.3d 548, 555 (6th Cir. 

2009); Adoption of Amendments to the Rules of Practice and Related Provisions and Delegations 

of Authority of the Commission, Exchange Act Release No. 52846 (Nov. 29, 2005), 70 FR 

72566, 72567 (Dec. 5, 2005), available at http://www.sec.gov/rules/final/34-52846.pdf (last 

visited July 8, 2016) (“Motions for summary dispositions are often made in cases where a 

respondent has been criminally convicted or an injunction has been entered and the conviction or 

injunction provides the basis for an administrative order against the respondent.”).
55

(2) that the movant is entitled to summary disposition as a matter of law.115 If it appears that a 

party, for good cause shown, cannot present prior to the hearing facts essential to justify 

opposition to the motion, paragraph (c) provides that the hearing officer shall deny or defer the 

motion. 

Leave of the hearing officer must be obtained in order to file a Rule 250(c) motion. 

Leave may be granted only if the moving party establishes good cause and if consideration of the 

motion will not delay the scheduled start of the hearing. Paragraph (c) further provides that the 

hearing officer shall promptly grant or deny the motion for summary disposition or shall defer 

decision on the motion. 

The requirement that leave be obtained to make a motion under paragraph (c) is 

consistent with the Commission’s long-held view that because “[t]ypically, Commission 

proceedings that reach litigation involve basic disagreement as to material facts . . . [t]he 

circumstances when summary disposition prior to hearing could be appropriately sought or 

granted will be comparatively rare.”116 In contrast to matters like 12(j) proceedings that are 

amenable to resolution on summary disposition,117 we have noted that the proceedings designated 

for the longest timeline may not be “appropriate vehicle[s]” for summary disposition.118 This is 

 

115 This is analogous to Federal Rule of Civil Procedure 56 (summary judgment); see also supra 

note 112. 

116 1995 Release, 60 FR at 32768.

117 See supra note 113. 

118 Comeaux, 2014 WL 4160054, at *4 n.30 (“We urge parties in the future to consider whether, 

if the Commission has determined that a particular matter is not an appropriate vehicle for the 
56

so because, as a general matter, hearings are necessary in 120-day proceedings for evidence to be 

taken on fact-intensive issues such as a respondent’s state of mind that generally are not 

susceptible to summary disposition. 

Consequently, we have previously stated in discussing Rule 250 that “leave to file such a 

motion shall be granted only for good cause shown, and if consideration of the motion will not 

delay the scheduled start of the hearing.”119 We now codify this as the two-part standard for a 

hearing officer to grant leave for a party to file a motion for summary disposition under amended 

Rule 250(c).120 It is the Commission’s view that good cause may generally be demonstrated 

where there is a substantial likelihood that the party seeking leave to file a motion under 

paragraph (c) will be successful on the merits of the motion.121 Additional factors the hearing 

officer generally should consider in assessing whether a party has demonstrated good cause 

include, but are not limited to, whether (1) there is agreement among the parties on the operative 

facts that are the basis of the motion; (2) the motion, if granted, would obviate the need to 

conduct a substantial portion, or all, of the final hearing; and (3) the motion would not impose 

undue expense or harassment on the opposing party. Consideration of these factors is intended 

 

120- or 210-day time periods [under current Rule 360], it is an appropriate vehicle for a motion 

for summary disposition.”).

119 See 1995 Release, 60 FR at 32768.

120 Hearing officers have cited to this standard in assessing whether to grant leave to file a 

summary disposition motion under current Rule 250. See, e.g., Arthur F. Jacob, CPA, Admin. 

Proc. Ruling No. 3370, 2015 SEC LEXIS 4945, at *3 (Dec. 4, 2015).

121 See 1995 Release, 60 FR at 32768, Comment to Rule 250 (“Where a genuine issue as to 

material facts clearly exists as to an issue, it would be inappropriate for a party to seek leave to 

file a motion for summary disposition or for a hearing officer to grant the motion.”). 
57

to further the goal of Rule 250 to promote efficient resolution of proceedings, without 

introducing unnecessary costs or delays. Consistent with the Commission’s prior statements

regarding summary disposition in proceedings designated for the longest timeframe, we believe

that the good cause standard under paragraph (c) will rarely be satisfied.

122 Granting leave to file 

a motion for summary disposition only in exceptional cases where good cause is established, and 

limiting summary disposition to the rare cases where it is appropriate, promotes efficiency by 

avoiding the attendant delays that may ensue if a hearing officer grants summary disposition and 

the Commission subsequently remands the case for an evidentiary hearing.123

Paragraph (d) of amended Rule 250 governs the filing of motions for a ruling following 

completion of the Division’s case in chief at a hearing. It provides that following the interested 

division’s presentation of its case in chief, any party may make a motion, asserting that it is 

entitled to a ruling as a matter of law on one or more claims or defenses.

124 Leave from the 

 

122 We note that we have removed the provision in current Rule 250(b) stating that denial of 

leave to file a summary disposition motion “is not subject to interlocutory appeal.” The denial of 

leave to file a motion pursuant to paragraph (c) in amended Rule 250 is subject to Commission 

review, consistent with the Commission’s plenary authority over our administrative proceedings. 

See supra note 111.

123 See, e.g., Diane M. Keefe, Exchange Act Release No. 61928, 2010 SEC LEXIS 1122, at *4 -

5 (Apr. 16, 2010) (reversing grant of summary disposition, remanding for a hearing, and noting 

“[w]e have reviewed the limited record before us and believe that the record would benefit from 

direct and cross-examination of any relevant witnesses and the fact-finding determinations of a 

law judge” and “that amplification of the current record with facts supporting either party’s 

position on the issue of materiality would aid any decisional process”); Joseph P. Doxey, 

Exchange Act Release No. 77773, 2016 WL 2593988 (May 5, 2016) (finding evidence did not 

support grant of summary disposition as to Division’s allegations of antifraud and registration 

violations and remanding claims to the law judge).

124 This is analogous to Federal Rule of Civil Procedure 50(a) (judgment as a matter of law). 
58

hearing officer is not required to file such a motion. But as with the motion for summary 

disposition discussed in paragraph (c), it is the Commission’s view that proceedings designated 

for the longest timeframe will rarely be amenable to resolution based solely on the Division’s 

case in chief, and prior to the respondent’s presentation of evidence, and therefore we believe

that Rule 250(d) motions should be granted in only the rarest of cases.

125 

Paragraph (e) of amended Rule 250 provides the length limitations applicable to 

dispositive motions under paragraphs (a) – (d) of amended Rule 250.126 It provides that 

dispositive motions, together with any supporting memorandum of points and authorities 

(exclusive of any declarations, affidavits, deposition transcripts or other attachments), shall not 

exceed 9,800 words and that requests for leave to file motions and accompanying documents in 

excess of 9,800 words are disfavored.127 A party should not circumvent this length limitation by 

filing or appending a separate document, incorporated by reference into the supporting 

 

125 In Rita Villa, Exchange Act Release No. 39518, 1998 WL 4530 (Jan. 6, 1998), the 

Commission stated that it did not favor an “abbreviated procedure” in which a hearing officer 

orally granted a motion for summary disposition following the presentation of the Division’s 

case in chief. We clarify today that Rita Villa, which interpreted a prior Rule of Practice, should 

not be read to apply to amended Rule 250(d) to suggest that a party may never make a motion for 

summary disposition after a hearing has begun. Such a motion is available as of right: under 

amended Rule 250(d), a party may move for a ruling as a matter of law following completion of 

the Division’s case in chief. 

126 Motions made pursuant to amended Rule 250(d) may be made orally, or in writing, but such 

motions should not be used as a means of delaying completion of the hearing. Should the 

hearing officer decide that a motion made pursuant to Rule 250(d) requires briefing, the hearing 

officer may require the parties to brief the motion while the hearing continues to proceed. 

127 We note that paragraph (e) of amended Rule 250 contains the same length limitations as were 

applicable to summary disposition motions under current Rule 250(c). We have added the term 

“deposition transcripts” to the list of documents excluded from the page count to comport with 

the language of amended Rule 250(d) and the amendments to Rule 233. 
59

memorandum, that contains a recitation of any allegedly undisputed facts. To the extent that a 

party does incorporate a separate statement of facts by reference in its memorandum, such a 

document counts towards the length limitations in paragraph (e). A motion that does not, 

together with any accompanying memorandum of points and authorities, exceed 35, doublespaced pages in length, inclusive of pleadings incorporated by reference (but excluding any 

declarations, affidavits, deposition transcripts or attachments) is presumptively considered to 

contain no more than 9,800 words. Any motion that exceeds this page limit must include a 

certificate by the attorney, or an unrepresented party, stating that the brief complies with the 

word limit set forth in this paragraph and stating the number of words in the motion. The person 

preparing the certificate may rely on the word count of a word-processing program to prepare the 

document. 

Paragraph (f) of amended Rule 250 provides the length limitations and response times for 

opposition and reply briefs pertaining to motions under paragraphs (a) – (d) of amended Rule 

250. Paragraph (f)(1) provides that the length limitations in paragraph (e) apply to any 

opposition to a motion under paragraphs (a) – (d) of amended Rule 250. This reflects the 

Commission’s belief that, in the context of summary disposition motions, affording the 

responding party the same page limitation as the moving party should help to ensure that the 

responding party has a sufficient opportunity to respond to all of the positions advanced in the 

motion. Paragraph (f)(1) further provides that the length limitations in Rule 154(c) apply to any 

reply; this is consistent with current practice. Paragraph (f)(2)(i) provides that the response times 

in Rule 154(b) apply to all opposition and reply briefs pertaining to motions under paragraphs 

(a), (b), and (d) of amended Rule 250. Paragraph (f)(2)(ii) provides that, for any motion for 

which leave has been granted consistent with the standard in paragraph (c), any opposition must
60

be filed within 21 days after service of a Rule 250(c) motion and that any reply shall be filed 

within seven days after the service of any opposition. These expanded response times for 

oppositions and replies pertaining to summary disposition motions pursuant to paragraph (c) are 

intended to provide sufficient time to respond to the motion in those rare instances where good 

cause to file such a motion has been established. 

N. Rule 320 (Evidence: Admissibility)

1. Proposed Rule

Rule 320 provides the standards for admissibility of evidence. Under the current rule, the 

Commission or hearing officer may receive relevant evidence and shall exclude all evidence that 

is irrelevant, immaterial, or unduly repetitious. We proposed to amend the rule to add 

“unreliable” to the list of evidence that shall be excluded. In addition, we proposed adding new 

Rule 320(b) to clarify that hearsay may be admitted if it is relevant, material, and bears 

satisfactory indicia of reliability so that its use is fair. 

2. Comments Received 

Commenters raised a number of concerns about the admissibility of hearsay under 

proposed Rule 320(b). Most commenters argued that the Commission should incorporate 

Federal Rules of Evidence governing hearsay into the Commission’s administrative 

proceedings.128 Commenters, focusing on the importance of cross-examination to test 

“credibility, memory, [and] bias,” argued for limiting the admission of hearsay.

129 Commenters 

 

128 FSR; Gibson; Hudson II (citing anonymous blog); Brune; Grundfest; NJSBA.

129 Gibson; CCMC.
61

also argued that applying the federal court hearsay rules would ensure consistency and 

objectivity in administrative proceedings,130 and suggested that allowing hearsay evidence in 

administrative proceedings incentivizes forum selection based on the quality and nature of the

evidence and witnesses rather than other more appropriate considerations.131 Some commenters 

contended that the Commission had not, or could not, “establish a principled basis for adopting a 

different standard” than the federal rules or other rules requiring “greater scrutiny of hearsay 

evidence.”132 

Other commenters acknowledged the longstanding admissibility of hearsay in 

administrative proceedings,133 but argued that the proposed hearsay standards are nevertheless 

insufficient.134 One such commenter argued that the Commission should be bound by the federal 

rules, and advocated the exclusion of hearsay evidence in proceedings involving civil monetary 

penalties or bars from association in the securities industry.135 The other commenter advocated 

various other limitations on hearsay, including heightened standards for admitting hearsay; 

 

130 Calfee.

131 Gibson.

132 FSR; see also Brune; NJSBA. 

133 Gibson; CCMC.

134 Gibson; CCMC.

135 Gibson.
62

notice requirements; and provisions allowing additional depositions to counter proposed 

hearsay.136

A number of the commenters argued that the proposed standards provide insufficient 

guidance and are prone to unfair application.137 One commenter argued that hearing officers 

currently “err on the side of admitting hearsay” and apply the reliability standard 

inconsistently.

138 Commenters further objected that the proposed standards will “fail to offer any 

meaningful protection” or improve current practices.139 Commenters claimed that the absence of 

more bright-line guidance or procedural hurdles to introducing hearsay creates an undue burden 

on hearing officers and parties.140 

3. Final Rule

We are adopting the amendments to Rule 320 as proposed. As the proposing release 

explained, the standard for excluding unreliable evidence is consistent with the APA. The 

admission of hearsay evidence that satisfies a threshold showing of relevance, materiality, and 

reliability also is consistent with the APA, and the “indicia of reliability” standard for admitting 

such evidence is grounded in well-established interpretations of administrative law.

141 

 

136 CCMC.

137 FSR; Brune. 

138 Gibson.

139 Gibson; Grundfest.

140 Brune; FSR.

141 See 5 U.S.C. 556(d) (stating that any oral or documentary evidence may be received, but the 

agency as a matter of policy shall provide for the exclusion of irrelevant, immaterial or unduly 
63

We are not persuaded of the need to incorporate federal court hearsay rules or the other 

suggested standards for pre-emptively excluding or challenging hearsay.142 We believe that Rule 

320(b) appropriately focuses on the relevance, materiality, reliability and fairness of proposed 

hearsay evidence. Nor are we persuaded that the proposed admissibility standards provide 

insufficient guidance or impose an undue burden on hearing officers or the parties. Hearsay 

evidence is currently evaluated on a case-by-case basis in light of, among other things, the 

motives or potential bias of the declarant; the availability and credibility of the declarant; 

whether the statements are contradicted or consistent with direct testimony; the type of hearsay 

(e.g., sworn, written, attributable to an identified person); the availability of the missing witness 

and any attempts to compel witness testimony; and whether or not the hearsay is corroborated by 

other evidence in the record.143 We continue to believe that a case-by-case determination of the 

 

repetitious evidence); see, e.g., J.A.M. Builders, Inc. v. Herman, 233 F.3d 1350, 1354 (11th Cir. 

2000) (hearsay admissible in administrative proceedings if “reliable and credible”); Calhoun v. 

Bailar, 626 F.2d 145, 148 (9th Cir. 1980) (hearsay admissible if “it bear[s] satisfactory indicia of 

reliability” and is “probative and its use fundamentally fair”). Courts also have held that hearsay 

can constitute substantial evidence that satisfies the APA requirement. See, e.g., Echostar 

Communications Corp. v. FCC, 292 F.3d 749, 753 (D.C. Cir. 2002) (hearsay evidence is 

admissible in administrative proceedings if it “bear[s] satisfactory indicia of reliability” and “can 

constitute substantial evidence if it is reliable and trustworthy”); see generally Richardson v. 

Perales, 402 U.S. 389, 407-08 (1971) (holding that a medical report, though hearsay, could 

constitute substantial evidence in social security disability claim hearing); cf. Federal Rule of 

Evidence 403 (stating that relevant, material, and reliable evidence shall be admitted). 

142 The Supreme Court has stated that “...it has long been settled that the technical rules for the 

exclusion of evidence applicable in jury trials [the Federal Rules of Evidence] do not apply to 

proceedings before federal administrative agencies in the absence of a statutory requirement that 

such rules are to be observed.” Opp. Cotton Mills v. Administrator, 312 U.S. 126, 155 (1941).

143 See, e.g., Guy P. Riordan, Exchange Act Release No. 61153, 2009 WL 4731397, at *14 (Dec. 

11, 2009); Edgar B. Alacan, Exchange Act Release No. 49970, 2004 WL 1496843, at *6 (July 6, 

2004); Wheat, First Securities, Inc., Exchange Act Release No. 48378, 2003 WL 21990950, at 
64

admissibility of hearsay evidence is more appropriate than the broad exclusionary rules and 

procedures proposed by the commenters, and therefore adopt the rule as proposed.

O. Amendments to Appellate Procedure in Rules 410, 411, 420, 440, and 450

1. Proposed Rules 

We proposed amendments to Rules 410 (Appeal of Initial Decisions by Hearing 

Officers),144 411 (Commission Consideration of Initial Decisions by Hearing Officers),145 420 

(Appeal of Determinations by Self-Regulatory Organizations),146 440 (Appeal of Determinations 

by the Public Company Accounting Oversight Board),147 and 450 (Briefs Filed with the 

Commission),148 which govern appeals to the Commission.

 

*12 (Aug. 20, 2003); Harry Gliksman, Exchange Act Release No. 42255, 1999 WL 1211765 

(Dec. 20, 1999); Carlton Wade Fleming, Jr., Exchange Act Release No. 36215, 1995 WL 

539462 (Sept. 11, 1995). The Commission and hearing officers have declined to credit hearsay

evidence based on these standards. See, e.g., Wheat, 2003 WL 21990950, at *12 (noting that 

hearing officer declined to admit statements that “had no bearing on” the relevant issue and 

concluding they were “unreliable,” were not “written, signed, or made under oath” and “[t]here 

was no showing that any of the officials was unavailable to testify at the hearing”); Mark James 

Hankoff, Exchange Act Release No. 30778, 1992 WL 129520, at *3 (finding an affidavit and 

hearsay statement an unreliable basis for the NASD’s finding of fact); Gary L. Greenberg, 

Exchange Act Release No. 28076, 1990 WL 1104065, at *3 (June 1, 1990) (noting that the 

record as a whole did not provide “sufficient assurance” of the truthfulness or reliability of 

hearsay evidence to “justify [] crediting it over the first-hand testimony” of the respondent). 

144 17 CFR 201.410.

145 17 CFR 201.411.

146 17 CFR 201.420.

147 17 CFR 201.440.

148 17 CFR 201.450.
65

Rule 410(b) currently requires petitioners to set forth all the specific findings and 

conclusions of the initial decision to which exception is taken, and provides that an exception 

that is not stated in the notice may be deemed to have been waived by the petitioner.149 We 

proposed to amend Rule 410(b) to state, instead, that a petitioner is required to set forth only a 

summary statement of the issues presented for review.150 In addition, we proposed to amend 

Rule 410(c) to limit the length of petitions for review to three pages and to bar incorporation of 

pleadings or filings by reference.151 We reasoned that these changes would be consistent with 

Federal Rule of Appellate Procedure 3(c), which requires only notice pleading and filing where 

an appellant may appeal as of right.152

To help effectuate the amendments to Rule 410(b), we also proposed an amendment to 

Rule 411(d).153 Current Rule 411(d) provides that Commission review of an initial decision is 

limited to the issues specified in the petition for review and any issues specified in the order 

scheduling briefs.154 We proposed to amend Rule 411(d) to state that Commission review of an 

initial decision is limited to the issues specified in an opening brief and that any exception to an 

 

149 17 CFR 201.410(b).

150 80 FR at 60096.

151 Id.

152 Id. at n.36.

153 Id. at 60096.

154 17 CFR 201.411(d).
66

initial decision not supported in an opening brief may be deemed to have been waived by the 

petitioner.155

We also proposed to amend Rule 450(c) to no longer allow parties to incorporate

pleadings or filings by reference.156 We explained that, as a practical matter, it is difficult to 

enforce a word count that allows for incorporation by reference.157 In addition, we reasoned that 

current Rule 450(c) encouraged parties to rely on pleadings or filings from the hearing below, 

rather than addressing the relevant evidence or developing the arguments central to the appeal 

before the Commission.158 We explained that prohibiting incorporation by reference was 

intended to sharpen the arguments and require parties to provide specific support for each 

assertion.159

Finally, we proposed amendments to Rules 420(c) and 440(b) to make them consistent 

with the proposed amendments to Rules 410(b) and 450(b).160 Rule 420 governs appeals of 

determinations by self-regulatory organizations (SROs), and Rule 440 governs appeals of 

determinations by the Public Company Accounting Oversight Board (PCAOB).161 We proposed 

 

155 80 FR at 60096.

156 Id.

157 Id. at 60097.

158 Id.

159 Id.

160 Id. at 60097.

161 Id.
67

to amend Rule 440(b) to include a two-page limit for the application for review from a PCAOB 

decision, which is consistent with the current page limit under Rule 420(c) for applications from 

SROs.162 We also proposed to amend both Rule 420(c) and Rule 440(b) to include a provision 

stating that any exception to a determination that is not supported in an opening brief may be 

deemed to have been waived by the applicant.163 We explained that these proposed amendments 

to Rules 420 and 440 would align these rules with the rules governing appeals from initial 

decisions issued by Commission hearing officers.

164

2. Comments Received

Two commenters generally supported the proposed amendment to Rule 410(b) insofar as 

the amended rule would adopt a notice standard for filing appeals with the Commission.165 But 

both commenters opposed the proposed limit of the notice of appeal to three pages.166

One of the commenters argued that, because the notice of appeal will provide for a 

caption and other identifying information, three pages may not be sufficient to accurately 

describe the issues even in a summary format. This commenter suggested that the Commission 

increase the page limit for notices to five pages.167

 

162 Id.

163 Id.

164 Id.

165 FSR; NJSBA.

166 FSR; NJSBA.

167 NJSBA.
68

The second commenter argued that the Commission’s analogy to Federal Rule of 

Appellate Practice 3(c) was misplaced because, the commenter reasoned, appeals of initial

decisions are not as of right.168 This commenter suggested that, if the Commission were to limit 

petitions for review to three pages, it should also adopt one or more of the following proposals: 

(i) extend the word limit to opening briefs to 16,000 words; (ii) permit pleadings to be 

incorporated by reference, without counting their contents against any word limit; or (iii) remove 

language in Rule 450(c) providing that motions to file oversized briefs are disfavored.169

3. Final Rules

We are adopting the rules as proposed. We continue to believe that a three-page limit for 

petitions for review is sufficient to allow petitioners to provide notice of the issues that they are 

appealing. Based on the Commission’s experience with appeals from initial decisions, we 

continue to believe that a default limit of 14,000 words is reasonable, that allowing briefs to 

incorporate pleadings by reference would be impractical, and that motions to file oversized briefs 

should be disfavored. 

Finally, and in response to the comment regarding appeals from initial decisions not 

being as of right, we note that we are unaware of any case in which the Commission has declined 

to grant a procedurally proper petition for review.170 As we explained when we eliminated the 

filing of oppositions to petitions for review, such oppositions are “pointless” because “‘the 

 

168 FSR.

169 FSR.

170 See David F. Bandimere, Exchange Act Release No. 76308, 2015 WL 6575665, at *20, n.110 

(Oct. 29, 2015). 
69

Commission has long had a policy of granting petitions for review, believing that there is a 

benefit to Commission review when a party takes exception to a decision.’”171 We therefore do 

not find persuasive the argument that “the content and length of a petition for review should be 

compared to that described by Federal Rules of Appellate Practice Rule 5 (governing 

discretionary appeals).”172

P. Amendments to Rule 900 Guidelines

1. Proposed Rule

Rule 900 sets forth guidelines for the timely completion of proceedings, and provides for 

status reports to the Commission on pending cases and the publication of information concerning 

the pending case docket.173 As noted in the proposing release, these guidelines are examined 

periodically for readjustment in light of changes in the pending caseload and staff resources. 

Consistent with such examination, we proposed to amend Rule 900(a) to state that a decision by 

the Commission with respect to an appeal from the initial decision of a hearing officer, a review 

of a determination by an SRO or the PCAOB, or a remand of a prior Commission decision by a 

court of appeals ordinarily will be issued within eight months from the completion of briefing on 

the petition for review, application for review, or remand order. Under the proposed rule, if the 

Commission determines that the complexity of the issues presented in an appeal warrant 

additional time, the decision of the Commission may be issued within ten months of the 

 

171 Id. (quoting Exchange Act Release No. 48832, 2003 WL 22827684, at *13 (Nov. 23, 2003)).

172 FSR.

173 17 CFR 201.900.
70

completion of briefing. If a decision cannot be issued within the specified eight or ten-month 

period, the proposed rule provides that the Commission may issue orders extending the period as 

it deems appropriate in its discretion. 

We also proposed to amend Rule 900(c), which sets forth the information to be included 

in a semi-annual published report concerning the pending case docket. The current rule requires 

that the report show, among other things, the number of pending cases before the administrative 

law judges and the Commission, changes in the caseload, the median age of cases at resolution, 

and the number of cases decided within the guidelines. Proposed Rule 900(c) provides that the 

report for each time period would include, in addition to the information currently provided, the 

median number of days from the completion of briefing to the Commission’s decision for each 

appeal resolved.

2. Comments Received

One commenter objected to the proposed changes to the Commission review timeframes 

under Rule 900(a), arguing that the length of Commission review undermines the efficiency of 

administrative proceedings.

174 This commenter argued that the proposed amendments 

improperly relaxed the guidelines. Another commenter raised similar concerns about the length 

of time required to resolve Commission appeals.175 

3. Final Rule

We are adopting the amendments as proposed. We believe that the amendments 

 

174 CCMC.

175 Grundfest.
71

appropriately balance the public interest in efficient resolution of litigated matters with the public 

interest in carefully considered decision-making, particularly in resolving complex matters. 

Moreover, we believe that the final amendments balance these revised timeframes with 

mechanisms for enhancing the efficiency, transparency, and oversight of administrative 

proceedings, including through the mechanism for Commission orders extending periods for 

review in individual cases under Rule 900(a)(1)(iv) and the enhanced disclosure required under 

Rule 900(c). 

Q. Effective Date, Applicability Dates and Transition Period

1. Proposed Rule

We proposed that amendments govern any proceeding commenced after the effective 

date of the final rules.176 We solicited comments as to whether the amendments as proposed

should be applied, in whole or in part, to proceedings that are pending or have been docketed 

before or on the effective date, and, if so, the standard for applying any amended rules to such 

pending proceedings.177

2. Comments Received

Commenters generally agreed that certain of the amended rules should apply to at least 

some pending proceedings. But commenters offered different standards for determining when 

and how the amended rules should apply.

 

176 80 FR at 60097.

177 Id.
72

One commenter, for instance, suggested that the amended rules apply “in whole to cases 

pending as of the effective date where possible.”178 Another commenter proposed that any 

changes that “enhance the rights of respondents, no matter how small, should apply to 

proceedings pending on their effective date.”179 A third commenter, citing the general practice in 

federal court, argued that “[i]nstead of implementing a uniform prospective application,” the 

Commission should require that the amendments apply to pending cases “insofar as just and 

practicable”—that is, to “pending cases which have yet to proceed to an evidentiary hearing.”180

Finally, one commenter suggested that the amended rules apply to pending matters “to 

the fullest extent possible,” and provided specific examples of how the various rules would apply 

to pending proceedings, depending on the phase of the proceeding.181 Specifically, this 

commenter suggested that “the new rules for timing and depositions should apply at least to 

proceedings for which the prehearing conference has not yet taken place, and the new 

evidentiary rules should apply to any matter for which no hearing has yet taken place.”182

 

178 Navistar.

179 Zornow/Gunther/Silverman.

180 Hudson I (citing Landgraf v. USI Film Prods., 511 U.S. 244, 275 n.29 (1994)).

181 Gibson.

182 Gibson.
73

3. Final Rule

The amended rules will become effective 60 days after publication in the Federal 

Register and shall apply to proceedings initiated on or after that date.

183 For proceedings 

instituted on or after the date of these amended rules184 but before the effective date, there will be 

a transition period. The parties may elect to have these amended rules apply to such 

proceedings. Specifically, in proceedings that are instituted on or after the date of these amended 

rules but before the effective date, all of the amended rules (except the amendments to Rule 141, 

governing service of OIPs) shall apply to such proceedings if, within 14 days of service of the 

OIP, every party to the proceeding, including the Division, submits a request in writing to the 

Secretary that the proceedings be conducted under the amended rules. This approach is similar 

to the approach we took in the 1995 amendments to the Rules of Practice.185 If any party does 

not submit such a request, the former rules shall apply, except as provided below.

For all other proceedings instituted before the effective date of these rules, the 

applicability of the amended rules is described more fully below. 

There are many rational ways to implement amendments to procedural rules. When we 

amended the Rules of Practice in 1995, the new rules became effective one month after 

 

183 See 5 U.S.C. 553(d).

184 For purposes of this section, the “date of these amended rules” means the date on the last page 

of this release.

185 See 1995 Release, 60 FR at 32738 (“Any proceeding docketed by the Commission after the 

date of this Federal Register publication but prior to the effective date shall be conducted under 

the former Rules of Practice unless, within 30 days of the effective date, each respondent in the 

proceeding submits a request in writing to the Secretary that the proceeding be conducted under 

the Rules of Practice adopted today.”).
74

publication in the Federal Register, and the former rules continued to apply in full to pending 

administrative proceedings.186 Other agencies take varying approaches; sometimes they apply 

amendments to rules prospectively,187 and at other times they apply such amendments to pending 

proceedings.188 Finally, as commenters observed, amendments to the Federal Rules of Civil 

Procedure generally apply to pending proceedings “insofar as just and practicable.”189

We conclude that the amended evidentiary rules should apply to proceedings where the 

hearing has not begun as of the effective date, and that other amended rules should sometimes 

apply, depending on the stage of the proceeding, as set forth in detail below.190 For example, 

amended Rules 221, 233, and 360 shall apply to proceedings where the prehearing conference 

has not been held as of the effective date of these rules, as well as to proceedings that are stayed

(other than pursuant to consideration of a settlement offer under Rule 161(c)(2)(i)),

191 whether by 

 

186 See 1995 Release, 60 FR at 32738.

187 See, e.g., Department of Labor, Rules of Practice and Procedure for Administrative Hearings 

Before the Office of Administrative Law Judges, 80 FR 28767 (May 19, 2015), providing that the 

rules would be effective 30 days after publication.

188 See, e.g., Federal Trade Commission, Revisions to Rules of Practice, 80 FR 25940 (May 6, 

2015), providing that the rules would generally apply to pending proceedings, as well as to 

newly instituted proceedings.

189 Federal Rules of Civil Procedure, 2015 Amendments.

190 Gibson. 

191 Under current Rule 161(c)(2)(i), proceedings may be stayed upon notification by the parties 

that they have agreed in principle to a settlement on all major terms. In the interest of prompt 

resolution of such proceedings, we are excluding such proceedings from the application of 

amended Rules 221, 233 and 360. Such proceedings would have been operating under the 

current rules, and should a stay in such a proceeding be lifted, we believe that application of 

these amended rules could result in unnecessary delays.
75

court or Commission order, as of the effective date. Based on the Commission’s experience with 

administrative proceedings, we believe that applying the amended rules in such proceedings 

would not unduly disrupt pending proceedings.

With respect to a commenter’s suggestion of using a “just and practicable” standard to 

determine whether the amended rules should apply in a given proceeding, the tables below 

reflect the Commission’s determinations of what is just and practicable.

The tables below provide whether and how the amended rules apply:

192

Rules regarding initial filings—apply to proceedings instituted on or after the 

effective date of these amendments

Rule 141 Requirements for serving OIP

Rule 220 Requirements for answers to OIP

Rule 230 Documents that may be withheld or redacted by the Division

Rules regarding depositions, timing of proceedings and dispositive motions—apply 

to those proceedings where, as of the effective date of these amendments: (i) the 

initial prehearing conference pursuant to Rule 221 has not been held; or (ii) the 

proceedings have been stayed, except for proceedings stayed pursuant to Rule 

161(c)(2)(i)

Rule 221

Rule amended to add depositions, expert witness disclosures or reports, and 

timing for completion of production of documents by the Division to the list of 

subjects to be discussed at the prehearing conference

Rule 222 Rule amended to change information that is required to be submitted in 

conjunction with expert reports

Rule 233 Rule amended to expand use of depositions

Rule 234

Rule amended to provide that moving party may take a deposition on written 

questions either by stipulation of the parties or by filing a motion demonstrating 

good cause

Rule 250 Dispositive motions

Rule 360 Rule amended to change timing of proceedings

 

192 All of the amended rules apply to proceedings instituted on or after the effective date of these 

amendments.
76

Evidentiary rules and rules governing hearings—apply to all proceedings where 

hearing has not begun as of the effective date of these amendments

Rule 180

Rule amended to allow the Commission or a hearing officer to exclude or 

summarily suspend a person for any portion of a deposition if the person engages 

in contemptuous conduct before either the Commission or a hearing officer

Rule 232 Rule amended to clarify standards for the issuance of subpoenas and motions to 

quash

Rule 235 Standard for granting a motion to introduce prior sworn statement of a non-party 

witness

Rule 320 Standard for admissibility of evidence

Rule governing motions—apply to all proceedings pending as of the effective date

of these amendments

Rule 154 Rule governing motions and related filings, except where another rule expressly 

governs

Rule governing extensions of time, postponements, and adjournments—apply to all 

proceedings pending as of the effective date of these amendments

Rule 161 Rule governing extensions of time, postponements, and adjournments requested 

by parties – amended to allow a stay pending Commission consideration of 

settlement offers to also stay timelines set forth in Rule 360

Amendments to appellate procedure rules—apply to appeals filed on or after the 

effective date of these amendments

Rule 410 Procedure for filing petition for review

Rule 411 Standards for granting petition for review and limitation on matters reviewed

Rule 420 Appeals from SRO determinations

Rule 440 Appeals from PCAOB determinations

Rule 450 Briefs filed with the Commission

Rule 900 Guidelines for timely completion of proceedings

III. Economic Analysis

The Commission is sensitive to the economic effects that could result from the final rules, 

including the benefits and costs of the final rules, as well as effects on efficiency, competition, 

and capital formation. These quantitative and qualitative economic effects are discussed below.
77

In adopting these amendments, we seek to enhance flexibility in the conduct of 

administrative proceedings while maintaining the ability to timely and efficiently resolve 

administrative proceedings. The amendments include changes or clarifications to, among other 

things, the timing of hearings, the use of depositions, the filing of motions for summary 

disposition, and the submission of expert reports. The current rules governing administrative 

proceedings serve as the baseline against which we assess these final rules. 

We continue to believe that there will not be significant economic consequences 

stemming from the amendments to Rules 141, 154, 161, 220, 230, 235, 320, 410, 411, 420, 440, 

450, and 900. Thus, those sections are not discussed below. As explained in further detail 

below, we expect the amendments to Rules 222, 232, 233, 250, and 360 will have an impact on 

the costs and efficiency of administrative proceedings, but we do not expect them to significantly 

affect the efficiency of securities markets, competition, or capital formation. 

A. Benefits, Costs, and Effects on Efficiency, Competition, and Capital 

Formation

As discussed in further detail above, the amendments to Rule 360 concern the timing for 

the various stages of an administrative proceeding, providing additional time for discovery. The 

amendments to Rule 233 permit a limited number of depositions, while the amendments to Rule 

232 support this change by providing standards governing motions to quash or modify deposition 

notices or subpoenas. The amendments to Rule 222 concern requirements for a written report for 

expert witnesses. The amendments to Rule 250 clarify how dispositive motions will operate 

with the amendments to Rules 233 and 360 and provide the procedures and standards governing 

the various types of dispositive motions.
78

Current Commission rules set the prehearing period of a proceeding at approximately 

four months for a 300-day proceeding and do not permit parties to take depositions solely for the 

purpose of discovery. In addition, rules governing the testimony of expert witnesses have not 

previously been formalized, but some hearing officers require expert reports in proceedings 

before them.

We continue to believe that the aggregate benefits and costs of the final rules will depend, 

among other things, on the expected volume of administrative proceedings. For example, Rule 

360 adjusts the potential timing of administrative proceedings, and an increase or a decrease in 

the number of administrative proceedings will scale up or down, respectively, the total 

magnitude of costs and benefits of the new timeline for administrative proceedings. Similarly, 

Rules 232 and 233 provide the framework for expanded use of depositions in administrative 

proceedings, and an increase or a decrease in the number of administrative proceedings may 

scale up or down, respectively, the total magnitude of the costs and benefits of the expanded use 

of depositions. 

However, we are unable to precisely predict the economic effect of the final rules on 

administrative proceedings, as the number and type of proceedings can vary based on many 

factors unrelated to the Rules of Practice. Over the last three completed fiscal years, the number 

of new administrative proceedings initiated and not immediately settled has ranged from 

approximately 170 to approximately 230 proceedings, only a portion of which would be 
79

impacted by certain of the amended rules.193 As a result, we are unable to quantify the overall 

costs and benefits expected to flow from the amended rules.

1. Amendments to Rules Governing Depositions and the Timing of 

Hearings in Administrative Proceedings

The amendments to Rules 232, 233, and 360, as described above, may benefit both 

respondents and the Division by providing them with additional time and tools to potentially 

discover additional relevant facts. Specifically, the amendments to Rule 233 permit respondents 

and the Division to notice the oral depositions of fact witnesses, expert witnesses and document 

custodians. The amendments to Rule 232 correspond with the new provisions for depositions in 

Rule 233 and establish the requirement that a proposed deponent be a fact witness, an expert 

witness, or a document custodian. The amendments to Rule 360 enlarge the potential maximum 

prehearing period. We anticipate that the potential for a longer maximum prehearing period 

would allow, in appropriate cases, additional time to review investigative records, conduct 

depositions under amended Rule 233, and prepare for a hearing. 

These amendments may facilitate information acquisition during the prehearing stage, 

ultimately resulting in more focused hearings. We are unable to quantify these benefits, 

however, because any potential cost savings would depend on multiple factors, including the 

specific claims, facts, and defenses in a particular proceeding.

 

193 The total number of administrative proceedings initiated and not immediately settled each 

fiscal year encompasses various types of proceedings. These include proceedings under Section 

12(j) of the Exchange Act and “follow-on” proceedings following certain injunctions or criminal 

convictions, which constitute the vast majority of all proceedings instituted. On average, 

approximately 20% of all administrative proceedings initiated over the last three completed fiscal 

years were designated as 300-day proceedings.
80

The depositions and a longer prehearing period will, however, impose additional costs 

compared to the current practice in administrative proceedings where, with limited exception, 

depositions are not permitted and maximum prehearing periods are shorter. We continue to 

believe that the costs of the adopted amendments will be borne by the Division as well as by 

respondents and deponents who provide deposition testimony. These costs will primarily stem 

from the potential costs of depositions and the extension of the maximum prehearing period. 

Aggregate costs stemming from depositions depend on the number of depositions that 

respondents and the Division take and assume they attend depositions of third parties noticed by 

another party to the proceeding. Costs of depositions may include travel expenses, attorney’s 

fees, and reporter and transcription expenses. Based on Commission staff experience, we 

estimate the cost to a respondent of conducting one non-expert deposition to be approximately 

$45,640, and the cost of conducting one expert witness deposition to be approximately 

$75,696.

194 This cost estimate has been increased relative to the cost estimate in the proposal to 

 

194 The $45,640 estimate is comprised of the following expenses: (i) travel expenses: $4,000; (ii) 

reporter/videographer: $8,200; and (iii) professional costs for two attorneys (including 

reasonable preparation for the deposition): 40 hours x $504/hr and 40 hours x $332/hr = $33,440. 

The hourly rates for the attorneys and paralegal are based on the 2015-2016 Laffey Matrix. The 

Laffey Matrix is a matrix of hourly rates for attorneys of varying experience levels and 

paralegals that is prepared annually by the Civil Division of the United States Attorney’s Office 

for the District of Columbia. See Laffey Matrix – 2015-2016, available at

https://www.justice.gov/usao-dc/file/796471/download (last visited July 8, 2016) (the “Laffey 

Matrix”). In addition, if the deponent is an expert witness, we estimate the expert’s fees and 

travel expenses will be approximately $30,056 per deposition, for a combined total of $75,696. 

This includes (i) file review and preparation costs estimated at 80 hours, at a rate of $333/hr, 

which totals $26,640; and (ii) expert fees incurred with appearing for the deposition, 8 hours x 

$427/hr = $3,416. The hourly rate for expert witnesses is based on survey data of expert witness 

fees from the SEAK, Inc. 2014 Survey of Expert Witness Fees. See SEAK, Inc. 2014 Survey of 

Expert Witness Fees, which can be found at http://www.seak.com/wpcontent/uploads/2014/07/Expert-Witness-Fee-Data.pdf (last visited July 8, 2016). These 
81

reflect the increased time-limit for depositions in amended Rule 233 from six hours to seven 

hours and to include the costs associated with expert depositions. In single-respondent 

proceedings, if both the Division and the respondent each take three depositions, one of which is 

of an expert witness, and each attend each other’s depositions, then respondents may incur the 

cost of conducting or attending up to six depositions plus expert witness fees and costs – an 

estimated total of $303,896. Similarly, in multi-respondent proceedings, respondents may incur 

the cost of conducting or attending up to ten depositions plus expert witness fees and costs – an 

estimated total of $486,456. We recognize that respondents and the Division play a large role in 

managing their own costs by determining, for example, whether to take depositions or participate 

in the depositions of others, and whether to mitigate attorney costs, including by adjusting the 

number of attorneys attending each deposition, contracting with a competitively priced reporter, 

or arranging for less expensive travel. We note that determinations regarding the approach to 

requesting depositions will likely reflect parties’ beliefs regarding the potential benefits they 

expect to realize from taking or attending depositions. However, the costs of depositions are 

borne by all attendees of the deposition, including not only the deposing party, but also the other 

parties to the proceeding, the deponent, and third parties, in the form of lost wages, travel, 

preparation, and attorney costs.195 

 

estimates exclude transcription costs, which are estimated at $3.65 per page, based on the 

Federal Court Maximum Transcription Rates for Court Reporters, available at 

http://www.uscourts.gov/services-forms/federal-court-reporting-program (last visited July 8, 

2016).

195 Some witnesses who are deposed might bear little if any out-of-pocket cost if, for example, 

the deposition is conducted in the city in which they live or work, and they choose not be 
82

Relative to the proposed amendments to Rule 233, the adopted amendments expand the 

potential use of depositions by allowing each side to request an additional two depositions from a 

hearing officer. This would place the ultimate limit on depositions at five depositions for each 

side in a single-respondent proceeding, and seven depositions for each side in a proceeding 

against multiple respondents. In single-respondent proceedings, if the Division and the 

respondent each take five depositions, one of which is of an expert witness, and each attend each 

other’s depositions, then respondents may incur the cost of conducting or attending as many as 

ten depositions plus expert witness fees and costs – an estimated total of $486,456. Similarly, in 

multi-respondent proceedings, respondents may incur the cost of conducting or attending as 

many as fourteen depositions plus expert witness fees and costs – an estimated total of 

$669,016.

196 Although the total number of depositions increases, we believe that parties will 

make the decision to request an additional deposition by considering the expected costs and 

benefits of acquiring information from the deponent. To the extent that additional depositions 

may reveal important information or evidence relevant to the proceeding and thus lead to more 

focused hearings, this provision may improve the efficiency of administrative proceedings. 

However, neither the parties to a proceeding nor the hearing officer can predict whether 

additional depositions will ultimately have such an effect, and in situations where additional 

depositions ultimately prove to be unhelpful or unnecessary, permitting those additional 

depositions may impose delays and costs that can have an adverse effect on efficiency. 

 

represented by counsel at the deposition. Moreover, the party seeking the deposition might 

choose to reimburse the witness for some costs. 

196 See supra note 194.
83

Similarly, the longer maximum prehearing periods permitted by the amendment to Rule 

360 may impose costs on the parties. Based on our estimates of staffing requirements and

corresponding hourly rates, we estimate that the potential to lengthen the overall timeline in 120-

day proceedings by up to six months to allow more time for discovery may result in additional 

costs to respondents of up to $754,080.197 We thus estimate that the combined costs of the 

lengthened prehearing period and the availability of depositions could cost respondents in a 

single-respondent 120-day proceeding $1,240,536.

198 Similar combined costs for respondents in 

a 120-day multi-respondent proceeding could be as high as $1,423,096.

199 Again, however, we 

recognize that while a party is likely to take actions under the amended rules that result in these 

costs only to the extent that the party expects to receive benefits from a longer maximum 

prehearing period and the availability of depositions, actions taken by one party to a proceeding 

 

197 The $754,080 estimate is comprised of the following expenses: (i) 1 senior attorney x 40 

hours per week x 24 weeks x $504/hr = $483,840; (ii) 1 mid-level attorney x 20 hours per week x 

24 weeks x $332/hr = $159,360; (iii) 1 paralegal x 30 hours per week x 24 weeks x $154/hr = 

$110,880. The hourly rates for the attorneys and paralegal are based on the Laffey Matrix. We 

do not anticipate the amendments to Rule 360 concerning the timing of hearings in 75-day and 

30-day proceedings will generally result in a significant departure from current practice in the 

length of time necessary for completion of such proceedings, which often are resolved by default 

or summary disposition. 

198 $754,080 + $486,456 =$1,240,536. This estimate is comprised of the potential costs 

associated with the maximum lengthening of the prehearing period in 120-day proceedings and 

the total estimated costs of depositions in single-respondent proceedings. To the extent the hours 

spent during the prehearing period are used to prepare and/or respond to depositions, this may 

overestimate the total costs of a single-respondent proceeding. 

199 $754,080 + $669,016 = $1,423,096. As explained supra, this figure may overestimate the 

total costs in multi-respondent proceedings to the extent there is overlap with the hourly rate 

calculations associated with depositions. 
84

during the additional time for discovery may result in costs incurred by the other parties to the 

proceeding. 

The amendments related to the timing of hearings and the use of depositions may also 

affect the efficiency of proceedings. To the extent that the adopted amendments facilitate the 

discovery of relevant facts and information through depositions and the extension of the 

maximum prehearing periods, they may lead to more expeditious resolution of proceedings. For 

example, for cases that may benefit significantly from the additional information, there could be 

efficiency gains from the final rules if the costs associated with the use of depositions are smaller 

than the value of the information gained from depositions. However, we note that because 

parties may not take into account the costs that depositions may impose on other individuals 

and/or entities, a potential consequence of the adopted amendments to Rule 233 is that parties 

may engage in more discovery than is efficient. For example, for proceedings that may not 

benefit significantly from information gained from a deposition, requesting depositions may 

result in inefficiency by imposing costs on all attendees of the deposition, including the deposing 

party, the other parties to the proceeding, the deponent, and third parties, without any significant 

informational benefit. However, we believe that the amendments to Rules 232 and 233 may 

mitigate the risk of this efficiency loss by setting forth standards for the issuance of subpoenas 

and motions to quash deposition notices and subpoenas, and setting a limit on the maximum 

number of depositions each side may notice. 

Ultimately, it is difficult to predict with any certainty the economic efficiency gains, if 

any, from the addition of depositions, a longer prehearing period, and associated rule changes. 

At the same time, we recognize that there are necessarily cost increases from longer hearing 

periods and additional discovery tools, and as we have explained, those costs are borne by 
85

respondents and the Division, as well as other attendees of depositions, including deponents, and 

third parties. We continue to believe that any such costs are appropriate given the benefits of 

such rule changes. 

2. Amendments Concerning Expert Reports and Testimony

The final amendments to Rule 222 specify a set of submissions and disclosures that 

hearing officers may require from parties to a proceeding, and require parties to a proceeding 

who intend to call expert witnesses to submit information about these expert witnesses. Though 

producing submissions and disclosures may cause parties to proceedings to incur costs, these 

amendments may yield benefits by facilitating access to information that may aid in interpreting 

statements, evidence, and testimony during hearings. We are aware that some hearing officers 

may currently require submissions and disclosures similar to those referenced in amended Rule 

222, so the final rule will impose costs and yield benefits only to the extent that they result in 

additional information being submitted to hearing officers beyond that submitted under current 

practice.

3. Amendments Concerning Dispositive Motions 

As discussed above, Rule 250 has been amended to provide that both sides to a 

proceeding shall be permitted, as a matter of right, to make certain dispositive motions in certain 

types of proceedings. The amendments to Rule 250 clarify how dispositive motions will operate 

in conjunction with the amendments to Rules 233 and 360, which permit parties to take 

depositions and provide for a longer maximum prehearing period. 

Amended Rule 250 may improve the efficiency of administrative proceedings by 

eliminating unnecessary hearings. The ability of either side to bring a dispositive motion serves 

several functions, including those attendant to potential early resolution of claims. For example, 
86

in proceedings where the underlying facts are not in dispute, the granting of a dispositive motion 

may reduce the costs borne by all parties by narrowing the focus of or entirely eliminating the 

need for a hearing. On the other hand, where motions are filed in proceedings not susceptible to 

resolution via dispositive motion, the decision to allow dispositive motions could delay 

proceedings or otherwise result in inefficiencies. For example, if the hearing officer grants

summary disposition, delays could result if the Commission subsequently remands the case for 

an evidentiary hearing. Such delays could result in costs to parties to the proceeding.

Because the amendments to Rule 250 largely clarify how pre-existing motion practice 

will operate alongside the amendments to Rules 233 and 360, the rule change may not result in a 

significant departure from current practice. Further, we cannot predict with certainty how 

practice will change in response to the availability of dispositive motions filed pursuant to 

amended Rules 250(a), (b), and (d) as a matter of right—rather than with leave of the hearing 

officer—given that parties will respond based on the individual facts of each case and their own 

cost estimates of filing the motions. We are thus unable to estimate the total potential costs 

associated with these amendments. Moreover, to the extent a party files a motion under 

amended Rule 250 where it would not have filed under previous Rule 250, we do not have 

sufficient information to quantify the individual costs associated with such a motion because the 

scope of each motion may vary significantly depending on the facts and circumstances of each 

case and the approach of the filing party.

B. Alternatives

As mentioned previously, although commenters generally supported extensions of the 

prehearing period previously proposed under Rule 360, some suggested that longer periods be 

adopted. Longer prehearing periods for discovery, whether restricted only to 120-day 
87

proceedings, or permitted for all proceedings as one commenter suggested, would allow parties 

more time to prepare for a hearing, but might adversely affect the timely and efficient resolution 

of administrative proceedings.

As alternatives to the final rule amending Rule 233, we could continue to permit 

depositions only when a witness is likely to be unable to attend or testify at a hearing, or we 

could authorize other limited discovery tools, such as the use of interrogatories or requests for 

admissions in lieu of depositions. Although alternatives such as interrogatories or admissions 

might reduce some of the costs of the discovery process (i.e., the cost of depositions), they might 

entail other costs (resulting from the time attorneys and parties need to prepare responses) and 

also might yield less useful information for the administrative proceeding given the limited 

nature of questioning and information these forms permit. Therefore, regardless of their lower 

cost, interrogatories and other discovery tools may not provide the same qualitative benefits. 

Commenters also suggested that the Commission allow even more depositions per side 

than proposed. As we have noted previously, permitting parties to the proceedings to take 

additional depositions may result in both benefits and costs for all parties. Additional 

depositions could lead to more focused hearings, but may impose costs on entities involved in 

the depositions, and ultimate resolution of the proceeding may be delayed. We believe that the 

final amendments to Rule 233 that permit the hearing officer to grant an additional two 

depositions to a side will make administrative proceedings flexible enough to realize the benefits 

of additional depositions when they are necessary, while avoiding unnecessarily delaying

proceedings for additional depositions. 

Another alternative to amended Rule 233 would be to adopt the proposed limit of three 

depositions per side for single-respondent proceedings and five depositions per side for multi-
88

respondent proceedings and not permit the hearing officer to allow two additional depositions 

per side. As discussed previously, the informational benefit of each additional deposition would 

depend on the particulars of the administrative proceeding, and some proceedings may present 

unique challenges that warrant affording the parties additional opportunities to conduct 

prehearing depositions. The Commission believes that providing an opportunity for two 

additional depositions strikes a balance between the potential benefits from additional factfinding and the corresponding impact on the overall goal of timely resolving administrative 

proceedings. 

IV. Administrative Law Matters

The Commission finds, in accordance with Section 553(b)(3)(A) of the Administrative 

Procedure Act,200 that these revisions relate solely to agency organization, procedure, or practice. 

They are therefore not subject to the provisions of the Administrative Procedure Act requiring 

notice, opportunity for public comment, and publication. The Regulatory Flexibility Act201

therefore does not apply.202 Nonetheless, we previously determined that it would be useful to 

publish the rules for notice and comment before adoption. The Commission has considered all 

comments received. To the extent these rules relate to agency information collections during the 

 

200 5 U.S.C. 553(b)(3)(A).

201 5 U.S.C. 601- 612.

202 See 5 U.S.C. 604.
89

conduct of administrative proceedings, they are exempt from review under the Paperwork 

Reduction Act.203

VI. Statutory Basis 

These amendments to the Rules of Practice are being adopted pursuant to statutory authority 

granted to the Commission, including section 3 of the Sarbanes-Oxley Act of 2002, 15 U.S.C. 

7202; section 19 of the Securities Act, 15 U.S.C. 77s; sections 4A, 19, and 23 of the Exchange 

Act, 15 U.S.C. 78d-1, 78s, and 78w; section 319 of the Trust Indenture Act of 1939, 15 U.S.C. 

77sss; sections 38 and 40 of the Investment Company Act, 15 U.S.C. 80a-37 and 80a-39; and 

section 211 of the Investment Advisers Act, 15 U.S.C. 80b-11. 

List of Subjects in 17 CFR Part 201

Administrative practice and procedure.

Text of the Amendments

For the reasons set out in the preamble, 17 CFR part 201 is amended as follows:

PART 201 – RULES OF PRACTICE

Subpart D – Rules of Practice

1. The authority citation for part 201, subpart D, continues to read as follows:

Authority: 15 U.S.C. 77f, 77g, 77h, 77h-1, 77j, 77s, 77u, 77sss, 77ttt, 78c(b), 78d-1, 78d-2, 

78l, 78m, 78n, 78o(d), 78o-3, 78s, 78u-2, 78u-3, 78v, 78w, 80a-8, 80a-9, 80a-37, 80a-38, 80a39, 80a-40, 80a-41, 80a-44, 80b-3, 80b-9, 80b-11, 80b-12, 7202, 7215, and 7217.

 

203 See 44 U.S.C. 3518(c)(1)(B)(ii); 5 CFR 1320.4 (exempting collections during the conduct of 

administrative proceedings or investigations).
90

2. Section 201.141 is amended by revising paragraphs (a)(2)(iv) and (v) and (a)(3) to 

read as follows:

§201.141 Orders and decisions: Service of orders instituting proceedings and other orders 

and decisions.

(a) * * * 

(2) * * * 

(iv) Upon persons in a foreign country. Notice of a proceeding to a person in a foreign 

country may be made by any of the following methods:

(A) Any method specified in paragraph (a)(2) of this section that is not prohibited by the 

law of the foreign country; or 

(B) By any internationally agreed means of service that is reasonably calculated to give 

notice, such as those authorized by the Hague Convention on the Service Abroad of Judicial and 

Extrajudicial Documents; or

(C) Any method that is reasonably calculated to give notice:

(1) As prescribed by the foreign country's law for service in that country in an action in 

its courts of general jurisdiction; or 

(2) As the foreign authority directs in response to a letter rogatory or letter of request; or

(3) Unless prohibited by the foreign country's law, by delivering a copy of the order 

instituting proceedings to the individual personally, or using any form of mail that the Secretary 

or the interested division addresses and sends to the individual and that requires a signed receipt; 

or 

(D) By any other means not prohibited by international agreement, as the Commission or 

hearing officer orders. 
91

(v) In stop order proceedings. Notwithstanding any other provision of paragraph (a)(2) 

of this section, in proceedings pursuant to Sections 8 or 10 of the Securities Act of 1933, 15 

U.S.C. 77h or 77j, or Sections 305 or 307 of the Trust Indenture Act of 1939, 15 U.S.C. 77eee or 

77ggg, notice of the institution of proceedings shall be made by personal service or confirmed 

telegraphic notice, or a waiver obtained pursuant to paragraph (a)(4) of this section.

* * * * *

(3) Record of service. The Secretary shall maintain a record of service on parties (in hard 

copy or computerized format), identifying the party given notice, the method of service, the date 

of service, the address to which service was made, and the person who made service. If a 

division serves a copy of an order instituting proceedings, the division shall file with the 

Secretary either an acknowledgement of service by the person served or proof of service 

consisting of a statement by the person who made service certifying the date and manner of 

service; the names of the persons served; and their mail or electronic addresses, facsimile 

numbers, or the addresses of the places of delivery, as appropriate for the manner of service. If 

service is made in person, the certificate of service shall state, if available, the name of the 

individual to whom the order was given. If service is made by U.S. Postal Service certified or 

Express Mail, the Secretary shall maintain the confirmation of receipt or of attempted delivery, 

and tracking number. If service is made to an agent authorized by appointment to receive 

service, the certificate of service shall be accompanied by evidence of the appointment. 

* * * * *

3. Section 201.154 is amended by adding introductory text and revising the first sentence of 

paragraph (b) to read as follows:
92

§201.154. Motions. 

The requirements in this section apply to motions and related filings except where 

another rule expressly governs.

* * * * *

(b) * * * Briefs in opposition to a motion shall be filed within five days after service of the 

motion. * * *

* * * * *

4. Section 201.161 is amended by revising paragraph (c)(2)(iii) to read as follows:

§201.161 Extensions of time, postponements and adjournments.

* * * * *

(c) * * *

(2) * * *

(iii) The granting of any stay pursuant to this paragraph (c) shall stay the timeline pursuant to 

§201.360(a).

5. Section 201.180 is amended by revising paragraphs (a)(1) introductory text, (a)(1)(i), 

(a)(2), and (c) introductory text to read as follows:

§201.180 Sanctions.

(a) * * *
93

(1) Subject to exclusion or suspension. Contemptuous conduct by any person before the 

Commission or a hearing officer during any proceeding, including at or in connection with any 

conference, deposition or hearing, shall be grounds for the Commission or the hearing officer to: 

(i) Exclude that person from such deposition, hearing or conference, or any portion thereof; 

and/or 

* * * * *

(2) Review procedure. A person excluded from a deposition, hearing or conference, or a 

counsel summarily suspended from practice for the duration or any portion of a proceeding, may 

seek review of the exclusion or suspension by filing with the Commission, within three days of 

the exclusion or suspension order, a motion to vacate the order. The Commission shall consider 

such motion on an expedited basis as provided in §201.500. 

* * * * *

(c) Failure to make required filing or to cure deficient filing. The Commission or the hearing 

officer may enter a default pursuant to §201.155, dismiss one or more claims, decide the 

particular claim(s) at issue against that person, or prohibit the introduction of evidence or 

exclude testimony concerning that claim if a person fails:

* * * * *

6. Revise § 201.220 to read as follows:

§201.220 Answer to allegations.

(a) When required. In its order instituting proceedings, the Commission may require any 

respondent to file an answer to each of the allegations contained therein. Even if not so ordered, 

any respondent in any proceeding may elect to file an answer. Any other person granted leave by 
94

the Commission or the hearing officer to participate on a limited basis in such proceedings 

pursuant to §201.210(c) may be required to file an answer.

(b) When to file. Except where a different period is provided by rule or by order, a respondent

required to file an answer as provided in paragraph (a) of this section shall do so within 20 days 

after service upon the respondent of the order instituting proceedings. Persons granted leave to 

participate on a limited basis in the proceeding pursuant to §201.210(c) may file an answer 

within a reasonable time, as determined by the Commission or the hearing officer. If the order 

instituting proceedings is amended, the Commission or the hearing officer may require that an

amended answer be filed and, if such an answer is required, shall specify a date for the filing 

thereof.

(c) Contents; effect of failure to deny. Unless otherwise directed by the hearing officer or the 

Commission, an answer shall specifically admit, deny, or state that the party does not have, and 

is unable to obtain, sufficient information to admit or deny each allegation in the order instituting 

proceedings. When a party intends in good faith to deny only a part of an allegation, the party 

shall specify so much of it as is true and shall deny only the remainder. A statement of a lack of 

information shall have the effect of a denial. Any allegation not denied shall be deemed 

admitted. A respondent must affirmatively state in the answer any avoidance or affirmative 

defense, including but not limited to res judicata and statute of limitations. In this regard, a 

respondent must state in the answer whether the respondent relied on the advice of counsel, 

accountants, auditors, or other professionals in connection with any claim, violation alleged or 

remedy sought. Failure to do so may be deemed a waiver.

(d) Motion for more definite statement. A respondent may file with an answer a motion for a 

more definite statement of specified matters of fact or law to be considered or determined. Such 
95

motion shall state the respects in which, and the reasons why, each such matter of fact or law 

should be required to be made more definite. If the motion is granted, the order granting such 

motion shall set the periods for filing such a statement and any answer thereto.

(e) Amendments. A respondent may amend its answer at any time by written consent of each 

adverse party or with leave of the Commission or the hearing officer. Leave shall be freely 

granted when justice so requires.

(f) Failure to file answer: default. If a respondent fails to file an answer required by this 

section within the time provided, such respondent may be deemed in default pursuant to 

§201.155(a). A party may make a motion to set aside a default pursuant to §201.155(b).

7. Section 201.221 is amended by revising paragraph (c) to read as follows.

§201.221 Prehearing conference.

* * * * *

(c) Subjects to be discussed. At a prehearing conference consideration may be given and 

action taken with respect to any and all of the following: 

(1) Simplification and clarification of the issues; 

(2) Exchange of witness and exhibit lists and copies of exhibits; 

(3) Timing of expert witness disclosures and reports, if any;

(4) Stipulations, admissions of fact, and stipulations concerning the contents, authenticity, or 

admissibility into evidence of documents; 

(5) Matters of which official notice may be taken; 

(6) The schedule for exchanging prehearing motions or briefs, if any; 

(7) The method of service for papers other than Commission orders; 

(8) The filing of any motion pursuant to §201.250; 
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(9) Settlement of any or all issues; 

(10) Determination of hearing dates;

(11) Amendments to the order instituting proceedings or answers thereto;

(12) Production, and timing for completion of the production, of documents as set forth in 

§201.230, and prehearing production of documents in response to subpoenas duces tecum as set 

forth in §201.232;

(13) Specification of procedures as set forth in §201.202; 

(14) Depositions to be conducted, if any, and date by which depositions shall be completed; 

and

(15) Such other matters as may aid in the orderly and expeditious disposition of the 

proceeding.

* * * * *

8. Section 201.222 is amended by revising the section heading and paragraph (b) to read as 

follows:

§201.222 Prehearing submissions and disclosures.

* * * * *

(b) Expert witnesses—(1) Information to be supplied; reports. Each party who intends 

to call an expert witness shall submit, in addition to the information required by paragraph (a)(4) 

of this section, a statement of the expert's qualifications, a listing of other proceedings in which 

the expert has given expert testimony during the previous four years, and a list of publications 

authored or co-authored by the expert in the previous ten years. Additionally, if the witness is 

one retained or specially employed to provide expert testimony in the case or one whose duties 
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as the party's employee regularly involve giving expert testimony, then the party must include in 

the disclosure a written report—prepared and signed by the witness. The report must contain:

(i) A complete statement of all opinions the witness will express and the basis and 

reasons for them;

(ii) The facts or data considered by the witness in forming them;

(iii) Any exhibits that will be used to summarize or support them; and

(iv) A statement of the compensation to be paid for the study and testimony in the case.

(2) Drafts and communications protected. (i) Drafts of any report or other disclosure 

required under this section need not be furnished regardless of the form in which the draft is 

recorded.

(ii) Communications between a party's attorney and the party's expert witness who is 

required to provide a report under this section need not be furnished regardless of the form of the 

communications, except if the communications relate to compensation for the expert's study or 

testimony, identify facts or data that the party's attorney provided and that the expert considered 

in forming the opinions to be expressed, or identify assumptions that the party's attorney 

provided and that the expert relied on in forming the opinions to be expressed.

9. Section 201.230 is amended by: 

a. In paragraph (a)(1)(vi), removing the term "Division of Market Regulation" and 

adding in its place "Division of Trading and Markets"; 

b. Revising the paragraph (b) heading; 

c. Removing “or” at the end of paragraph (b)(1)(iii);

d. Redesignating paragraph (b)(1)(iv) as paragraph (b)(1)(v) and adding a new paragraph 

(b)(1)(iv);
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e. Redesignating paragraph (b)(2) as paragraph (b)(3) and adding a new paragraph (b)(2); 

and

f. In paragraph (c), removing the term "(b)(1)(i) through (b)(1)(iv)" and adding in its 

place "(b)(1)(i) through (v)" wherever it occurs. 

The revision and additions read as follows:

§201.230 Enforcement and disciplinary proceedings: Availability of documents for 

inspection and copying.

* * * * *

(b) Documents that may be withheld or redacted.

(1) * * *

(iv) The document reflects only settlement negotiations between the Division of Enforcement 

and a person or entity who is not a respondent in the proceeding; or

* * * * *

(2) Unless the hearing officer orders otherwise upon motion, the Division of Enforcement 

may redact information from a document if:

(i) The information is among the categories set forth in paragraphs (b)(1)(i) through (v) 

of this section; or

(ii) The information consists of the following with regard to a person other than the 

respondent to whom the information is being produced:

(A) An individual's social-security number;

(B) An individual’s birth date;

(C) The name of an individual known to be a minor; or 
99

(D) A financial account number, taxpayer-identification number, credit card or debit card 

number, passport number, driver's license number, or state-issued identification number other 

than the last four digits of the number.

* * * * *

10. Section 201.232 is amended by revising paragraphs (a) introductory text, (c), (d), (e), 

and (f) to read as follows:

§201.232 Subpoenas.

(a) Availability; procedure. In connection with any hearing ordered by the Commission 

or any deposition permitted under §201.233, a party may request the issuance of subpoenas 

requiring the attendance and testimony of witnesses at such depositions or at the designated time 

and place of hearing, and subpoenas requiring the production of documentary or other tangible 

evidence returnable at any designated time or place. Unless made on the record at a hearing, 

requests for issuance of a subpoena shall be made in writing and served on each party pursuant to 

§201.150. A person whose request for a subpoena has been denied or modified may not request 

that any other person issue the subpoena. 

* * * * *

(c) Service. Service shall be made pursuant to the provisions of §201.150(b) through (d). 

The provisions of this paragraph (c) shall apply to the issuance of subpoenas for purposes of 

investigations, as required by 17 CFR 203.8, as well as depositions and hearings.

(d) Tender of fees required. When a subpoena ordering the attendance of a person at a 

hearing or deposition is issued at the instance of anyone other than an officer or agency of the 

United States, service is valid only if the subpoena is accompanied by a tender to the subpoenaed 

person of the fees for one day's attendance and mileage specified by paragraph (f) of this section.
100

(e) Application to quash or modify—(1) Procedure. Any person to whom a subpoena or 

notice of deposition is directed, or who is an owner, creator or the subject of the documents that 

are to be produced pursuant to a subpoena, or any party may, prior to the time specified therein 

for compliance, but in no event more than 15 days after the date of service of such subpoena or 

notice, request that the subpoena or notice be quashed or modified. Such request shall be made 

by application filed with the Secretary and served on all parties pursuant to §201.150. The party 

on whose behalf the subpoena or notice was issued may, within five days of service of the 

application, file an opposition to the application. If a hearing officer has been assigned to the 

proceeding, the application to quash shall be directed to that hearing officer for consideration, 

even if the subpoena or notice was issued by another person. 

(2) Standards governing application to quash or modify. If compliance with the subpoena 

or notice of deposition would be unreasonable, oppressive, unduly burdensome or would unduly 

delay the hearing, the hearing officer or the Commission shall quash or modify the subpoena or 

notice, or may order a response to the subpoena, or appearance at a deposition, only upon 

specified conditions. These conditions may include but are not limited to a requirement that the 

party on whose behalf the subpoena was issued shall make reasonable compensation to the 

person to whom the subpoena was addressed for the cost of copying or transporting evidence to 

the place for return of the subpoena. 

(3) Additional standards governing application to quash deposition notices or subpoenas 

filed pursuant to §201.233(a). The hearing officer or the Commission shall quash or modify a 

deposition notice or subpoena filed or issued pursuant to §201.233(a) unless the requesting party 

demonstrates that the deposition notice or subpoena satisfies the requirements of §201.233(a), 

and: 
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(i) The proposed deponent was a witness of or participant in any event, transaction, 

occurrence, act, or omission that forms the basis for any claim asserted by the Division of 

Enforcement, any defense, or anything else required to be included in an answer pursuant to 

§201.220(c) by any respondent in the proceeding (this excludes a proposed deponent whose only 

knowledge of these matters arises from the Division of Enforcement's investigation or the 

proceeding);

(ii) The proposed deponent is a designated as an "expert witness" under §201.222(b); 

provided, however, that the deposition of an expert who is required to submit a written report 

under §201.222(b) may only occur after such report is served; or 

(iii) The proposed deponent has custody of documents or electronic data relevant to the 

claims or defenses of any party (this excludes Division of Enforcement or other Commission 

officers or personnel who have custody of documents or data that was produced by the Division 

to the respondent).

(f) Witness fees and mileage. Witnesses summoned before the Commission shall be paid the 

same fees and mileage that are paid to witnesses in the courts of the United States, and witnesses 

whose depositions are taken and the persons taking the same shall severally be entitled to the 

same fees as are paid for like services in the courts of the United States. Witness fees and 

mileage shall be paid by the party at whose instance the witnesses appear. Except for such 

witness fees and mileage, each party is responsible for paying any fees and expenses of the 

expert witnesses whom that party designates under § 201.222(b), for appearance at any 

deposition or hearing.
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11. Section 201.233 is revised to read as follows:

§201.233 Depositions upon oral examination. 

(a) Depositions upon written notice. In any proceeding under the 120-day timeframe 

designated pursuant to §201.360(a)(2), depositions upon written notice may be taken as set forth 

in this paragraph. No other depositions shall be permitted except as provided in paragraph (b) of 

this section. 

(1) If the proceeding involves a single respondent, the respondent may file written 

notices to depose no more than three persons, and the Division of Enforcement may file written 

notices to depose no more than three persons. 

(2) If the proceeding involves multiple respondents, the respondents collectively may file 

joint written notices to depose no more than five persons, and the Division of Enforcement may 

file written notices to depose no more than five persons. The depositions taken under this 

paragraph (a)(2) shall not exceed a total of five depositions for the Division of Enforcement, and

five depositions for all respondents collectively. 

(3) Additional depositions upon motion. Any side may file a motion with the hearing 

officer seeking leave to notice up to two additional depositions beyond those permitted pursuant 

to paragraphs (a)(1) and (2) of this section.

(i) Procedure. (A) A motion for additional depositions must be filed no later than 90 days 

prior to the hearing date. Any party opposing the motion may submit an opposition within five 

days after service of the motion. No reply shall be permitted. The motion and any oppositions 

each shall not exceed seven pages in length. These limitations exclusively govern motions under 

this section; notwithstanding §201.154(a), any points and authorities shall be included in the 
103

motion or opposition, with no separate statement of points and authorities permitted, and none of 

the requirements in §201.154(b) or (c) shall apply. 

(B) Upon consideration of the motion and any opposing papers, the hearing officer will 

issue an order either granting or denying the motion. The hearing officer shall consider the 

motion on an expedited basis.

(C) The proceeding shall not automatically be stayed pending the determination of the 

motion.

(ii) Grounds and standards for motion. A motion under this paragraph (a)(3) shall not be 

granted unless the additional depositions satisfy §201.232(e) and the moving side demonstrates a 

compelling need for the additional depositions by:

(A) Identifying each of the witnesses whom the moving side plans to depose pursuant to 

paragraph (a)(1) or (2) of this section as well as the additional witnesses whom the side seeks to 

depose;

(B) Describing the role of each witness and proposed additional witness;

(C) Describing the matters concerning which each witness and proposed additional 

witness is expected to be questioned, and why the deposition of each witness and proposed 

additional witness is necessary for the moving side’s arguments, claims, or defenses; and

(D) Showing that the additional deposition(s) requested will not be unreasonably 

cumulative or duplicative.

(iii) If the moving side proposes to take and submit the additional deposition(s) on written 

questions, as provided in §201.234, the motion shall so state. The motion for additional 

depositions shall constitute a motion under §201.234(a), and the moving party is required to 
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submit its questions with its motion under this rule. The procedures for such a deposition shall 

be governed by § 201.234.

(4) A deponent’s attendance may be ordered by subpoena issued pursuant to the 

procedures in §201.232; and 

(5) The Commission or hearing officer may rule on a motion that a deposition noticed 

under paragraph (a)(1) or (2) of this section shall not be taken upon a determination under 

§201.232(e). The fact that a witness testified during an investigation does not preclude the 

deposition of that witness. 

(b) Depositions when witness is unavailable. In addition to depositions permitted under 

paragraph (a) of this section, the Commission or the hearing officer may grant a party's request to 

file a written notice of deposition if the requesting party shows that the prospective witness will 

likely give testimony material to the proceeding; that it is likely the prospective witness, who is 

then within the United States, will be unable to attend or testify at the hearing because of age, 

sickness, infirmity, imprisonment, other disability, or absence from the United States, unless it 

appears that the absence of the witness was procured by the party requesting the deposition; and 

that the taking of a deposition will serve the interests of justice. 

(c) Service and contents of notice. Notice of any deposition pursuant to this section shall 

be made in writing and served on each party pursuant to §201.150. A notice of deposition shall 

designate by name a deposition officer. The deposition officer may be any person authorized to 

administer oaths by the laws of the United States or of the place where the deposition is to be 

held. A notice of deposition also shall state: 

(1) The name and address of the witness whose deposition is to be taken; 
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(2) The time and place of the deposition; provided that a subpoena for a deposition may 

command a person to attend a deposition only as follows:

(i) Within 100 miles of where the person resides, is employed, or regularly 

transacts business in person; 

(ii) Within the state where the person resides, is employed, or regularly transacts business 

in person, if the person is a party or a party's officer; 

(iii) At such other location that the parties and proposed deponent stipulate; or 

(iv) At such other location that the hearing officer or the Commission determines is 

appropriate; and 

(3) The manner of recording and preserving the deposition.

(d) Producing documents. In connection with any deposition pursuant to this section, a 

party may request the issuance of a subpoena duces tecum under §201.232. The party 

conducting the deposition shall serve upon the deponent any subpoena duces tecum so issued. 

The materials designated for production, as set out in the subpoena, must be listed in the notice 

of deposition. 

(e) Method of recording—(1) Method stated in the notice. The party who notices the 

deposition must state in the notice the method for recording the testimony. Unless the hearing 

officer or Commission orders otherwise, testimony may be recorded by audio, audiovisual, or 

stenographic means. The noticing party bears the recording costs. Any party may arrange to 

transcribe a deposition, at that party's expense. Each party shall bear its own costs for obtaining 

copies of any transcripts or audio or audiovisual recordings.

(2) Additional method. With prior notice to the deponent and other parties, any party may 

designate another method for recording the testimony in addition to that specified in the original 
106

notice. That party bears the expense of the additional record or transcript unless the hearing 

officer or the Commission orders otherwise.

(f) By remote means. The parties may stipulate—or the hearing officer or Commission 

may on motion order—that a deposition be taken by telephone or other remote means. For the 

purpose of this section, the deposition takes place where the deponent answers the questions.

(g) Deposition officer’s duties—(1) Before the deposition. The deposition officer 

designated pursuant to paragraph (c) of this section must begin the deposition with an on-therecord statement that includes: 

(i) The deposition officer's name and business address;

(ii) The date, time, and place of the deposition;

(iii) The deponent's name;

(iv) The deposition officer's administration of the oath or affirmation to the deponent; and

(v) The identity of all persons present.

(2) Conducting the deposition; avoiding distortion. If the deposition is recorded nonstenographically, the deposition officer must repeat the items in paragraphs (g)(1)(i) through (iii) 

of this section at the beginning of each unit of the recording medium. The deponent's and 

attorneys' appearance or demeanor must not be distorted through recording techniques.

(3) After the deposition. At the end of a deposition, the deposition officer must state on 

the record that the deposition is complete and must set out any stipulations made by the attorneys 

about custody of the transcript or recording and of the exhibits, or about any other pertinent 

matters.

(h) Order and record of the examination—(1) Order of examination. The examination 

and cross-examination of a deponent shall proceed as they would at the hearing. After putting 
107

the deponent under oath or affirmation, the deposition officer must record the testimony by the 

method designated under paragraph (e) of this section. The testimony must be recorded by the 

deposition officer personally or by a person acting in the presence and under the direction of the 

deposition officer. The witness being deposed may have counsel present during the deposition.

(2) Form of objections stated during the deposition. An objection at the time of the 

examination—whether to evidence, to a party’s conduct, to the deposition officer’s 

qualifications, to the manner of taking the deposition, or to any other aspect of the deposition—

must be noted on the record, but the examination shall still proceed and the testimony shall be 

taken subject to any objection. An objection must be stated concisely in a nonargumentative and 

nonsuggestive manner. A person may instruct a deponent not to answer only when necessary to 

preserve a privilege, to enforce a limitation ordered by the hearing officer or the Commission, or 

to present a motion to the hearing officer or the Commission for a limitation on the questioning 

in the deposition. 

(i) Waiver of objections—(1) To the notice. An objection to an error or irregularity in a 

deposition notice is waived unless promptly served in writing on the party giving the notice. 

(2) To the deposition officer's qualification. An objection based on disqualification of the 

deposition officer before whom a deposition is to be taken is waived if not made: 

(i) Before the deposition begins; or 

(ii) Promptly after the basis for disqualification becomes known or, with reasonable 

diligence, could have been known.

(3) To the taking of the deposition--(i) Objection to competence, relevance, or 

materiality. An objection to a deponent's competence—or to the competence, relevance, or 
108

materiality of testimony—is not waived by a failure to make the objection before or during the 

deposition, unless the ground for it might have been corrected at that time.

(ii) Objection to an error or irregularity. An objection to an error or irregularity at an 

oral examination is waived if:

(A) It relates to the manner of taking the deposition, the form of a question or answer, the 

oath or affirmation, a party's conduct, or other matters that might have been corrected at that 

time; and 

(B) It is not timely made during the deposition.

(4) To completing and returning the deposition. An objection to how the deposition 

officer transcribed the testimony—or prepared, signed, certified, sealed, endorsed, sent, or 

otherwise dealt with the deposition—is waived unless a motion to suppress is made promptly 

after the error or irregularity becomes known or, with reasonable diligence, could have been 

known.

(j) Duration; cross-examination; motion to terminate or limit--(1) Duration. Unless 

otherwise stipulated or ordered by the hearing officer or the Commission, a deposition is limited 

to one day of seven hours, including cross-examination as provided in this subsection. In a 

deposition conducted by or for a respondent, the Division of Enforcement shall be allowed a 

reasonable amount of time for cross-examination of the deponent. In a deposition conducted by 

the Division, the respondents collectively shall be allowed a reasonable amount of time for crossexamination of the deponent. The hearing officer or the Commission may allow additional time 

if needed to fairly examine the deponent or if the deponent, another person, or any other 

circumstance impedes or delays the examination. 
109

(2) Motion to terminate or limit—(i) Grounds. At any time during a deposition, the 

deponent or a party may move to terminate or limit it on the ground that it is being conducted in 

bad faith or in a manner that unreasonably annoys, embarrasses, or oppresses the deponent or 

party. If the objecting deponent or party so demands, the deposition must be suspended for the 

time necessary to present the motion to the hearing officer or the Commission.

(ii) Order. Upon a motion under paragraph (j)(2)(i) of this section, the hearing officer or 

the Commission may order that the deposition be terminated or may limit its scope. If 

terminated, the deposition may be resumed only by order of the hearing officer or the 

Commission.

(k) Review by the witness; changes--(1) Review; statement of changes. On request by 

the deponent or a party before the deposition is completed, and unless otherwise ordered by the 

hearing officer or the Commission, the deponent must be allowed 14 days after being notified by 

the deposition officer that the transcript or recording is available, unless a longer time is agreed 

to by the parties or permitted by the hearing officer, in which:

(i) To review the transcript or recording; and

(ii) If there are changes in form or substance, to sign a statement listing the changes and 

the reasons for making them.

(2) Changes indicated in the deposition officer’s certificate. The deposition officer must 

note in the certificate prescribed by paragraph (l)(1) of this section whether a review was 

requested and, if so, must attach any changes the deponent makes during the 14-day period.

(l) Certification and delivery; exhibits; copies of the transcript or recording--(1) 

Certification and delivery. The deposition officer must certify in writing that the witness was 

duly sworn and that the deposition accurately records the witness’s testimony. The certificate 
110

must accompany the record of the deposition. Unless the hearing officer orders otherwise, the 

deposition officer must seal the deposition in an envelope or package bearing the title of the

action and marked “Deposition of [witness’s name]” and must promptly send it to the attorney or 

party who arranged for the transcript or recording. The attorney or party must store it under 

conditions that will protect it against loss, destruction, tampering, or deterioration.

(2) Documents and tangible things--(i) Originals and copies. Documents and tangible 

things produced for inspection during a deposition must, on a party’s request, be marked for 

identification and attached to the deposition. Any party may inspect and copy them. But if the 

person who produced them wants to keep the originals, the person may:

(A) Offer copies to be marked, attached to the deposition, and then used as originals—

after giving all parties a fair opportunity to verify the copies by comparing them with the 

originals; or

(B) Give all parties a fair opportunity to inspect and copy the originals after they are 

marked—in which event the originals may be used as if attached to the deposition.

(ii) Order regarding the originals. Any party may move for an order that the originals be 

attached to the deposition pending final disposition of the case.

(3) Copies of the transcript or recording. Unless otherwise stipulated or ordered by the 

hearing officer or Commission, the deposition officer must retain the stenographic notes of a 

deposition taken stenographically or a copy of the recording of a deposition taken by another 

method. When paid reasonable charges, the deposition officer must furnish a copy of the 

transcript or recording to any party or the deponent, as directed by the party or person paying 

such charges.
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(m) Presentation of objections or disputes. Any party seeking relief with respect to 

disputes over the conduct of a deposition may file a motion with the hearing officer to obtain 

relief as permitted by this part.

12. Section 201.234 is amended by revising paragraphs (a) and (c) to read as follows:

§201.234 Depositions upon written questions.

(a) Availability. Any deposition permitted under §201.233 may be taken and submitted on 

written questions upon motion of any party, for good cause shown, or as stipulated by the parties. 

* * * * *

(c) Additional requirements. The order for deposition, filing of the deposition, form of the 

deposition and use of the deposition in the record shall be governed by paragraphs (c) through (l) 

of §201.233, except that no cross-examination shall be made. 

13. Section 201.235 is amended by revising the section heading and paragraphs (a) 

introductory text, (a)(2), (4), and (5) and adding paragraph (b) to read as follows:

§201.235 Introducing prior sworn statements or declarations.

(a) At a hearing, any person wishing to introduce a prior, sworn deposition taken pursuant to 

§201.233 or §201.234, investigative testimony, or other sworn statement or a declaration 

pursuant to 28 U.S.C. 1746, of a witness, not a party, otherwise admissible in the proceeding, 

may make a motion setting forth the reasons therefor. If only part of a statement or declaration is 

offered in evidence, the hearing officer may require that all relevant portions of the statement or 

declaration be introduced. If all of a statement or declaration is offered in evidence, the hearing 
112

officer may require that portions not relevant to the proceeding be excluded. A motion to 

introduce a prior sworn statement or declaration may be granted if: 

* * * * *

(2) The witness is out of the United States, unless it appears that the absence of the witness 

was procured by the party offering the prior sworn statement or declaration; 

* * * * *

(4) The party offering the prior sworn statement or declaration has been unable to procure 

the attendance of the witness by subpoena; or

(5) In the discretion of the Commission or the hearing officer, it would be desirable, in the 

interests of justice, to allow the prior sworn statement or declaration to be used. In making this 

determination, due regard shall be given to the presumption that witnesses will testify orally in 

an open hearing. If the parties have stipulated to accept a prior sworn statement or declaration in 

lieu of live testimony, consideration shall also be given to the convenience of the parties in 

avoiding unnecessary expense. 

(b) Sworn statement or declaration of party or agent. An adverse party may use for any 

purpose a deposition taken pursuant to §201.233 or §201.234, investigative testimony, or other 

sworn statement or a declaration pursuant to 28 U.S.C. 1746, of a party or anyone who, when 

giving the sworn statement or declaration, was the party's officer, director, or managing agent.

14. Section 201.250 is revised to read as follows:

§201.250 Dispositive motions.

(a) Motion for a ruling on the pleadings. No later than 14 days after a respondent’s answer 

has been filed, any party may move for a ruling on the pleadings on one or more claims or 

defenses, asserting that, even accepting all of the non-movant’s factual allegations as true and 
113

drawing all reasonable inferences in the non-movant’s favor, the movant is entitled to a ruling as 

a matter of law. The hearing officer shall promptly grant or deny the motion. 

(b) Motion for summary disposition in 30- and 75-day proceedings. In any proceeding under 

the 30- or 75-day timeframe designated pursuant to §201.360(a)(2), after a respondent’s answer 

has been filed and documents have been made available to that respondent for inspection and 

copying pursuant to §201.230, any party may make a motion for summary disposition on one or 

more claims or defenses, asserting that the undisputed pleaded facts, declarations, affidavits, 

documentary evidence or facts officially noted pursuant to §201.323 show that there is no 

genuine issue with regard to any material fact and that the movant is entitled to summary 

disposition as a matter of law. The hearing officer shall promptly grant or deny the motion for 

summary disposition or shall defer decision on the motion. If it appears that a party, for good 

cause shown, cannot present prior to the hearing facts essential to justify opposition to the 

motion, the hearing officer shall deny or defer the motion.

(c) Motion for summary disposition in 120-day proceedings. In any proceeding under the 

120-day timeframe designated pursuant to §201.360(a)(2), after a respondent’s answer has been 

filed and documents have been made available to that respondent for inspection and copying 

pursuant to §201.230, a party may make a motion for summary disposition on one or more 

claims or defenses, asserting that the undisputed pleaded facts, declarations, affidavits, 

deposition transcripts, documentary evidence or facts officially noted pursuant to §201.323 show 

that there is no genuine issue with regard to any material fact and that the movant is entitled to 

summary disposition as a matter of law. A motion for summary disposition shall be made only 

with leave of the hearing officer. Leave shall be granted only for good cause shown and if 

consideration of the motion will not delay the scheduled start of the hearing. The hearing officer 
114

shall promptly grant or deny the motion for summary disposition or shall defer decision on the 

motion. If it appears that a party, for good cause shown, cannot present prior to the hearing facts 

essential to justify opposition to the motion, the hearing officer shall deny or defer the motion.

(d) Motion for a ruling as a matter of law following completion of case in chief. Following 

the interested division’s presentation of its case in chief, any party may make a motion, asserting 

that the movant is entitled to a ruling as a matter of law on one or more claims or defenses. 

(e) Length limitation for dispositive motions. Dispositive motions, together with any 

supporting memorandum of points and authorities (exclusive of any declarations, affidavits, 

deposition transcripts or other attachments), shall not exceed 9,800 words. Requests for leave to 

file motions and accompanying documents in excess of 9,800 words are disfavored. A doublespaced motion that does not, together with any accompanying memorandum of points and 

authorities, exceed 35 pages in length, inclusive of pleadings incorporated by reference (but

excluding any declarations, affidavits, deposition transcripts or attachments) in the dispositive 

motion, is presumptively considered to contain no more than 9,800 words. Any motion that 

exceeds this page limit must include a certificate by the attorney, or an unrepresented party, 

stating that the brief complies with the word limit set forth in this paragraph and stating the 

number of words in the motion. The person preparing the certificate may rely on the word count 

of a word-processing program to prepare the document.

(f) Opposition and reply length limitations and response time. A non-moving party may file 

an opposition to a dispositive motion and the moving party may thereafter file a reply.

(1) Length limitations. Any opposition must comply with the length limitations applicable to 

the movant’s motion as set forth in paragraph (e) of this section. Any reply must comply with 

the length limitations set forth in §201.154(c). 
115

(2) Response time. (i) For motions under paragraphs (a), (b), and (d) of this section, the 

response times set forth in §201.154(b) apply to any opposition and reply briefs. 

(ii) For motions under paragraph (c) of this section, any opposition must be filed within 

21 days after service of such a motion, and any reply must be filed within seven days after 

service of any opposition. 

15. Section 201.320 is revised to read as follows: 

§201.320 Evidence: Admissibility.

(a) Except as otherwise provided in this section, the Commission or the hearing officer may 

receive relevant evidence and shall exclude all evidence that is irrelevant, immaterial, unduly 

repetitious, or unreliable.

(b) Subject to §201.235, evidence that constitutes hearsay may be admitted if it is 

relevant, material, and bears satisfactory indicia of reliability so that its use is fair.

16. Section 201.360 is amended by revising the section heading and paragraphs (a)(2) 

and (3), (b) introductory text, and (c) to read as follows:

§201.360 Initial decision of hearing officer and timing of hearing.

(a) * * * 

(2) Time period for filing initial decision and for hearing—(i) Initial decision. In the 

order instituting proceedings, the Commission will specify a time period in which the hearing 

officer's initial decision must be filed with the Secretary. In the Commission's discretion, after 

consideration of the nature, complexity, and urgency of the subject matter, and with due regard 

for the public interest and the protection of investors, this time period will be either 30, 75, or 

120 days. The time period will run from the occurrence of the following events:
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(A) The completion of post-hearing briefing in a proceeding where the hearing has been 

completed; or

(B) The completion of briefing on a §201.250 motion in the event the hearing officer has 

determined that no hearing is necessary; or

(C) The determination by the hearing officer that, pursuant to §201.155, a party is 

deemed to be in default and no hearing is necessary.

(ii) Hearing. Under the 120-day timeline, the hearing officer shall issue an order 

scheduling the hearing to begin approximately four months (but no more than ten months) from 

the date of service of the order instituting the proceeding. Under the 75-day timeline, the hearing 

officer shall issue an order scheduling the hearing to begin approximately 2-1⁄2 months (but no 

more than six months) from the date of service of the order instituting the proceeding. Under the 

30-day timeline, the hearing officer shall issue an order scheduling the hearing to begin 

approximately one month (but no more than four months) from the date of service of the order 

instituting the proceeding. These deadlines confer no substantive rights on respondents. If a stay 

is granted pursuant to §201.161(c)(2)(i) or §201.210(c)(3), the time period specified in the order 

instituting proceedings in which the hearing officer's initial decision must be filed with the 

Secretary, as well as any other time limits established in orders issued by the hearing officer in 

the proceeding, shall be automatically tolled during the period while the stay is in effect.

(3) Certification of extension; motion for extension. (i) In the event that the hearing 

officer presiding over the proceeding determines that it will not be possible to file the initial 

decision within the specified period of time, the hearing officer may certify to the Commission in 

writing the need to extend the initial decision deadline by up to 30 days for case management 

purposes. The certification must be issued no later than 30 days prior to the expiration of the 

time specified for the issuance of an initial decision and be served on the Commission and all 
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parties in the proceeding. If the Commission has not issued an order to the contrary within 14 

days after receiving the certification, the extension set forth in the hearing officer's certification 

shall take effect.

(ii) Either in addition to a certification of extension, or instead of a certification of 

extension, the Chief Administrative Law Judge may submit a motion to the Commission 

requesting an extension of the time period for filing the initial decision. First, the hearing officer 

presiding over the proceeding must consult with the Chief Administrative Law Judge. Following 

such consultation, the Chief Administrative Law Judge may determine, in his or her discretion, 

to submit a motion to the Commission requesting an extension of the time period for filing the 

initial decision. This motion may request an extension of any length but must be filed no later 

than 15 days prior to the expiration of the time specified in the certification of extension, or if 

there is no certification of extension, 30 days prior to the expiration of the time specified in the 

order instituting proceedings. The motion will be served upon all parties in the proceeding, who 

may file with the Commission statements in support of or in opposition to the motion. If the 

Commission determines that additional time is necessary or appropriate in the public interest, the 

Commission shall issue an order extending the time period for filing the initial decision. 

(iii) The provisions of this paragraph (a)(3) confer no rights on respondents.

(b) Content. An initial decision shall include findings and conclusions, and the reasons or 

basis therefor, as to all the material issues of fact, law or discretion presented on the record and 

the appropriate order, sanction, relief, or denial thereof. The initial decision shall also state the 

time period, not to exceed 21 days after service of the decision, except for good cause shown, 

within which a petition for review of the initial decision may be filed. The reasons for any 
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extension of time shall be stated in the initial decision. The initial decision shall also include a 

statement that, as provided in paragraph (d) of this section:

* * * * *

(c) Filing, service and publication. The Secretary shall promptly serve the initial decision 

upon the parties and shall promptly publish notice of the filing thereof on the SEC Website. 

Thereafter, the Secretary shall publish the initial decision in the SEC Docket; provided, however, 

that in nonpublic proceedings no notice shall be published unless the Commission otherwise 

directs.

* * * * *

17. Section 201.410 is amended by revising paragraph (b), redesignating paragraph (c) as 

paragraph (d), and adding a new paragraph (c) to read as follows:

§201.410 Appeal of initial decisions by hearing officers.

* * * * *

(b) Procedure. The petition for review of an initial decision shall be filed with the 

Commission within such time after service of the initial decision as prescribed by the hearing 

officer pursuant to §201.360(b) unless a party has filed a motion to correct an initial decision 

with the hearing officer. If such correction has been sought, a party shall have 21 days from the 

date of the hearing officer's order resolving the motion to correct to file a petition for review. 

The petition shall set forth a statement of the issues presented for review under §201.411(b). In 

the event a petition for review is filed, any other party to the proceeding may file a cross-petition 

for review within the original time allowed for seeking review or within ten days from the date 

that the petition for review was filed, whichever is later.
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(c) Length limitation. Except with leave of the Commission, the petition for review shall not 

exceed three pages in length. Incorporation of pleadings or filings by reference into the petition

is not permitted. Motions to file petitions in excess of those limitations are disfavored.

* * * * *

18. Section 201.411 is amended by: 

a. In paragraph (c), removing the term "§ 210.410(b)" and adding in its place 

"§ 201.410(b)"; and

b. Revising paragraph (d).

The revision reads as follows:

§201.411 Commission consideration of initial decisions by hearing officers.

* * * * *

(d) Limitations on matters reviewed. Review by the Commission of an initial decision shall 

be limited to the issues specified in an opening brief that complies with §201.450(b), or the 

issues, if any, specified in the briefing schedule order issued pursuant to §201.450(a). Any 

exception to an initial decision not supported in an opening brief that complies with §201.450(b) 

may, at the discretion of the Commission, be deemed to have been waived by the petitioner. On 

notice to all parties, however, the Commission may, at any time prior to issuance of its decision, 

raise and determine any other matters that it deems material, with opportunity for oral or written 

argument thereon by the parties.

* * * * *

19. Section 201.420 is amended by:

a. Revising paragraph (a); and 

b. Adding a sentence to the end of paragraph (c).

The revision and addition read as follows: 
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§201.420 Appeal of determinations by self-regulatory organizations.

(a) Application for review; when available. An application for review by the Commission 

may be filed by any person who is aggrieved by a determination of a self-regulatory organization 

with respect to any: 

(1) Final disciplinary sanction; 

(2) Denial or conditioning of membership or participation; 

(3) Prohibition or limitation in respect to access to services offered by that self-regulatory 

organization or a member thereof; or 

(4) Bar from association as to which a notice is required to be filed with the Commission 

pursuant to Section 19(d)(1) of the Exchange Act, 15 U.S.C. 78s(d)(1).

* * * * *

(c) * * * Any exception to a determination not supported in an opening brief that complies 

with §201.450(b) may, at the discretion of the Commission, be deemed to have been waived by 

the applicant.

* * * * *

20. Section 201.440 is amended by revising paragraph (b) to read as follows:

§201.440 Appeal of determinations by the Public Company Accounting Oversight Board.

* * * * *

(b) Procedure. An aggrieved person may file an application for review with the Commission 

pursuant to §201.151 within 30 days after the notice filed by the Board of its determination with 

the Commission pursuant to 17 CFR 240.19d-4 is received by the aggrieved person applying for 

review. The applicant shall serve the application on the Board at the same time. The application 
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shall identify the determination complained of, set forth in summary form a brief statement of 

alleged errors in the determination and supporting reasons therefor, and state an address where 

the applicant can be served. The application should not exceed two pages in length. The notice 

of appearance required by §201.102(d) shall accompany the application. Any exception to a 

determination not supported in an opening brief that complies with §201.450(b) may, at the 

discretion of the Commission, be deemed to have been waived by the applicant.

* * * * *

21. Section 201.450 is amended by revising paragraphs (b), (c), and (d) to read as 

follows.

§201.450 Briefs filed with the Commission.

* * * * *

(b) Contents of briefs. Briefs shall be confined to the particular matters at issue. Each 

exception to the findings or conclusions being reviewed shall be stated succinctly. Exceptions 

shall be supported by citation to the relevant portions of the record, including references to the 

specific pages relied upon, and by concise argument including citation of such statutes, decisions 

and other authorities as may be relevant. If the exception relates to the admission or exclusion of 

evidence, the substance of the evidence admitted or excluded shall be set forth in the brief, or by 

citation to the record. Reply briefs shall be confined to matters in opposition briefs of other 

parties; except as otherwise determined by the Commission in its discretion, any argument raised 

for the first time in a reply brief shall be deemed to have been waived.

(c) Length limitation. Except with leave of the Commission, opening and opposition briefs 

shall not exceed 14,000 words and reply briefs shall not exceed 7,000 words, exclusive of pages 

containing the table of contents, table of authorities, and any addendum that consists solely of 

copies of applicable cases, pertinent legislative provisions or rules, and exhibits. Incorporation 
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of pleadings or filings by reference into briefs submitted to the Commission is not permitted. 

Motions to file briefs in excess of these limitations are disfavored.

(d) Certificate of compliance. An opening or opposition brief that does not exceed 30 pages 

in length, exclusive of pages containing the table of contents, table of authorities, and any 

addendum that consists solely of copies of applicable cases, pertinent legislative provisions, or 

rules and exhibits, is presumptively considered to contain no more than 14,000 words. A reply 

brief that does not exceed 15 pages in length, exclusive of pages containing the table of contents, 

table of authorities, and any addendum that consists solely of copies of applicable cases, 

pertinent legislative provisions, or rules and exhibits is presumptively considered to contain no 

more than 7,000 words. Any brief that exceeds these page limits must include a certificate by the 

party's representative, or an unrepresented party, stating that the brief complies with the 

requirements set forth in paragraph (c) of this section and stating the number of words in the 

brief. The person preparing the certificate may rely on the word count of the word-processing 

system used to prepare the brief.

22. Section 201.900 is revised to read as follows: 

§ 201.900 Informal procedures and supplementary information concerning adjudicatory 

proceedings. 

(a) Guidelines for the timely completion of proceedings. (1) Timely resolution of 

adjudicatory proceedings is one factor in assessing the effectiveness of the adjudicatory program 

in protecting investors, promoting public confidence in the securities markets and assuring 

respondents a fair hearing. Establishment of guidelines for the timely completion of key phases 

of contested administrative proceedings provides a standard for both the Commission and the 

public to gauge the Commission's adjudicatory program on this criterion. The Commission has 

directed that:
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(i) To the extent possible, a decision by the Commission on review of an interlocutory matter 

should be completed within 45 days of the date set for filing the final brief on the matter 

submitted for review.

(ii) To the extent possible, a decision by the Commission on a motion to stay a decision that 

has already taken effect or that will take effect within five days of the filing of the motion, 

should be issued within five days of the date set for filing of the opposition to the motion for a 

stay. If the decision complained of has not taken effect, the Commission's decision should be 

issued within 45 days of the date set for filing of the opposition to the motion for a stay.

(iii) Ordinarily, a decision by the Commission with respect to an appeal from the initial 

decision of a hearing officer, a review of a determination by a self-regulatory organization or the 

Public Company Accounting Oversight Board, or a remand of a prior Commission decision by a 

court of appeals will be issued within eight months from the completion of briefing on the 

petition for review, application for review, or remand order. If the Commission determines that 

the complexity of the issues presented in a petition for review, application for review, or remand 

order warrants additional time, the decision of the Commission in that matter may be issued 

within ten months of the completion of briefing. 

(iv) If the Commission determines that a decision by the Commission cannot be issued within 

the period specified in paragraph (a)(1)(iii) of this section, the Commission may extend that 

period by orders as it deems appropriate in its discretion. The guidelines in this paragraph (a) 

confer no rights or entitlements on parties or other persons.

(2) The guidelines in this paragraph (a) do not create a requirement that each portion of a 

proceeding or the entire proceeding be completed within the periods described. Among other 

reasons, Commission review may require additional time because a matter is unusually complex 
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or because the record is exceptionally long. In addition, fairness is enhanced if the Commission's 

deliberative process is not constrained by an inflexible schedule. In some proceedings, 

deliberation may be delayed by the need to consider more urgent matters, to permit the 

preparation of dissenting opinions, or for other good cause. The guidelines will be used by the 

Commission as one of several criteria in monitoring and evaluating its adjudicatory program. 

The guidelines will be examined periodically, and, if necessary, readjusted in light of changes in 

the pending caseload and the available level of staff resources.

(b) Reports to the Commission on pending cases. The administrative law judges, the 

Secretary and the General Counsel have each been delegated authority to issue certain orders or 

adjudicate certain proceedings. See 17 CFR 200.30-1 through 200.30-18. Proceedings are also 

assigned to the General Counsel for the preparation of a proposed order or opinion which will 

then be recommended to the Commission for consideration. In order to improve accountability 

by and to the Commission for management of the docket, the Commission has directed that 

confidential status reports with respect to all filed adjudicatory proceedings shall be made 

periodically to the Commission. These reports will be made through the Secretary, with a 

minimum frequency established by the Commission. In connection with these periodic reports, 

if a proceeding pending before the Commission has not been concluded within 30 days of the 

guidelines established in paragraph (a) of this section, the General Counsel shall specifically 

apprise the Commission of that fact, and shall describe the procedural posture of the case, project 

an estimated date for conclusion of the proceeding, and provide such other information as is 

necessary to enable the Commission to make a determination under paragraph (a)(1)(iv) of this 

section or to determine whether additional steps are necessary to reach a fair and timely 

resolution of the matter.
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(c) Publication of information concerning the pending case docket. Ongoing disclosure of 

information about the adjudication program caseload increases awareness of the importance of 

the program, facilitates oversight of the program and promotes confidence in the efficiency and 

fairness of the program by investors, securities industry participants, self-regulatory 

organizations and other members of the public. The Commission has directed the Secretary to 

publish in the first and seventh months of each fiscal year summary statistical information about 

the status of pending adjudicatory proceedings and changes in the Commission's caseload over 

the prior six months. The report will include the number of cases pending before the 

administrative law judges and the Commission at the beginning and end of the six-month period. 

The report will also show increases in the caseload arising from new cases being instituted, 

appealed or remanded to the Commission and decreases in the caseload arising from the 

disposition of proceedings by issuance of initial decisions, issuance of final decisions issued on 

appeal of initial decisions, other dispositions of appeals of initial decisions, final decisions on 

review of self-regulatory organization determinations, other dispositions on review of selfregulatory organization determinations, and decisions with respect to stays or interlocutory 

motions. For each category of decision, the report shall also show the median age of the cases at 

the time of the decision, the number of cases decided within the guidelines for the timely 

completion of adjudicatory proceedings, and, with respect to appeals from initial decisions, 

reviews of determinations by self-regulatory organizations or the Public Company Accounting 

Oversight Board, and remands of prior Commission decisions, the median days from the 

completion of briefing to the time of the Commission’s decision.
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By the Commission.

Dated: July 13, 2016.

Robert W. Errett,

Deputy Secretary.