`	NO. 5-00-0525

	IN THE

	APPELLATE COURT OF ILLINOIS

	FIFTH DISTRICT

________________________________________________________________________

A.G. EDWARDS, INC., ROBERT D.		)  Appeal from the

MAURER, BRENT A. WILHELM, and 	)  Circuit Court of

GARY W. HENCY,				)  St. Clair County.

							)

     Petitioners-Appellees,				)

							)

v.							)  No. 00-MR-117

							)

THE SECRETARY OF STATE, THE		)

DEPARTMENT OF SECURITIES OF THE	)

STATE OF ILLINOIS,				)  Honorable

							)  John M. Goodwin, Jr.,

     Respondent-Appellant.				)  Judge, presiding.

________________________________________________________________________

	PRESIDING JUSTICE MAAG delivered the opinion of the court: 

	A.G. Edwards, Inc. (A.G. Edwards), Robert D. Maurer, Brent A. Wilhelm, and Gary

W. Hency (collectively petitioners) filed a motion to quash the subpoenas duces tecum directed against them by the Secretary of State, the Department of Securities of the State of

Illinois (respondent).  The subpoenas, issued May 5, 2000, as part of a routine audit of A.G.

Edwards' Waterloo, Illinois, office, sought personal banking information from Maurer,

Wilhelm, and Hency.  Respondent filed a motion to enforce the subpoenas on June 1, 2000. 

The circuit court held a hearing and on July 25, 2000, sustained the motion to quash the

subpoenas.  Respondent filed a timely notice of appeal.

	The relevant facts are as follows.  A.G. Edwards is the parent corporation of A.G.

Edwards & Sons, Inc., a broker/dealer.  A.G. Edwards maintains an office located in

Waterloo, Illinois, for the purposes of conducting a securities business and providing

investment services.  The Waterloo office is a satellite office of A.G. Edwards' Belleville branch office.  A.G. Edwards employs Maurer, Wilhelm, and Hency as salespersons.

	On May 5, 2000, each petitioner received a subpoena duces tecum issued by respondent pursuant to the Illinois Securities Law of 1953 (Securities Law) (815 ILCS 5/1 et seq. (West 2000)), directing A.G. Edwards' Waterloo office to produce specified bank records for "any and all bank accounts in which A.G. Edwards & Sons, Inc.[,] commission

checks are deposited" for Maurer, Wilhelm, and Hency (salespersons).  Specifically,

respondent sought copies of all bank statements, copies of all check registers, copies of all

canceled checks, and copies of all deposit slips for the salespersons for the previous two

years, commencing May 4, 1998.  The subpoenas required petitioners to produce personal

financial information at respondent's office in Chicago, Illinois, within four days of the

service of the subpoenas.  Respondent agreed that some of these accounts were held with

the individual salesperson's respective spouse.  Additionally, respondent admitted that it had

no reason to believe that the individual salespersons had engaged in any improper conduct. 

The personal banking information that respondent had subpoenaed was requested as a

routine audit.  

	Petitioners filed a motion to quash the subpoenas.  Petitioners alleged that the

subpoenas were so broad and invasive "as to constitute an invasion of the *** brokers'

[salespersons'] fundamental rights of privacy."  Additionally, petitioners claimed that

respondent had not demonstrated any cause or justification for such a pervasive invasion of

privacy.

	On May 17, 2000, petitioners submitted the affidavit of Brian Underwood, director

of compliance for A.G. Edwards & Sons, Inc.  Underwood's affidavit stated that he had been

employed with A.G. Edwards & Sons, Inc., since 1984 and that his job responsibilities have

been exclusively with respect to litigation and compliance functions.  Underwood stated that

due to his work experience, he had become familiar with the practices of the Securities and Exchange Commission, the National Association of Securities Dealers Regulation, Inc., the

various exchanges of which A.G. Edwards & Sons, Inc., is a member, and the state

regulatory agencies responsible for monitoring the activities of broker/dealers such as A.G.

Edwards & Sons, Inc.  Underwood  claimed as follows: "During my 161⁄2 years in the

securities industry, I am not aware of a single instance in which any regulatory organization

has requested the personal financial records of any Edwards' broker [salesperson] as part of

a routine audit or investigation, other than the *** respondent's request that is the subject

of the motion to quash."  Additionally, Underwood stated that before this particular request

was made, respondent had never requested the personal financial records of any A.G.

Edwards Illinois broker as a part of a routine audit.

	A.G. Edwards filed a response to the subpoena on May 30, 2000.  It stated, "[N]either

A.G. Edwards, Inc.[,] nor A.G. Edwards & Sons, Inc.[,] have [sic] in their [sic] possession, custody, or control any of the documents requested in the subpoena."  Further, it claimed,

"[Neither A.G. Edwards nor A.G. Edwards & Sons, Inc., has] any obligation under the laws,

rules, or regulations of the State of Illinois, any self-regulatory organization, the Securities

Exchange Commission, or the National Association of Securities Dealers Regulation, Inc.[,]

to maintain records pertaining to the personal bank accounts of any of its employees."

	On June 1, 2000, respondent filed a motion to enforce the subpoenas, a response to

the motion to quash, and a supporting memorandum.  Respondent argued that section

11(D)(1) of the Securities Law (815 ILCS 5/11(D)(1) (West 2000)) authorized it to issue

subpoenas during an audit if the information is relevant and that the requested records were

relevant to the audit of the Waterloo office.  Respondent further argued that section 11(D)(1)

allows it to require the production of any books and records for audit purposes.  

	Petitioners filed a memorandum in opposition to respondent's motion to enforce the

subpoenas.  They argued that the Securities Law was unconstitutional as applied to them, thereby violating their rights to privacy and due process.  Petitioners claimed that they had

a right of privacy in their bank records and that the subpoenas were an unreasonable

invasion of that right.  Additionally, petitioners contended that the administrative

investigation in the instant case was arbitrary, in excess of statutory authority, and

undertaken for an improper purpose.  Thus, petitioners claimed that it was a violation of due

process.  Petitioners also claimed that respondent did not have the authority to subpoena the

personal bank records because the information was not relevant to discovering any

violations.

	The court conducted a hearing on July 12, 2000.  Susan LaRussa, an auditor for

respondent, testified that she audited A.G. Edwards' Waterloo office on May 4 and May 5,

2000.  Although the salespersons and Robert Vaught, the compliance officer for the area,

gave her most of the books and records that she requested, she was told that she would not

be able to review the salespersons' personal bank records.  LaRussa stated that individual

checking account information was subpoenaed because A.G. Edwards' Waterloo satellite

office did not maintain a business account.  LaRussa testified that all revenue received by

the Waterloo office was deposited into a "sweep account."  Each night, the money deposited

into the sweep account was transferred into an account maintained by A.G. Edwards' main

office in St. Louis, Missouri.  Each salesperson then received a commission check or a

paycheck from A.G. Edwards that was made payable to the individual salesperson.  Each

salesperson stated that he deposited his check into his personal checking account.  LaRussa

admitted that she did not attempt to obtain any information from the St. Louis office or the

sweep account.  She also agreed that she was not denied access to the Waterloo office sweep

account or the records in St. Louis.  Instead, LaRussa stated that if the salespersons wanted

to avoid divulging personal banking information, they should have created a business

account.  LaRussa claimed that she needed the personal banking information in order to determine who the salespersons were making their checks out to.  She claimed that because

the checks from A.G. Edwards are considered security commission checks, respondent has

the authority to look at the account that the commission check is deposited into because it

is security-related.  When reviewing personal checking accounts, LaRussa looks for

"repetitious names [and] entities that checks have been made out to."  She stated that she

looks for unregistered securities or "selling away."  LaRussa explained that "selling away"

occurs when a salesperson is registered with one broker/dealer and "selling away" another

broker/dealer's products.  LaRussa explained that "selling away" is illegal.  She stated that

salespersons can only sell the products that they are registered to sell with their

broker/dealer.  When reviewing personal checking accounts, LaRussa is also looking for

instances where the personal checking account is made out in the broker/dealer's name.  For

example, if a check is printed in the name of ABC Company in care of the salesperson's

name, the salesperson can deposit the check into his personal checking account because that

is the name that is printed on his personal checking account.  LaRussa stated that this type

of account is not allowed because the salesperson can deposit the check into his personal

checking account.

	Kirby Kitner, senior auditor for respondent, testified that he had worked for

respondent since April 1989.  Kitner stated that his primary duty is to oversee field auditors. 

Kitner explained that he attempts to keep the auditors consistent in their application,

reviews, and examinations.  He reviews the auditors' findings and discusses potential action

that respondent might take.  Since 1996, respondent's audit policy has included reviewing

bank records used directly or indirectly in the operation of the office.  This included any

account into which a commission check or paycheck was deposited.  If the business has an

operating account, respondent would not request the salesperson's personal account.  Kitner's

explanation of what respondent looks for in the personal bank accounts was virtually identical to LaRussa's explanation.

	Underwood testified that petitioners did not maintain business accounts.  In fact,

Underwood stated that petitioners were not permitted to maintain a business account because

all deposits received by the office are deposited into a sweep account and each night they

are "swept to the home office bank account."  Additionally, all of the expenses had to be

submitted to the St. Louis office for payment.  Underwood testified that the records that

would show the operating expenses of the office and the business expenses of the

individuals were records of A.G. Edwards and were available.

	In written closing arguments, respondent claimed that it had the authority, pursuant

to the Securities Law, to conduct audits and issue subpoenas during the course of an audit. 

Further, respondent argued that the requests in the subject subpoenas were relevant, material,

and reasonable.  Respondent claimed that bank records for the personal accounts might

expose violations of the Securities Law.  Respondent stated that deposit slips might reveal

"selling away," fee-splitting or the sharing of commissions, the diversion of customer funds,

or the commingling of funds. 

	Petitioners, in their written closing arguments, argued that the subpoenas violated 

petitioners' rights to privacy and were not within respondent's statutory authority.  Petitioners

also claimed that there was no evidence of impropriety by the Waterloo office, and they

claimed that the information sought in the subpoenas was available to respondent through

A.G. Edwards' home office records.

	The circuit court entered an order on July 25, 2000, sustaining petitioners' motion to

quash the subpoenas and denying respondent's motion to enforce the subpoenas.  The court

determined that the subpoenas were unconstitutionally overbroad and violated the due

process and privacy rights of the individual salespersons.  The court also stated that the

undisputed evidence showed that during its audit of the Waterloo office respondent had found no evidence of impropriety.  Moreover, the court noted that the business records

pertaining to the income and expenses of the Waterloo office were available at the home

office of A.G. Edwards.  Respondent filed a timely notice of appeal.

	Respondent claims that the circuit court erred by granting petitioners' motion to quash

the subpoenas and denying respondent's motion to enforce the subpoenas.  Specifically,

respondent claims that it was authorized to initiate the subpoenas pursuant to  sections

8(I)(3) and 11(D)(1) of the Securities Law (815 ILCS 5/8(I)(3), 11(D)(1) (West 2000)) and

section 130.825(c)(1) of the Illinois Administrative Code (14 Ill. Adm. Code §130.825(c)(1)

(2000)).  We disagree.

	The appellate review of a motion to quash involving the circuit court's application of

the law to uncontroverted facts is de novo.  People v. Buss, 187 Ill. 2d 144, 204, 718 N.E.2d 1, 35 (1999).  In the instant case, the facts are undisputed; hence, the standard of review is de novo.  See ESG Watts, Inc. v. Pollution Control Board, 191 Ill. 2d 26, 29, 727 N.E.2d 1022, 1024 (2000).

	Pursuant to section 2-1101 of the Code of Civil Procedure (735 ILCS 5/2-1101 (West

2000)), the circuit court may quash a subpoena for good cause shown.  The circuit court may

decline to enforce an arbitrary, capricious, or oppressive administrative subpoena.  People v. McWhorter, 13 Ill. 2d 374, 380, 498 N.E.2d 1154, 1156 (1986).  In evaluating the propriety of the issuance of an administrative subpoena, the circuit court may consider the

following:

	"(1) the constitutionality of the statute; (2) whether the contemplated agency

proceedings are included within the statutory authority; (3) the reasonableness of the

demand; and (4) the relevance of the information sought."  Department of Public Aid v. Kessler, 72 Ill. App. 3d 802, 804, 391 N.E.2d 160, 162 (1979).

	A subpoena is reasonable where (1) the document sought is relevant to the inquiry and (2) the specification of the document to be produced is adequate but not excessive for

the purpose of the relevant inquiry.  People v. Jackson, 116 Ill. App. 3d 430, 435-36, 452 N.E.2d 85, 89 (1983).

	Section 8(I) of the Securities Law states, in relevant part, as follows:

		"I.  (1) Every registered dealer *** and investment adviser shall make and

keep[,] for such periods, such accounts, correspondence, memoranda, papers,

books[,] and records as the Secretary of State may by rule or regulation prescribe. 

***

		***

		(3) All the books and records referred to in paragraph (1) of this subsection

I are subject at any time or from time to time to such reasonable periodic, special[,]

or other audits, examinations, or inspections by representatives of the Secretary of

State, within or without this State, as the Secretary of State deems necessary or

appropriate in the public interest or for the protection of investors."  815 ILCS

5/8(I)(1), (I)(3) (West 2000).

	Section 11(D)(1) of the Securities Law states that respondent can require the

production of any books and records, papers, or other documents which respondent deems

relevant or material to the inquiry.  815 ILCS 5/11(D)(1) (West 2000).

	Additionally, section 130.825(c)(1) of the Illinois Administrative Code (14 Ill. Adm.

Code §130.825(c)(1) (2000)) states as follows:

	"(c) Every dealer registered by the Secretary of State shall preserve, for a period of not less than 3 years, the first 2 years in an easily accessible place:

		(1) all check books, bank statements, cancelled checks[,] and cash

reconciliations." (Emphasis added.)

	Initially, we note that respondent states in its brief that the parties agree that petitioners are "salespersons" within the meaning of the Securities Law.  See 815 ILCS 5/2.9

(West 2000).  Hence, they are not "dealers" as contemplated in the Securities Law or the

foregoing regulations, since the definition states, " 'Dealer' means any person, other than a salesperson ***, who engages *** as agent, broker[,] or principal[] in the business of offering, selling, [or] buying and selling *** securities ***."  (Emphasis added.)  815 ILCS

5/2.7 (West 2000).  We note that neither the plain language of the statutes nor the

administrative regulation states that salespersons must preserve their personal checkbooks, bank statements, canceled checks, or cash reconciliations or that respondent would be able

to periodically audit such information.  In fact, nothing in the foregoing statutes or

regulation implies such a construction.  Consequently, the contemplated agency proceedings

are not included within the statutory authority.

	Moreover, the permissible scope of an administrative subpoena, and of any

administrative demand for information or the production of documents, is measured by the

relevance of the information sought to the problem under investigation.  Heritage House of Glamour, Inc. v. Attorney General of the State of Illinois, 179 Ill. App. 3d 336, 339, 534 N.E.2d 648, 650-51 (1989).  Here, the subpoenas requested personal financial information

from the salespersons that was not reasonably related to a routine audit.  The circuit court

properly held that the documents requested by the subpoena were irrelevant to a routine

audit.

	Respondent claims that even though it recognizes that citizens have a right to privacy

in their bank records, this protection is only against unreasonable searches and seizures and

not reasonable ones such as the request in the instant case.

	The reasonableness of a seizure is determined by balancing the need for official

intrusion against the constitutionally protected interests of the private citizen.  People v. Garman, 123 Ill. App. 3d 682, 684, 463 N.E.2d 158, 160 (1984).  "An administrative subpoena 'may be so unreasonable in its demands, or so indefinite and general in its terms, as to go beyond the statutory purpose for which the inquiry was authorized and amount to

a "constructive search." ' "  (Emphasis added.)  Heritage House of Glamour, Inc., 179 Ill. App. 3d at 339, 534 N.E.2d at 650-51 (quoting Scott v. Ass'n for Childbirth at Home, International, 88 Ill. 2d 279, 298, 430 N.E.2d 1012, 1021 (1981)).  "[A] depositor reveals many aspects of her personal affairs, opinion, habit[,] and associations which provide a

current biography of her activities.  Such a biography should not be subject to an

unreasonable seizure by the State government."  Jackson, 116 Ill. App. 3d at 435, 452 N.E.2d at 89.

	The Illinois Constitution recognizes an individual's basic rights of privacy with

respect to his or her personal bank records.  Ill. Const. 1970, art. I, §6; Dufour v. Mobil Oil Corp., 301 Ill. App. 3d 156, 161, 703 N.E.2d 448, 452 (1998).  Section 6 of article I of the Illinois Constitution of 1970 was amended to provide as follows:  "The people shall have

the right to be secure in their persons, houses, papers[,] and other possessions against

unreasonable searches, seizures, invasions of privacy[,] or interceptions of communications

by eavesdropping devices or other means."  Ill. Const. 1970, art. I, §6.  The constitutional

commentary on section 6 points out that section 6 expands upon the individual rights which

were contained in section 6 of article II of the Illinois Constitution of 1870 and in the United

States Constitution.  Ill. Ann. Stat., 1970 Const., art. I, §6, Constitutional Commentary, at

522 (Smith-Hurd 1997).  Thus, the Illinois Constitution goes beyond federal constitutional

guarantees by expressly recognizing a zone of personal privacy.  The protection of that

privacy is stated broadly and without restrictions.  Even before the adoption of the Illinois

Constitution of 1970, Illinois courts had protected individual privacy rights by demanding

that a subpoena for books and records not be unreasonably broad or general in its terms (People v. Lurie, 39 Ill. 2d 331, 336, 235 N.E.2d 637, 640 (1968)) and that the documents sought be relevant to the investigation.  People v. Reynolds, 350 Ill. 11, 19-20, 182 N.E. 754, 757 (1932).  A person has a reasonable expectation that his or her private records will

not be exposed to public view.  Similarly, a person has a reasonable expectation that he or

she will not be forced to submit to a close scrutiny of his or her personal characteristics,

unless for a valid reason.  Once a right to privacy is established, the court must determine

whether a search and seizure is reasonable.  In re May 1991 Will County Grand Jury, 152 Ill. 2d 381, 390, 604 N.E.2d 929, 934-35 (1992).

	On the other hand, the purpose of the Securities Law is to protect innocent persons

who might be induced to invest their money in speculative enterprises over which they have

little control.  People v. Bartlett, 294 Ill. App. 3d 435, 439, 690 N.E.2d 154, 156 (1998).  The Securities Law is paternalistic and must be liberally construed to better protect the

public from deceit and fraud in the sale of securities.  Bartlett, 294 Ill. App. 3d at 439, 690 N.E.2d at 156.  Respondent is charged with the administration of the Securities Law.  815

ILCS 5/11(A)(1) (West 2000).  The Securities Law provides that all securities, except those

exempt, must be registered prior to their offer or sale in Illinois.  815 ILCS 5/5 (West 2000).

This allows respondent to review a proposed security before it is offered to the public and

ensures that investors have sufficient information regarding the security to make an informed

investment decision.  815 ILCS 5/5 (West 2000).  Additionally, every dealer and salesperson

must be registered with respondent.  815 ILCS 5/8(A) (West 2000).  No dealer, issuer, or

controlling person may employ a salesperson unless the salesperson is registered with 

respondent.  815 ILCS 5/8(B), (C) (West 2000).  These requirements ensure that persons

selling securities are qualified to do so.  The Securities Law also provides that it is a

violation for any person to offer or sell any security except in accordance with the provisions

of the Securities Law, to deliver to a purchaser any security required to be registered unless

accompanied or preceded by a prospectus that meets the requirements of the Securities Law, to act as a dealer or salesperson unless registered as such, or to engage in any transaction,

practice, or course of business in connection with the sale or purchase of securities that

works or tends to work a fraud or deceit upon the purchase or seller.  815 ILCS 5/12(A), (B),

(C), (F) (West 2000).  The Securities Law also provides that every registered dealer must

keep accounts, correspondence, memoranda, papers, books, and records as required by

respondent under its rules or regulations.  815 ILCS 5/8(I)(1) (West 2000).  All such books

and records are subject at any time to reasonable periodic, special, or other audits,

examinations, or inspections by respondent's representatives, within or without the State of

Illinois, as respondent deems necessary or appropriate in the public interest or for the

protection of investors.  815 ILCS 5/8(I)(3) (West 2000).  Pursuant to respondent's

administrative regulations, every dealer registered by respondent must, among other things, preserve all checkbooks, bank statements, canceled checks, and cash reconciliations for at

least three years.  14 Ill. Adm. Code §130.825(c) (2000).  For the purpose of all audits,

respondent is empowered to require, among other things, the production of any books and

records, papers, or other documents that respondent deems relevant or material to the

inquiry.  815 ILCS 5/11(D)(1) (West 2000).

	In balancing the need for official intrusion against the constitutionally protected

interests of the private citizen, we find that the subpoenas duces tecum in the instant case violated petitioners' right to privacy.  Respondent sought the personal banking records of the

salespersons in the Waterloo office because that office did not maintain a business account. 

As we previously stated, some of these accounts were held jointly with the salespersons'

spouses.  The testimony at the hearing demonstrated that some of the information sought by

respondent was available from A.G. Edwards' home office in St. Louis.  Customer checks

for transactions at the Waterloo office were placed into a sweep account and sent to the St.

Louis office at the end of each business day.  Records of the deposits made by customers were available to respondent from deposit slips at the Waterloo office.  All expenses paid

by the Waterloo office were also available for review by respondent.  Furthermore,

information regarding each salesperson's commissions was available from the St. Louis

office.  Although these records were readily available to respondent, it made no attempt to

review any of those records.  Even so, respondent insists that it is necessary that it review

personal financial information from each of the previously mentioned salespersons because

each salesperson deposits his paycheck into a personal checking account.  Respondent

claims that this means that each salesperson uses his checking account "directly or indirectly

to operate securities business."  We note, however, that LaRussa failed to explain how

creating an intermediate step such as setting up another account at the Waterloo office called

a "business account" and depositing commission checks into that account rather than the 

salesperson's personal bank account would lessen the opportunity for potential fraud or

provide a greater level of information to respondent.  In fact, respondent's assertion that it

would not have requested the information had a business account been maintained at the

Waterloo office demonstrates that respondent's request was irrelevant and unreasonable. 

Moreover, it is unreasonable to conclude that auditing personal banking information is

necessary when "the business records relating to the income and expenses attributable to

A.G. Edwards' Waterloo office are readily available at the St. Louis home office" but that

it is not necessary if that information has been maintained at the Waterloo office.

	Based on the foregoing considerations, we find that a salesperson's personal financial

records should not be and are not required to be produced as part of a routine audit by

respondent.  While there may be situations where such an invasive approach might be

warranted, this case does not merit such an intrusion, in the absence of some indicia of fraud. 

We must vigilantly guard against meritless meddling in the private lives of our citizens by

inquisitive government actors who lack any reasonable justification for their demands.  The request for the personal financial records of the salespersons in the instant case was

unreasonable and irrelevant and a violation of their right to privacy.

	For the foregoing reasons, we affirm the circuit court's order sustaining petitioners'

motion to quash the subpoenas and denying respondent's motion to enforce the subpoenas.

	Affirmed.

	CHAPMAN, Melissa, and RARICK, JJ., concur.

                                     	NO. 5-00-0525

	IN THE

	APPELLATE COURT OF ILLINOIS

	FIFTH DISTRICT

___________________________________________________________________________________

A.G. EDWARDS, INC., ROBERT D.		)  Appeal from the

MAURER, BRENT A. WILHELM, and 	)  Circuit Court of

GARY W. HENCY,				)  St. Clair County.

							)

     Petitioners-Appellees,				)

							)

v.							)  No. 00-MR-117

							)

THE SECRETARY OF STATE, THE		)

DEPARTMENT OF SECURITIES OF THE	)

STATE OF ILLINOIS,				)  Honorable

							)  John M. Goodwin, Jr.,

     Respondent-Appellant.				)  Judge, presiding.

___________________________________________________________________________________

Opinion Filed:		June 27, 2002	

___________________________________________________________________________________

Justices:	Honorable Gordon E. Maag, P.J.

	Honorable Melissa A. Chapman, J., and

	Honorable Philip J. Rarick, J.,

	Concur

___________________________________________________________________________________

Attorneys	James E. Ryan, Attorney General, State of Illinois, Joel D. Bertocchi, Solicitor

for	General, Janon E. Fabiano, Assistant Attorney General, 100 West Randolph Street,

Appellant	12th Floor, Chicago, IL 60601

___________________________________________________________________________________

Attorneys	Carrie J. Bechtold, Jeffrey J. Kalinowski, Blackwell Sanders Peper Martin, LLP, 

for	720 Olive Street, St. Louis, MO 63101; M. Jane Matosian, A.G. Edwards, Inc., One 

Appellees	oOne North Jefferson, St. Louis, MO 63101

___________________________________________________________________________________