Source: http://www.chanrobles.com/usa/us_supremecourt/467/735/case.php
Timestamp: 2019-09-17 12:55:34
Document Index: 706280507

Matched Legal Cases: ['§ 19', '§ 77', '§ 203', '§ 3401', '§ 3401', '§ 3401', '§ 3410', '§ 3410']

This case represents one shard of a prolonged investigation by the SEC into the affairs of respondent Harry F. Magnuson and persons and firms with whom he has dealt. The investigation began in 1980, when the Commission's staff reported to the Commission that information in their possession tended to show that Magnuson and others had been trading in the stock of specified mining companies in a manner violative of the registration, reporting, and antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. In response, the Commission issued a Formal chanroblesvirtualawlibrary
O'Brien, Pennaluna, and their respective owners [Footnote 2] promptly filed a suit in the District Court for the Eastern District of Washington, seeking to enjoin the Commission's investigation and to prevent Magnuson from complying with subpoenas that had been issued to him. [Footnote 3] Magnuson filed a cross-claim, also seeking to block portions of the investigation. chanroblesvirtualawlibrary
Following the District Court's decision, the SEC issued several subpoenas to third parties. In response, Magnuson and O'Brien renewed their request to the District Court for injunctive relief, accompanying the request with a motion, pursuant to Rule 62(c) of the Federal Rules of Civil Procedure, for a stay pending appeal. For the first time, respondents expressly sought notice of the subpoenas issued by the Commission to third parties. Reasoning that respondents lacked standing to challenge voluntary compliance with subpoenas chanroblesvirtualawlibrary
The Court of Appeals denied the Commission's request for rehearing and rejected its suggestion for rehearing en banc. 719 F.2d 300 (1983). Judge Kennedy, joined by four other judges, dissented from the rejection, arguing that the panel decision was unprecedented, and threatened the ability of the chanroblesvirtualawlibrary
No provision in the complex of statutes governing the SEC's investigative power expressly obliges the Commission to notify the "target" of an investigation when it issues a subpoena to a third party. If such an obligation is to be imposed on the Commission, therefore, it must be derived from one of three sources: a constitutional provision; an understanding on the part of Congress, inferable from the structure of the securities laws, regarding how the SEC should conduct its inquiries; or the general standards governing judicial chanroblesvirtualawlibrary
It is also settled that a person inculpated by materials sought by a subpoena issued to a third party cannot seek shelter in the Self-Incrimination Clause of the Fifth Amendment. The rationale of this doctrine is that the Constitution proscribes only compelled self-incrimination, and, whatever may be the pressures exerted upon the person to whom a subpoena is directed, [Footnote 10] the subpoena surely does not "compel" anyone else to be a witness against himself. Fisher v. United States, 425 U. S. 391, 425 U. S. 397 (1976); Couch v. United States, 409 U. S. 322, 409 U. S. 328-329 (1973). If the "target" of an investigation by the SEC has no Fifth Amendment right to challenge enforcement of a subpoena directed at a third chanroblesvirtualawlibrary
The language and structure of the statutes administered by the Commission afford respondents no greater aid. The provisions vesting the SEC with the power to issue and seek enforcement of subpoenas are expansive. For example, § 19(b) chanroblesvirtualawlibrary
More generally, both statutes vest the SEC with "power to make such rules and regulations as may be necessary or appropriate to implement [their] provisions. . . ." 15 U.S.C. §§ 77s(a), 78w(a)(1). Relying on this authority, the SEC has promulgated a variety of rules governing its investigations, one of which provides that, "[u]nless otherwise ordered by the Commission, all formal investigative proceedings shall be non-public." 17 CFR § 203.5 (1983). In other words, the Commission has formally adopted the policy of not routinely informing anyone, including targets, of the existence and progress of its investigations. [Footnote 14] To our knowledge, Congress has never questioned this exercise by the Commission of its statutory power. And, in another context, we have held that rulemaking authority comparable to that enjoyed by the SEC is broad enough to empower an agency to "establish chanroblesvirtualawlibrary
The inference that the relief sought by respondents is not necessary to give effect to congressional intent is reinforced by the fact that, in one special context, Congress has imposed on the Commission an obligation to notify persons directly affected by its subpoenas. In 1978, in response to this Court's decision in United States v. Miller, supra, [Footnote 15] Congress enacted the Right to Financial Privacy Act, 92 Stat. 3697, 12 U.S.C. § 3401 et seq. That statute accords customers of banks and similar financial institutions certain rights to be notified of and to challenge in court administrative subpoenas of financial records in the possession of the banks. The most salient feature of the Act is the narrow scope of the entitlements it creates. Thus, it carefully limits the kinds of customers to whom it applies, §§ 3401(4), (5), and the types of records they may seek to protect, § 3401(2). A customer's ability to challenge a subpoena is cabined by strict procedural requirements. For example, he must assert his claim within a short period of time, § 3410(a), and cannot appeal an adverse determination until the Government has completed its investigation, § 3410(d). Perhaps most importantly, the statute is drafted in a fashion that minimizes the risk that customers' objections to subpoenas will delay or frustrate agency investigations. chanroblesvirtualawlibrary
H.R.Rep. No. 951383, p. 33 (1978). The manner in which Congress dealt with this problem teaches us two things. First, it seems apparent that Congress assumed that the SEC was not and would not be subject to a general obligation to notify "targets" of its investigations whenever it issued administrative subpoenas. [Footnote 16] Second, the complexity and subtlety of the chanroblesvirtualawlibrary
The last of the three potential footings for the remedy sought by respondents is some other entitlement that would be effectuated thereby. Respondents seek to derive such an entitlement from a combination of our prior decisions. Distilled, their argument is as follows: a subpoena issued by the SEC must comport with the standards set forth in our decision in United States v. Powell, 379 U.S. at 379 U. S. 57-58. [Footnote 18] Not chanroblesvirtualawlibrary
only the recipient of an SEC subpoena, but also any person who would be affected by compliance therewith, has a substantive right, under Powell to insist that those standards are met. A target of an SEC investigation may assert the foregoing right in two ways. First, relying on Reisman v. Caplin, 375 U. S. 440, 375 U. S. 445 (1964), and Donaldson v. United States, 400 U.S. at 400 U. S. 529, [Footnote 19] the target may seek permissive intervention in an enforcement action brought by the Commission against the subpoena recipient. Second, if the recipient of the subpoena threatens voluntarily to turn over the requested information, the target "might restrain compliance" by the recipient, thereby forcing the Commission to institute an enforcement suit. See Reisman v. Caplin, supra, at 375 U. S. 450. A target can avail himself of these options only if he is aware of the existence of subpoenas directed at others. To ensure that ignorance does not prevent a target from asserting his chanroblesvirtualawlibrary
Two considerations underlie our decision on this issue. First, administration of the notice requirement advocated by respondents would be highly burdensome for both the Commission and the courts. The most obvious difficulty would involve identification of the persons and organizations that should be considered "targets" of investigations. [Footnote 20] The SEC often undertakes investigations into suspicious securities transactions without any knowledge of which of the parties involved may have violated the law. [Footnote 21] To notify all potential wrongdoers in such a situation of the issuance of each subpoena would be virtually impossible. The Commission would thus be obliged to determine the point at which enough evidence had been assembled to focus suspicion on a manageable chanroblesvirtualawlibrary
Second, the imposition of a notice requirement on the SEC would substantially increase the ability of persons who have something to hide to impede legitimate investigations by the Commission. A target given notice of every subpoena issued to third parties would be able to discourage the recipients from complying, and then further delay disclosure of damaging information by seeking intervention in all enforcement actions brought by the Commission. More seriously, the understanding of the progress of an SEC inquiry that would flow from knowledge of which persons had received subpoenas would enable an unscrupulous target to destroy or alter documents, intimidate witnesses, or transfer securities or funds, so that they could not be reached by the Government. [Footnote 24] Especially in the context of securities regulation, chanroblesvirtualawlibrary