Release No. 33-6111

Release No. 34-16129

Release No. 35-21197

Release No. 39-539

Release No. IC-10837

Release No. IA-695

August 23, 1979

Relationship Between Commission and Its Staff and Members of Other Governmental Agencies

SUMMARY: The Commission is amending its regulations to provide notice that settlement of a Commission enforcement action does not extend to pending or possible criminal prosecutions; to clarify the Commissions practices with respect to referrals and grants of access to its files and the initiation of administrative proceedings and other enforcement activities in individual cases; to provide expressly that Commission officials may discuss non-public investigations with officials of other governmental agencies and self-regulatory organizations; and to delegate to the Director of the Division of Enforcement, with the concurrence of the General Counsel in matters in which the Commission has entered a formal order of investigation, authority to grant requests by domestic and foreign governmental authorities and self-regulatory organizations for access to the Commissions investigative files.

EFFECTIVE DATE: Effective upon publication in the FEDERAL REGISTER.

FOR FURTHER INFORMATION CONTACT: James R. Farrand, Office of the General Counsel, Securities and Exchange Commission, Room 723, 500 North Capitol Street, Washington, D.C. 20549, (202) 755-1144.

SUPPLEMENTARY INFORMATION: These amendments are promulgated for the purpose of assisting the Commission in the effective and efficient carrying out of its administrative responsibilities; they are not intended for the benefit of any individual or organization, and they do not confer any rights upon any such person. The Commission finds, in accordance with the Administrative Procedure Act ("APA"), 5 U.S.C. 553(b)(A) and 553(d), that these amendments relate solely to agency organization, procedure, or practice and do not relate to a substantive rule. Thus, notice and opportunity for public comment pursuant to the APA are not necessary, and the foregoing action becomes effective immediately upon the publication of these rules in the Federal Register.

The Commission is adopting these amendments pursuant to its authority under Sections 19 and 20 of the Securities Act of 1933 (15 U.S.C. 77s and 77t); Sections 21 and 23 of the Securities Exchange Act of 1934 (15 U.S.C. 78u and 78w); Sections 18 and 20 of the Public Utility Holding Company Act of 1935 (15 U.S.C. 79r and 79t); Sections 319 and 321 of the Trust Indenture Act of 1939 (15 U.S.C. 77sss and 77uuu); Sections 38 and 42 of the Investment Company Act of 1940 (15 U.S.C. 80a-37 and 80a-41); Sections 209 and 211 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-9 and 80b-11); and Section 1 of Pub. L. 87-592 (15 U.S.C. 78d-1).

Chapter II of Title 17 of the Code of Federal Regulations is amended as follows:

PART 200-ORGANIZATION; CONDUCT AND ETHICS; AND INFORMATION AND REQUESTS

1. By amending §200.19b to read as follows: §200.19b Director of the Division of Enforcement.

The Director of the Division of Enforcement is responsible to the Commission for the supervision and conduct of all of the enforcement activities under each of the acts administered by the Commission and the investigations relating thereto. The Director is responsible also for recommending the institution of administrative and injunctive actions arising out of such investigations and enforcement activities and for the determination of whether the available evidence supports the allegations in the proposed complaint. In addition, the Director is responsible, in collaboration with the General Counsel, for the review of cases to be referred to the Department of Justice with a recommendation for criminal prosecution and for granting or denying requests by domestic and foreign governmental authorities and self-regulatory organizations for access to the Commissions files concerning non-public investigations.

2. By amending paragraph (a) of §200.21 to read as follows:

§200-21 The General Counsel.

(a) The General Counsel is the chief legal officer of the Commission. He or she is responsible for the representation of the Commission in judicial proceedings in which it is involved as a party or as amicus curiae, for directing and supervising all civil litigation involving the Commission in the United States District Courts, and for representing the Commission in all cases in appellate courts. The General Counsel is responsible for the review of cases which the Division of Enforcement recommends be referred to the Department of Justice with a recommendation for criminal prosecution and for the review of requests by domestic and foreign governmental authorities and self-regulatory organizations for access to materials contained in Commission files concerning a non-public investigatory proceeding in which a formal order of investigation has been entered. In addition, he or she is responsible for advising the Commission at its request or at the request of any division director or office head, or on his or her own motion, with respect to interpretations involving questions of law; for reviewing and advising the Commission upon the legal aspects and policy implications of pre-argument memorandums and draft Commission opinions prepared by the Office of Opinions and Review; for the conduct of administrative proceedings relating to the disqualification of professional persons from practice before the Commission; for the preparation of Commission comments to the Congress on pending legislation; and for the drafting, in conjunction with appropriate divisions and offices, of legislative proposals to be sponsored by the Commission. The General Counsel is also responsible for the review and clearance of the form and content of articles, treatises, and prepared speeches and addresses by members of the staff relating to the Commission or to the statutes and rules administered by the Commission and is responsible for investigating any claims of staff improprieties. Additionally, he or she has responsibility with the Office of Opinions and Review for dealing with general problems arising under the Administrative Procedure Act, including (with the Office of Opinions and Review) the revision or adoption of rules of practice. He or she is responsible (with the Director of Personnel) for administering and interpreting the Commissions Conduct Regulation. He or she serves as Counselor to the Commission and its staff with regard to ethical and conflicts of interest questions and acts as the Commissions liaison on such matters with the Office of Personnel Management and the Department of Justice. The General Counsel also is responsible for coordinating and reviewing the interpretative positions of the various divisions and offices. In addition, he or she is responsible for preparing and recommending to the Commission appropriate dispositions of all Freedom of Information Act appeals and is the Commissions advisor with respect to legal problems arising under the Freedom of Information Act, the Privacy Act, the Federal Reports Act, the Federal Advisory Committee Act, the Civil Service laws and regulations, the statutes and rules applicable to the Commissions procurement, contracting, fiscal and related administrative activities, and other statutes and regulations of a similar nature applicable to a number of Government agencies.

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3. By amending §200.30-4 by adding paragraph (a)(7) to read as follows:

§200.30-4 Delegation of authority to Director of Division of Enforcement.

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(7) To grant requests for access to, or copies of, materials in the Commissions files concerning a non-public investigation upon written request for such access submitted by domestic and foreign governmental authorities and self regulatory organizations; Provided That, in matters in which the Commission has entered a formal order of investigation, such access shall be granted only with the concurrence of the General Counsel or his or her delegate.

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PART 202-INFORMAL AND OTHER PROCEDURES

By amending §202.5 by amending paragraph (b) and by adding paragraph (f) to read as follows:

§202.5 Enforcement activities.

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(b) After investigation or otherwise, the Commission may in its discretion take one or more of the following actions: institution of administrative proceedings looking to the imposition of remedial sanctions, initiation of injunctive proceedings in the courts, and, in case of a willful violation, reference of the matter of the Department of Justice for criminal prosecution. The Commission may also, on some occasions, refer the matter to, or grant requests for access to its files made by, domestic and foreign governmental authorities or self-regulatory organizations such as the stock exchanges or the National Association of Securities Dealers, Inc.

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(f) In the course of the Commissions investigations, civil lawsuits, and administrative proceedings, the staff, with appropriate authorization, may discuss with persons involved the disposition of such matters by consent, by settlement, or in some other matter. It is the policy of the Commission, however, that the disposition of any such matter may not, expressly or impliedly, extend to any criminal charges that have been, or may be, brought against any such person or any recommendation with respect thereto. Accordingly, any person involved in an enforcement matter before the Commission who consents, or agrees to consent, to any judgment or order does so solely for the purpose of resolving the claims against him in that investigative, civil, or administrative matter and not for the purpose of resolving any criminal charges that have been, or might be, brought against him. This policy reflects that fact that neither the Commission nor its staff has the authority or responsibility for instituting, conducting, settling, or otherwise disposing of criminal proceedings. That authority and responsibility are vested in the Attorney General and representatives of the Department of Justice.

PART 203-RULES RELATING TO INVESTIGATIONS

By revising §203.2 to read as follows:

§203.2 Information obtained in investigations and examinations.

Information or documents obtained by the Commission in the course of any investigation or examination, unless made a matter of public record, shall be deemed non-public, but the Commission approves the practice whereby officials of the Division of Enforcement at the level of Assistant Director or higher, and officials in Regional Offices at the level of Assistant Regional Administrator or higher, may engage in, and may authorize members of the Commissions staff to engage in, discussions with representatives of domestic or foreign governmental authorities and self-regulatory organizations concerning information obtained in individual investigations, including examinations and formal investigations conducted pursuant to Commission order.

PART 230-GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933

By amending §230.122 to read as follows:

§230.122 Nondisclosure of information obtained in the course of examinations and investigations.

Information or documents obtained by officers or employees of the Commission in the course of any examination or investigation pursuant to section 8(e) or 20(a) (48 Stat. 80, 86; 15 U.S.C. 77h(e), 77t(a)) shall, unless made a matter of public record, be deemed confidential. Except as provided by 17 CFR 203.2, officers and employees are hereby prohibited from making such confidential information or documents or any other non-public records of the Commission available to anyone other than a member, officer, or employee of the Commission, unless the Commission authorizes the disclosure of such information or the production of such documents as not being contrary to the public interest. Any officer or employee who is served with a subpoena requiring the disclosure of such information or the production of such documents shall appear in court and, unless the authorization described in the preceding sentence shall have been given, shall respectfully decline to disclose the information or produce the documents called for, basing his or her refusal upon this section. Any officer or employee who is served with such a subpoena shall promptly advise the Commission of the service of such subpoena, the nature of the information or documents sought, and any circumstances which may bear upon the desirability of making available such information or documents.

PART 240-GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 1934

By amending §240.0-4 to read as follows:

§240.0-4 Nondisclosure of information obtained in examinations and investigations.

Information or documents obtained by officers or employees of the Commission in the course of any (48 Stat. 897, sec. 4, 49 Stat. 1379; 15 U.S.C. 78q(a)) (48 Stat. 897, sec. 4, 49 Stat. 1379; 15 U.S.C. 78q(a)) or 21(a) (48 Stat. 899; 15 U.S.C. 78u(a)) shall, unless made a matter of public record, be deemed confidential. Except as provided by 17 CFR 203.2, officers and employees are hereby prohibited form making such confidential information or documents or any other non-public records of the Commission available to anyone other than a member, officer or employee of the Commission, unless the Commission authorizes the disclosure of such information or the production of such documents as not being contrary to the public interest. Any officer or employee who is served with a subpoena requiring the disclosure of such information or the production of such documents shall appear in court and, unless the authorization described in the preceding sentence shall have been given, shall respectfully decline to disclose the information or produce the documents called for, basing his or her refusal upon this section. Any officer or employee who is served with such a subpoena shall promptly advise the Commission of the service of such subpoena, the nature of the information or documents sought, and any circumstances which may bear upon the desirability of making available such information or documents.

PART 250-GENERAL RULES AND REGULATIONS, PUBLIC UTILITY HOLDING COMPANY ACT OF 1935

By amending §250.104 by amending paragraph (c) to read as follows:

§250.104 Public disclosure of information and objections thereto.

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(c) Information obtained in the course of examinations, studies, and investigation. Information or documents obtained by officers or employees of the Commission in the course of any examination, study or investigation pursuant to section 13(g), section 15(f) (49 Stat. 825, 828; 15 U.S.C. 79m, 79o), or paragraph (a) or (d) of section 18 (49 Stat. 831; 15 U.S.C. 79r) shall, unless made a matter of public record, be deemed confidential. Except as provided by 17 CFR 203.2, officers and employees are hereby prohibited from making such confidential information or documents or any other non-public records of the Commission available to anyone other than a member, officer, or employee of the Commission, unless the Commission authorizes the disclosure of such information or the production of such documents as not being contrary to the public interest. Any officer or employee who is served with a subpoena requiring the disclosure of such information or the production of such documents shall appear in court, and, unless the authorization described in the preceding sentence shall have been given, shall respectfully decline to disclose the information or produce the documents called for, basing his or her refusal upon this rule.

Any officer or employee who is served with such a subpoena, shall promptly advise the Commission of the service of such subpoena, the nature of the information or documents sought, and any circumstances which may bear upon the desirability of making available such information or documents.

PART 260-GENERAL RULES AND REGULATIONS, TRUST INDENTURE ACT OF 1939

By amending §260.0-6 to read as follows:

§260.0-6 Nondisclosure of information obtained in the course of examinations and investigations.

Information or documents obtained by officers or employees of the Commission in the course of any examination or investigation under section 8(e) of the Securities Act of 1933 (48 Stat. 79; 15 U.S.C. 77h), pursuant to section 307(c) of the Trust Indenture Act of 1939 (53 Stat. 1156; 15 U.S.C. 77ggg), or any examination or investigation under section 20(a) of the Securities Act of 1933 (48 Stat. 86; 15 U.S.C. 77t), pursuant to section 321(a) of the Trust Indenture Act of 1939 (53 Stat. 1174; 15 U.S.C. 77uuu), shall, unless made a matter of public record, be deemed confidential. Except as provided by 17 CFR 203.2, officers and employees are hereby prohibited from making such confidential information or documents or any other non-public records of the Commission available to anyone other than a member, officer, or employee of the Commission, unless the Commission authorizes the disclosure of such information or the production of such documents as not being contrary to the public interest. Any officer or employee who is served with a subpoena requiring the disclosure of such information or the production of such documents shall appear in court and, unless the authorization described in the preceding sentence shall have been given, shall respectfully decline to disclose the information or produce the documents called for, basing his or her refusal upon this section. Any officer or employee who is served with such a subpoena shall promptly advise the Commission of the service of such subpoena, the nature of the information or documents sought, and any circumstances which may bear upon the desirability of making available such information or documents.

(Sec. 19, 48 Stat. 85; Sec. 20, 48 Stat. 86; Sec. 21, 48 Stat. 899; Sec. 23, 48 Stat. 901; Sec. 18, 49 Stat. 831; Sec. 20, 49 Stat. 833; Sec. 319, 53 Stat. 1173; Sec. 321, 53 Stat. 1174; Sec. 38, 54 Stat. 841; Sec. 42, 54 Stat. 842; Sec. 209, 54 Stat. 853; Sec. 211, 54 Stat. 855; Sec. 1, 76 Stat. 394. (15 U.S.C. 77s, 77t, 78u, 78w, 79r, 79t, 77sss, 77uuu, 80a-37, 80a-41, 80b-9, 89b-11, 78d-1.))

By the Commission.

George A. Fitzsimmons

Secretary