Securities and Exchange Commission v. Leibowitz

Background

The Securities and Exchange Commission proposed a protective order for the case. A protective order is a court order that governs the handling and disclosure of confidential information. The parties agreed to the proposed provisions except for Paragraph 9, which stated that the protective order would not prevent the Commission from using or disclosing materials, including confidential information, consistently with its legal duties and authority.

Glen Leibowitz proposed adding a notice-and-objection procedure. Under his proposal, before disclosing materials to a state accountancy or audit board, an accountant-licensing or oversight authority, a professional accounting association, or a similar self-regulatory authority—including the Public Company Accounting Oversight Board—the Commission would have had to notify his counsel. Leibowitz would then have had five business days to object, the Commission would have had five business days to respond, and the Court would have decided whether the disclosure was appropriate.

The Commission opposed that proposed exception and asked the Court to use its language instead.

Court’s Analysis

The Court relied on 15 U.S.C. § 78x(c), which gives the Commission discretion to provide records and other information in its possession to certain domestic and foreign recipients when the statutory conditions are met, including appropriate confidentiality assurances. The Court also cited 15 U.S.C. § 78x(f)(1), which provides that the Commission does not waive applicable privilege merely by transferring information to, or permitting its use by, certain entities, including the Public Company Accounting Oversight Board. The Court further noted that 17 C.F.R. § 240.24c-1(b)(7) identifies organizations and authorities with whom the Commission may share nonpublic information.

Based on that statutory and regulatory authority, the Court found no basis for giving Leibowitz notice and an opportunity to object before the Commission made such disclosures. The Court agreed with reasoning from another case that adding conditions to the Commission’s disclosure authority without a specific showing of good cause could undermine the authority Congress gave the Commission.

Leibowitz argued that Form 1662 governed only information related to Commission investigations and not materials produced in litigation. The Court agreed that Form 1662 was focused on investigation materials and was not an appropriate basis for disclosures in pending litigation. But the Court rejected the argument that the Commission’s broader statutory authority to share information was limited to the investigative context. The Court concluded that the statutes authorize the relevant disclosures more broadly.

Disposition

The Court adopted the Commission’s proposed protective-order language with a minor revision and rejected Leibowitz’s proposal. The parties were directed to file a revised protective order omitting the final clause that referred to section 1662.