SEC Enforcement Director Warns Defense Counsel against Inappropriately Hampering Investigations
Commentary by Ilan T. Graff
SEC Enforcement Director Gurbir S. Grewal decried defense counsel tactics and behavior that inappropriately delays or obstructs SEC investigations.
In a speech at the Securities Enforcement Forum West Conference, Mr. Grewal emphasized the importance of public confidence in markets and government and lamented the growing perception "that there are two sets of rules: one for the big and powerful and another for everyone else." He underscored that he "appreciate[s] and welcome[s] zealous advocacy" as an aid to "ensur[ing] that [the SEC's] enforcement decisions are fair and informed," however, he criticized defense counsel conduct that "frustrates and delays [the SEC's] truth-seeking mission."
Mr. Grewal explained that defense counsel inappropriately harm SEC investigations when they (i) delay document productions, (ii) prepare (or fail to prepare) witnesses in a manner that undermines the clarity of their testimony, (iii) disregard potential conflicts of interest and (iv) make unfounded privilege claims. He warned that "by engaging in these tactics, defense counsel may . . . forfeit their clients' opportunity to obtain cooperation credit."
Mr. Grewal asserted that the SEC would "not play games during our investigations, negotiations, or litigations," and emphasized that "[t]he enforcement process is not a bazaar [but rather a] serious undertaking and we all need to treat it with the respect it deserves."
Commentary
Director Grewal's remarks are a more pointed version of Attorney General Merrick B. Garland's March speech (see related coverage), in which the Attorney General singled out the defense counsel as being "force-multipliers" for the Department of Justice's white-collar enforcement efforts. Director Grewal's critique offers some valuable level-setting for the counsel to consider when navigating cooperation. Of course, the line between principled "zealous advocacy" and perceived "dilatory or obstructive conduct" can often be in the eye of the beholder.