In a case concerning violations of the Investment Advisors Act, the U.S. District Court for the Southern District of New York ("SDNY") held that compliance communications are not protected by attorney-client privilege or the work-product doctrine, and that the SEC can force an investment adviser to produce such communications.
According to the June 10, 2019 Opinion and Order, former employees of Brite Advisors USA, Inc. ("DVU") allegedly misrepresented the tax consequences of an investment option the firm was offering. DVU argued that the SEC was not entitled to either (1) the tax opinions that were prepared by DVU's outside counsel or (2) communications between DVU and attorneys at a compliance consulting firm.
The Court determined that the tax opinions were not protected from disclosure by the work-product doctrine, and that DVU waived any attorney-client privilege by voluntarily disclosing the opinions to a third party (i.e., the compliance consulting firm).
Second, the Court ruled that the attorney-client privilege did not shield DVU's communications with the consulting firm. The firm assisted with compliance questions on federal securities laws, but did not perform traditional legal services even though it was staffed with attorneys. Moreover, the fate of DVU's attempt to assert privilege was overcome by its own agreement with its consultants, which disclaimed privilege over the parties' communications.
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