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Privacy Rules Shouldn't Handcuff the S.E.C.

Americans rely on both criminal and civil law enforcement to bring wrongdoers to justice. The Securities and Exchange Commission is responsible for holding those who commit securities fraud accountable, including Ponzi con artists and insider traders who harm investors and defraud our markets.

But a section of a bill passed recently by the House of Representatives would make it considerably easier for those who would steal hard-earned money from investors looking to save for their mortgage, retirement or children's education.

The bill, called H.R. 699, is an update of the Electronic Communications Privacy Act of 1986, which provides additional protections for individuals. Under the new bill, the government would be required to get a warrant to obtain someone's electronic communications from an Internet service provider and other companies that provide or store electronic communications for the public.

If the bill, as written, becomes law, civil law enforcement would be deprived of existing tools to obtain critical electronic evidence of wrongdoing, and people committing fraud could make their digital trail vanish with a single keystroke.

In carrying out its mandate, the S.E.C. frequently subpoenas emails and other records directly from those under investigation. And these communications and records often provide powerful evidence of wrongdoing.

So it should come as no surprise that lawbreakers are frequently reluctant to produce evidence, and often delete or attempt to destroy their incriminating communications. As a result, in some cases, the S.E.C. can gather relevant evidence only by obtaining those communications from the Internet service provider and other third parties.

Under the 1986 act and established Supreme Court precedent, the S.E.C. may seek these emails directly through the same type of subpoena that it serves on individuals who are the subject of an investigation. These are administrative subpoenas — different from criminal warrants — issued under the S.E.C.'s own statutory authority. When requesting information from Internet service providers, our practice has been to give notice to the account holders so that they are aware of our request and have an opportunity to object in court.

H.R. 699, however, would require government agencies to obtain a criminal warrant when seeking someone's emails directly from Internet service providers. But as a civil law enforcement agency, the S.E.C. cannot obtain warrants: That authority rests with criminal law enforcement authorities. So the bill, in effect, would prevent us from getting any electronic communications from Internet service providers, regardless of the circumstances.

Taking civil agencies out of the law enforcement equation makes no sense. Shielding emails from civil law enforcement's reach would create an unprecedented digital shelter — one that does not exist for paper materials — and one that would enable wrongdoers to conceal evidence from civil law enforcement and encourage bad actors to ignore our requests for emails.

Over the years, email obtained from Internet service providers has provided crucial evidence against wrongdoers who commit Ponzi frauds, insider trading and accounting fraud. Such evidence includes emails that contain tips used in an insider-trading scheme, communications planning market manipulation and critical emails that establish accounting fraud at a public company.

We believe that the Electronic Communications Privacy Act can be updated and modernized to provide important privacy safeguards to individuals without jeopardizing the effectiveness of the S.E.C. and other civil law enforcement agencies.

There is a simple solution: Require civil law enforcement agencies to first seek electronic communications directly from an individual before seeking them from an Internet service provider or commercial email service. And then, if it becomes necessary to obtain them from a service provider, allow the agency to seek a court order similar to a criminal warrant and give notice to the individual with the opportunity to challenge the request in court.

Such a proceeding is unquestionably constitutional and would offer even greater protection to individuals than a criminal warrant, from which individuals receive no opportunity to be heard by a court before their information is seized.

Civil law enforcement is critical to bringing wrongdoers to justice and, in our case, returning money to harmed investors. In the last year alone, the S.E.C. obtained orders totaling more than $4.1 billion in monetary relief.

[Source: By Mary Jo White, The Opinion Pages, The New York Times, 12May16]

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Privacy and counterintelligence
small logoThis document has been published on 20May16 by the Equipo Nizkor and Derechos Human Rights. In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.