SEC will adopt new policy on media subpoenas following controversy, chairman says
WASHINGTON – The Securities and Exchange Commission will adopt a new policy on subpoenaing journalists, SEC Chairman Christopher Cox said Thursday in a move to resolve a controversy over the agency’s recent demands for reporters’ records.Cox and the other four SEC commissioners decided unanimously at a closed-door meeting to issue “clear principles” to guide agency attorneys on media subpoenas within the next week or so, he told reporters in a meeting.On Monday, after news reports had appeared on the matter, Cox took the unusual step of halting the agency’s pursuit of subpoenas previously served on columnists for MarketWatch, Dow Jones Newswires and TheStreet.com in an investigation into allegations of stock manipulation. He suggested that SEC enforcement attorneys should have consulted him or other agency officials before issuing the subpoenas because of the sensitivity of ordering journalists to hand over records.The SEC, an independent regulatory agency with only civil powers, rarely subpoenas journalists or news organizations.”What didn’t work in this case was that (the SEC public affairs office) wasn’t apprised,” Cox said Thursday. “So we weren’t well equipped to respond.”Guidelines like those the SEC commissioners are contemplating “can be very helpful as a statement to the troops,” said Charles Davis, an associate professor at the Missouri School of Journalism and executive director of its Freedom of Information Center. “They send a very clear message to the bureaucracy.”The new policy will lay out the circumstances under which it is appropriate for journalists to be subpoenaed in SEC investigations when other means of getting the information are exhausted, Cox told reporters. It will not require agency attorneys to get approval for individual subpoenas from the commissioners but will call for consultation.”This would not be Soviet Red Army rules,” he said.The two news organizations involved, Dow Jones & Co. (which owns MarketWatch) and TheStreet.com, had objected to the subpoenas, issued in early February, for telephone records, e-mails and other material related to online retailer Overstock.com.The company has accused the research firm Gradient Analytics of issuing negative reports on the retailer in exchange for payments from a hedge fund seeking to profit from a drop in its stock price. Overstock has sued Gradient and the hedge fund in question, Rocker Partners; they deny any wrongdoing.The three online columnists subpoenaed were Herb Greenberg of MarketWatch, Carol Remond of Dow Jones Newswires and James Cramer, co-founder and major shareholder of TheStreet.com, who writes a column for the financial news Web site and is the host of the “Mad Money” show on the CNBC cable network. All three have written columns that were critical of Overstock.com.The Justice Department has guidelines that require prosecutors to get approval for individual subpoenas to journalists from the department’s public affairs director and either the attorney general or deputy attorney general.Such a stricter approach also “would be appropriate” for the SEC, said Lucy Dalglish, executive director of the Reporters Committee for Freedom of the Press.For the Justice Department, where the guidelines have been in effect for several decades, they “have put the brakes on (issuance of subpoenas) and have provided for high-level scrutiny,” Dalglish said.–On the Net:Securities and Exchange Commission: http://www.sec.govVail, Colorado
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