Case 8:24-cv-01377-SDM-SPF Document 1 Filed 06/06/24 Page 1 of 23 PageID 1
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE MIDDLE DISTRICT OF FLORIDA
`TAMPA DIVISION
`
`AMERICAN SECURITIES ASSOCIATION,
`
`Plaintiff,
`
`v.
`
`8:24-cv-1377
`No. _____________________
`
`U.S. SECURITIES AND EXCHANGE
`COMMISSION,
`
`Defendant.
`
`COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF
`
`The American Securities Association (ASA) brings this action against the
`
`U.S. Securities and Exchange Commission to compel compliance with the
`
`Freedom of Information Act, 5 U.S.C. §552.
`
`INTRODUCTION
`
`1.
`
`Federal securities law is built on transparency. Financial
`
`institutions must perform audits, disclose finances, and preserve records. For
`
`good reason: transparency in markets builds trust and promotes fair dealing.
`
`2.
`
`In our democratic system, transparency is a two-way street.
`
`Federal law also demands transparency from the government. Under the
`
`Freedom of Information Act, the public is entitled to documents created by
`
`federal agencies so the people can learn about their government’s actions and
`
`policies.
`
`
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE MIDDLE DISTRICT OF FLORIDA
`TAMPA DIVISION
`
`AMERICAN SECURITIES ASSOCIATION,
`
`Plaintiff,
`
`v.
`
`8:24-cv-1377
`No. _____________________
`
`U.S. SECURITIES AND EXCHANGE
`COMMISSION,
`
`Defendant.
`
`COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF
`
`The American Securities Association (ASA) brings this action against the
`
`U.S. Securities and Exchange Commission to compel compliance with the
`
`Freedom of Information Act, 5 U.S.C. §552.
`
`INTRODUCTION
`
`1.
`
`Federal securities law is built on transparency. Financial
`
`institutions must perform audits, disclose finances, and preserve records. For
`
`good reason: transparency in markets builds trust and promotes fair dealing.
`
`2.
`
`In our democratic system, transparency is a two-way street.
`
`Federal law also demands transparency from the government. Under the
`
`Freedom of Information Act, the public is entitled to documents created by
`
`federal agencies so the people can learn about their government’s actions and
`
`policies.
`
`
`
`Case 8:24-cv-01377-SDM-SPF Document 1 Filed 06/06/24 Page 2 of 23 PageID 2
`
`
`
`3.
`
`This lawsuit concerns the SEC’s unprecedented enforcement
`
`activities and the agency’s refusal to disclose its records of these activities
`
`under the Freedom of Information Act.
`
`4.
`
`In the Fall of 2021, the SEC began to investigate certain broker-
`
`dealers’ retention of “off-channel” communications, such as text messages on
`
`personal devices. The SEC demanded scores of documents from numerous
`
`companies without any suspicion that they violated the Commission’s rules.
`
`The period the SEC was investigating included 2020 and 2021, which covered
`
`the COVID-19 years when many employees were forced to work from home.
`
`5.
`
`As a result of these investigations, the SEC ultimately entered into
`
`settlements that imposed billions of dollars in penalties on broker-dealers.
`
`6.
`
`But there appears to be no rhyme or reason for how the SEC
`
`imposed these penalties, and the SEC has provided little explanation into its
`
`decisionmaking. The regulated community thus is left with many questions.
`
`How were these penalties calculated? And why were they targeted in the first
`
`place? Or, as two SEC Commissioners recently put it, is the SEC’s penalty-
`
`regime simply “a tool to generate numbers for year-end statistics” rather than
`
`“a means to achieve outcomes that enhance market integrity and investor
`
`protection”?
`
`
`
`2
`
`
`
`Case 8:24-cv-01377-SDM-SPF Document 1 Filed 06/06/24 Page 3 of 23 PageID 3
`
`
`
`7.
`
`Seeking answers to these questions, ASA filed requests with the
`
`SEC under the Freedom of Information Act to obtain records related to these
`
`settlements.
`
`8.
`
`Yet the SEC has refused to comply with its legal obligations.
`
`Indeed, the SEC has not produced a single document in response to ASA’s
`
`FOIA requests. The SEC has pointed to Exemption 7(A), which exempts
`
`documents when disclosure could “reasonably be expected to interfere” with
`
`ongoing or prospective “enforcement proceedings.”
`
`9.
`
`But the SEC concedes that ASA is seeking documents from settled
`
`proceedings. The SEC cannot withhold documents simply because it may bring
`
`different enforcement proceedings against other, unrelated entities. Such an
`
`outcome would license agencies to withhold documents in perpetuity. And even
`
`if the SEC could withhold documents on these grounds, it has fallen woefully
`
`short of its high burden to justify the withholding, as it has provided nothing
`
`but general, boilerplate statements for refusing to comply with ASA’s FOIA
`
`requests.
`
`10. FOIA requires transparency from the SEC. The records requested
`
`by ASA are not exempt from disclosure. By failing to disclose the requested
`
`records, the SEC has violated FOIA.
`
`
`
`3
`
`
`
`Case 8:24-cv-01377-SDM-SPF Document 1 Filed 06/06/24 Page 4 of 23 PageID 4
`
`
`
`JURISDICTION & VENUE
`
`11. This Court has jurisdiction over this action under 5 U.S.C.
`
`§552(a)(4)(B) and 28 U.S.C. §1331.
`
`12. Venue is proper under 5 U.S.C. §552(a)(4)(B) and 28 U.S.C.
`
`§1391(e) because ASA resides and has its principal place of business in this
`
`District.
`
`13. Plaintiff, the American Securities Association, is a trade
`
`PARTIES
`
`association that represents the retail and institutional capital-market
`
`interests of regional financial services firms who provide Main Street
`
`businesses with access to capital and advise hardworking Americans on how
`
`to create and preserve wealth. ASA’s mission is to promote trust and confidence
`
`among investors, facilitate capital formation, and support efficient and
`
`competitively balanced capital markets. This mission advances financial
`
`independence, stimulates job creation, and increases prosperity. ASA has a
`
`geographically diverse membership base that spans the Heartland, Southwest,
`
`Southeast, Atlantic, and Pacific Northwest regions of the United States. ASA’s
`
`principal place of business is in Tampa, Florida.
`
`14. Defendant, the SEC, is an agency of the federal government within
`
`the meaning of 5 U.S.C. §552(f) and has possession, custody, and control of the
`
`records that ASA seeks.
`
`
`
`4
`
`
`
`Case 8:24-cv-01377-SDM-SPF Document 1 Filed 06/06/24 Page 5 of 23 PageID 5
`
`
`
`BACKGROUND
`
`A.
`
`The SEC’s Investigatory and Enforcement Power
`
`15. The SEC has been given substantial and virtually unchecked
`
`power to investigate and enforce the nation’s securities laws. See Jarkesy v.
`
`SEC, 34 F.4th 446, 449 (5th Cir. 2022).
`
`16. The SEC’s investigatory power is far-reaching. The SEC can
`
`request documents and issue subpoenas without any evidence that anyone has
`
`been harmed. See SEC v. Marin, 982 F.3d 1341, 1352-53 (11th Cir. 2020)
`
`(emphasis added); see also 15 U.S.C. §78u(a)(1).
`
`17. Complying with an SEC subpoena is not cheap. The unlucky
`
`recipients must hire lawyers, collect and image devices, and sort through
`
`endless records. Responding to a single subpoena or document request can cost
`
`millions of dollars.
`
`18. Often the SEC’s investigation doesn’t end with a single subpoena.
`
`If the agency doesn’t find what it wants, it can simply ask for more records and
`
`more documents.
`
`19.
`
`If a violation is found (even if just a foot fault), the SEC has an
`
`enormous advantage. The odds stacked in favor of the SEC “reveal just how
`
`tilted this game is.” Axon Enter., Inc. v. FTC, 598 U.S. 175, 215 (2023)
`
`(Gorsuch, J., concurring in the judgment). The SEC “often acts as both
`
`prosecutor and judge.” Jarkesy, 34 F.4th at 449. This ability to prosecute in
`
`
`
`5
`
`
`
`Case 8:24-cv-01377-SDM-SPF Document 1 Filed 06/06/24 Page 6 of 23 PageID 6
`
`
`
`house enables the SEC to achieve “a rate of success notably higher than it has
`
`achieved in federal district courts.” Tilton v. SEC, 824 F.3d 276, 279 (2d Cir.
`
`2016). In recent years, “the SEC has undeniably shifted enforcement to its
`
`home court, and it has done so in areas it has designated as high priority for
`
`enforcement.” Gideon Mark, SEC and CFTC Administrative Proceedings,
`
`19 U. Pa. J. Const. L. 45, 57 (2016). The agency “win[s] the vast majority of
`
`these in-house prosecutions.” Adam M. Katz, Eventual Judicial Review,
`
`118 Colum. L. Rev. 1139, 1153-54 (2018).
`
`20. Companies can fight back, but “[l]itigation is particularly risky for
`
`a public company: Even if it ultimately prevails, the uncertainty of pending
`
`litigation can be disastrous.” Sonia A. Steinway, SEC “Monetary Penalties
`
`Speak Very Loudly,” But What Do They Say? A Critical Analysis of the SEC’s
`
`New Enforcement Approach, 124 Yale L.J. 209, 228 (2014). Indeed, “‘the
`
`pendency of an investigation places a cloud over the corporation that may
`
`inhibit its access to capital markets, chill relationships with vendors and
`
`customers, and distract and demoralize management.’” Id.
`
`21. Between the crushing compliance costs, the “threat of significant
`
`monetary fines,” and the SEC’s homecourt advantage, resistance is rarely an
`
`option. Axon Enter., 598 U.S. at 204 (Thomas, J., concurring). “Thanks in part
`
`to these realities, the bulk of agency cases settle.” Id. at 216 (Gorsuch, J.,
`
`concurring in the judgment).
`
`
`
`6
`
`
`
`Case 8:24-cv-01377-SDM-SPF Document 1 Filed 06/06/24 Page 7 of 23 PageID 7
`
`
`
`22. Settlement is often “preferable from the SEC’s perspective” too.
`
`Steinway, supra, at 228. “Since ‘settled injunctive actions rarely receive any
`
`detailed judicial scrutiny,’ these actions ensure a quick ‘victory’ that can be
`
`publicly touted.” Id. (footnote omitted). “Aware, too, that few can outlast or
`
`outspend the federal government, agencies sometimes use this as leverage to
`
`extract settlement terms they could not lawfully obtain any other way.” Axon
`
`Enter., 598 U.S. at 216 (Gorsuch, J., concurring in the judgment).
`
`23. Then come the penalties, which can be enormous. In 2002, a “$10
`
`million civil penalty was then ‘the largest ever levied in a Commission action
`
`against a public company for financial fraud.’” Steinway, supra, at 210. Those
`
`days are long gone. Since 2000, “penalties have grown 30% year-over-year,
`
`compared to 3% growth in cases filed.” Id.
`
`24. After the dust settles, those who were targeted by the SEC are left
`
`to wonder how it all happened. Why did the SEC choose to target certain
`
`companies for suspicion-less investigations? How did the SEC arrive at the
`
`penalties it imposed?
`
`25. Because the SEC “has considerable latitude to prioritize its
`
`enforcement agenda,” the agency has long been criticized for “select[ing]
`
`targets not because they are the worst violators, but for improper reasons such
`
`as agency or individual self-aggrandizement.” Id. at 224. For example,
`
`“empirical evidence suggests that the SEC targets ‘deep pockets’ for whom
`
`
`
`7
`
`
`
`Case 8:24-cv-01377-SDM-SPF Document 1 Filed 06/06/24 Page 8 of 23 PageID 8
`
`
`
`large-dollar fines will not induce insolvency, as well as violators whose cases
`
`will engender positive press.” Id.
`
`26. The financial incentive for the SEC to rake in massive penalties
`
`has caused the SEC to be “more concerned with generating large penalties than
`
`with ensuring” regulatory compliance. Stmt. of Comm’rs Hester M. Peirce &
`
`Mark T. Uyeda, Forget about Collaborating—Stop, Pay-Up, and Listen:
`
`Statement on Intercontinental Exchange et al. (May 22, 2024), bit.ly/3R7f534.
`
`The SEC has been imposing “disproportionately large” and “ever-steeper
`
`penalties” for “regulatory foot faults” that “bear little to no relation to real-
`
`world harm.” Id. This has led to the “[r]easonable” “perception that the
`
`Commission’s penalty regime is more a tool to generate numbers for year-end
`
`statistics and less a means to achieve outcomes that enhance market integrity
`
`and investor protection.” Id.
`
`27. Moreover, the SEC has no published guidelines or formulae
`
`explaining why it threw the book at one company while giving another similar
`
`company a slap on the wrist. To the public and the regulated community, the
`
`SEC appears to set the dollar amount of fines in each case inconsistently and
`
`unpredictably.
`
`28. The SEC claims that it “strives to promote a market environment
`
`that is worthy of the public’s trust and characterized by transparency and
`
`integrity.” U.S. Secs. & Exch. Comm., Agency and Mission Information 9
`
`
`
`8
`
`
`
`Case 8:24-cv-01377-SDM-SPF Document 1 Filed 06/06/24 Page 9 of 23 PageID 9
`
`
`
`(2014), perma.cc/Z8ZW-Q5UQ. Federal securities laws, after all, were founded
`
`on “‘a philosophy of full disclosure.’” Lorenzo v. SEC, 587 U.S. 71, 81 (2019).
`
`29. Yet the SEC doesn’t give the transparency that it demands from
`
`those it regulates. The SEC hides information about its penalties and
`
`settlements, leaving firms and markets in the dark.
`
`B. The SEC’s Investigation for Alleged Record-Keeping Violations
`
`30.
`
`In September 2021, the SEC
`
`launched a suspicion-less
`
`investigation into whether certain broker-dealers were properly retaining
`
`business-related text messages sent and received on personal devices as
`
`required by the Commission’s rules. See 17 C.F.R. §240.17a-4.
`
`31. As part of the investigation, the SEC sent demands to many
`
`companies instructing them to produce documents related to their retention of
`
`“off-channel” communications, such as text messages through mobile phone
`
`apps.
`
`32. The SEC’s investigation included communications made in 2020
`
`and 2021 when COVID-era lockdowns disrupted routines and forced many
`
`employees to work from home.
`
`33. Three months later, the settlements were announced, and the fines
`
`started rolling in. On December 17, 2021, the SEC announced that JPMorgan
`
`had agreed to pay an astounding $125 million penalty over its recordkeeping
`
`practices. See Press Release, JPMorgan Admits to Widespread Recordkeeping
`
`
`
`9
`
`
`
`Case 8:24-cv-01377-SDM-SPF Document 1 Filed 06/06/24 Page 10 of 23 PageID 10
`
`
`
`Failures and Agrees to Pay $125 Million Penalty to Resolve SEC Charges, Secs.
`
`& Exch. Comm’n (Dec. 17, 2021), perma.cc/2ZZB-82RV.
`
`34. The following year, on September 27, 2022, the SEC announced an
`
`additional $1.1 billion in penalties against 15 broker-dealers and one affiliated
`
`investment adviser over their record keeping. See Press Release, SEC Charges
`
`16 Wall Street Firms with Widespread Recordkeeping Failures, Secs. & Exch.
`
`Comm’n (Sept. 27, 2022), perma.cc/98C8-TNR2. These fines were as follows:
`
`Barclays Capital Inc.
`
`$125
`million
`
`BofA Securities Inc. together with Merrill Lynch,
`Pierce, Fenner & Smith Inc.
`
`$125
`million
`
`Citigroup Global Markets Inc.
`
`Credit Suisse Securities (USA) LLC
`
`Deutsche Bank Securities Inc. together with
`DWS Distributors Inc. and DWS Investment
`Management Americas, Inc.
`
`Goldman Sachs & Co. LLC
`
`$125
`million
`
`$125
`million
`
`$125
`million
`
`$125
`million
`
`Morgan Stanley & Co. LLC together with Morgan
`Stanley Smith Barney LLC
`
`$125
`million
`
`UBS Securities LLC together with UBS Financial
`Services Inc.
`
`$125
`million
`
`Jefferies LLC
`
`$50 million
`
`Nomura Securities International, Inc.
`
`$50 million
`
`
`
`10
`
`
`
`Case 8:24-cv-01377-SDM-SPF Document 1 Filed 06/06/24 Page 11 of 23 PageID 11
`
`
`
`
`
`Cantor Fitzgerald & Co.
`
`$10 million
`
`35. The following year, in May 2023, the SEC announced settlements
`
`with two firms for combined penalties of $22.5 million. See Press Release, SEC
`
`Charges HSBC and Scotia Capital with Widespread Recordkeeping Failures,
`
`Secs. & Exch. Comm’n (May 11, 2023), perma.cc/2E94-J3KD. These fines were:
`
`HSBC Securities (USA) Inc.
`
`Scotia Capital (USA) Inc.
`
`$15 million
`
`$7.5 million
`
`
`
`36.
`
`In August 2023, the SEC announced more settlements with eleven
`
`firms for combined penalties of $289 million. See Press Release, SEC Charges
`
`11 Wall Street Firms with Widespread Recordkeeping Failures, Secs. & Exch.
`
`Comm’n (August 8, 2023), perma.cc/39JJ-C3US. These fines were:
`
`Wells Fargo Securities, LLC, Wells Fargo Clearing
`Services, LLC, and Wells Fargo Advisors Financial
`Network, LLC
`
`$125 million
`
`BNP Paribas Securities Corp.
`
`SG Americas Securities, LLC
`
`BMO Capital Markets Corp.
`
`Mizuho Securities USA LLC
`
`Houlihan Lokey Capital, Inc.
`
`Moelis & Company LLC
`
`Wedbush Securities Inc.
`
`
`
`11
`
`$35 million
`
`$35 million
`
`$25 million
`
`$25 million
`
`$15 million
`
`$10 million
`
`$10 million
`
`
`
`Case 8:24-cv-01377-SDM-SPF Document 1 Filed 06/06/24 Page 12 of 23 PageID 12
`
`
`
`
`
`SMBC Nikko Securities America, Inc.
`
`$9 million
`
`37.
`
`In September 2023, the SEC announced settlements with another
`
`ten firms for combined penalties of $79 million. See Press Release, SEC
`
`Charges 10 Firms with Widespread Recordkeeping Failures, Secs. & Exch.
`
`Comm’n (Sept. 29, 2023), perma.cc/2HRQ-EP62. These fines were:
`
`Interactive Brokers Corp. and affiliate Interactive
`Brokers LLC
`
`$35 million
`
`Robert W. Baird & Co. Inc.
`
`William Blair & Company LLC and affiliate
`William Blair Investment Management LLC
`
`Nuveen Securities LLC
`
`Fifth Third Securities Inc.
`
`Perella Weinberg Partners LP, together with
`Tudor, Pickering, Holt & Co. Securities LLC and
`Perella Weinberg Partners Capital Management
`LP
`
`$15 million
`
`$10 million
`
`$8.5 million
`
`$8 million
`
`$2.5 million
`
`38. Earlier this year, on February 9, 2024, the SEC announced that
`
`another sixteen firms had agreed to pay more than $81 million to settle charges
`
`related to their recordkeeping. See Press Release, Sixteen Firms to Pay More
`
`Than $81 Million Combined to Settle Charges for Widespread Recordkeeping
`
`Failures, Secs. & Exch. Comm’n (Feb. 9, 2024), perma.cc/TRA5-4MCJ. These
`
`fines were:
`
`
`
`12
`
`
`
`Case 8:24-cv-01377-SDM-SPF Document 1 Filed 06/06/24 Page 13 of 23 PageID 13
`
`
`
`
`
`Northwestern Mutual Investment Services LLC,
`together with Northwestern Mutual Investment
`Management Co. LLC and Mason Street Advisors
`LLC
`
`$16.5
`million
`
`Guggenheim Securities LLC, together with
`Guggenheim Partners Investment Management
`LLC
`
`Oppenheimer & Co. Inc.
`
`Cambridge Investment Research Inc., together with
`Cambridge Investment Research Advisors Inc.
`
`Key Investment Services LLC, together with
`KeyBanc Capital Markets Inc.
`
`$15 million
`
`$12 million
`
`$10 million
`
`$10 million
`
`Lincoln Financial Advisors Corporation, together
`with Lincoln Financial Securities Corporation
`
`$8.5 million
`
`U.S. Bancorp Investments Inc.
`
`The Huntington Investment Company, together
`with Huntington Securities Inc. and Capstone
`Capital Markets LLC
`
`$8 million
`
`$1.25
`million
`
`39.
`
`In these orders, the SEC provided little to no reasoning for how
`
`most of the penalties were calculated. Were they based on the content of the
`
`off-channel communications that were sent? The volume of communications
`
`collected? The controls that the firm had in place? The seniority of the
`
`employees who violated the regulations? Or were the fines entirely arbitrary?
`
`It’s anyone’s guess.
`
`40. Not surprisingly, the SEC has broken records for enforcement and
`
`penalty collections. For fiscal year 2022, the SEC reported $6.439 billion in
`
`
`
`13
`
`
`
`Case 8:24-cv-01377-SDM-SPF Document 1 Filed 06/06/24 Page 14 of 23 PageID 14
`
`
`
`orders for civil penalties, disgorgement, and prejudgment interest—the most
`
`in SEC history, up from $3.852 billion in the prior year. U.S. Secs. & Exch.
`
`Comm., SEC Announces Enforcement Results for FY22 (Nov. 15, 2022),
`
`perma.cc/YSU6-8CVL. The SEC posted similar numbers in 2023, obtaining
`
`orders for nearly $5 billion—the second-most in SEC history. U.S. Secs. &
`
`Exch. Comm., SEC Announces Enforcement Results for Fiscal Year 2023
`
`(Nov. 14, 2023), perma.cc/FC7J-S2D2. In both years, a significant driver of the
`
`SEC’s record recoveries were its investigative sweeps into recordkeeping.
`
`C. The Freedom of Information Act
`
`41. Congress enacted the Freedom of Information Act to provide
`
`transparency into agency actions. FOIA “codified ‘a strong public policy in favor
`
`of public access to information in the possession of federal agencies.’” Broward
`
`Bulldog, Inc. v. DOJ, 939 F.3d 1164, 1175 (11th Cir. 2019). And FOIA serves
`
`to “‘ensure an informed citizenry, vital to the functioning of a democratic
`
`society.’” John Doe Agency v. John Doe Corp., 493 U.S. 146, 152 (1989). Robust
`
`enforcement of FOIA is thus “‘needed’” to “‘hold the governors accountable to
`
`the governed.’” Id.
`
`42. FOIA provides that, subject to certain statutory exemptions,
`
`federal agencies shall “upon any request for records which . . . reasonably
`
`describes such records . . . make the records promptly available to any person.”
`
`5 U.S.C. §552(a)(3)(A).
`
`
`
`14
`
`
`
`Case 8:24-cv-01377-SDM-SPF Document 1 Filed 06/06/24 Page 15 of 23 PageID 15
`
`
`
`43. Under FOIA, a federal agency must make and communicate a
`
`“determination” whether
`
`it will comply with a FOIA request—and
`
`communicate “the reasons therefor”—within 20 working days of receiving the
`
`request, or within 30 working days in “unusual circumstances.” 5 U.S.C.
`
`§552(a)(6)(A)(i), (a)(6)(B)(i).
`
`44. FOIA’s response deadline mandates “more than just an initial
`
`statement that the agency will generally comply with a FOIA request and will
`
`produce non-exempt documents and claim exemptions in the future.” CREW v.
`
`FEC, 711 F.3d 180, 188 (D.C. Cir. 2013). Rather, the agency must “(i) gather
`
`and review the documents; (ii) determine and communicate the scope of the
`
`documents it intends to produce and withhold, and the reasons for withholding
`
`any documents; and (iii) inform the requester that it can appeal whatever
`
`portion of the ‘determination’ is adverse.” Id.
`
`45. After a party appeals an agency decision to withhold documents,
`
`the agency must “make a determination with respect to any appeal within
`
`[20 working] days . . . after the receipt of such appeal,” or within 30 working
`
`days in “unusual circumstances.” 5 U.S.C. §552(a)(6)(A)(ii), (a)(6)(B)(i). And if
`
`the agency’s decision to withhold documents is upheld on appeal on appeal,
`
`“the agency shall notify the person . . . of the provisions for judicial review of
`
`that determination.” Id. Then the requester may sue in federal district court.
`
`Id.
`
`
`
`15
`
`
`
`Case 8:24-cv-01377-SDM-SPF Document 1 Filed 06/06/24 Page 16 of 23 PageID 16
`
`
`
`46. FOIA gives federal district courts jurisdiction “to enjoin the agency
`
`from withholding agency records and to order the production of any agency
`
`records improperly withheld from the complainant.” 5 U.S.C. §552(a)(4)(B).
`
`47. FOIA also allows the requester to recover “reasonable attorney
`
`fees and other litigation costs reasonably incurred in any case . . . in which the
`
`complainant has substantially prevailed.” 5 U.S.C. §552(a)(4)(E).
`
`D. ASA’s FOIA Requests
`
`48. Relying on FOIA’s guarantee of public access, ASA requested
`
`information on the SEC’s activities.
`
`49. On March 14, 2024, ASA submitted the following FOIA request to
`
`the SEC:
`
`Please produce all records (including, but not limited to, tables,
`calculations, schedules, matrices, standards, data, and guidelines)
`that were considered in connection with calculating, determining,
`proposing, or agreeing to any penalties, fines, or other sanctions
`associated with the SEC’s recent recordkeeping sweep initiative.
`
`For purposes of this request, “recordkeeping sweep initiative” is
`defined as any agency action related to possible violations of
`Section 17(a)(1) of the Exchange Act or Rule 17a-4 based on the
`use of unapproved communications platforms (such as text
`messaging on personal devices), including the investigations
`resolved through the settlements announced on December 17,
`2021, September 27, 2022, September 29, 2023, and February 9,
`2024. See JPMorgan Admits to Widespread Recordkeeping
`Failures and Agrees to Pay $125 Million Penalty to Resolve SEC
`Charges (Dec. 17, 2021), https://perma.cc/2ZZB-82RV; SEC
`Charges 16 Wall Street Firms with Widespread Recordkeeping
`Failures (Sept. 27, 2022), https://perma.cc/98C8-TNR2; SEC
`Charges 10 Firms with Widespread Recordkeeping Failures (Sept.
`29, 2023), https://perma.cc/2HRQ-EP62; Sixteen Firms to Pay More
`
`
`
`16
`
`
`
`Case 8:24-cv-01377-SDM-SPF Document 1 Filed 06/06/24 Page 17 of 23 PageID 17
`
`
`
`SEC:
`
`Than $81 Million Combined to Settle Charges for Widespread
`Recordkeeping Failures (Feb. 9, 2024), https://perma.cc/TRA5-
`4MCJ.
`
`Produce all such records created or used by the SEC within the
`past three years, regardless of whether they are drafts, currently
`in use by the SEC, or previously used by the SEC.
`
`50. Also on March 14, ASA submitted a second FOIA request to the
`
`Please produce all records (including, but not limited to, emails
`and memoranda) discussing how any penalties, fines, or other
`sanctions associated with the SEC’s recent recordkeeping sweep
`initiative were calculated, determined, proposed, or agreed to. This
`request includes any records comparing penalties, fines, or other
`sanctions across the industry or among individual entities or
`individuals.
`
`For purposes of this request, “recordkeeping sweep initiative” is
`defined as any agency action related to possible violations of
`Section 17(a)(1) of the Exchange Act or Rule 17a-4 based on the
`use of unapproved communications platforms (such as text
`messaging on personal devices), including the investigations
`resolved through the settlements announced on December 17,
`2021, September 27, 2022, September 29, 2023, and February 9,
`2024. See JPMorgan Admits to Widespread Recordkeeping
`Failures and Agrees to Pay $125 Million Penalty to Resolve SEC
`Charges (Dec. 17, 2021), https://perma.cc/2ZZB-82RV; SEC
`Charges 16 Wall Street Firms with Widespread Recordkeeping
`Failures (Sept. 27, 2022), https://perma.cc/98C8-TNR2; SEC
`Charges 10 Firms with Widespread Recordkeeping Failures (Sept.
`29, 2023), https://perma.cc/2HRQ-EP62; Sixteen Firms to Pay More
`Than $81 Million Combined to Settle Charges for Widespread
`Recordkeeping Failures (Feb. 9, 2024), https://perma.cc/TRA5-
`4MCJ.
`
`Produce all such records created or used by the SEC within the
`past three years, regardless of whether they are drafts, currently
`in use by the SEC, or previously used by the SEC.
`
`
`
`17
`
`
`
`Case 8:24-cv-01377-SDM-SPF Document 1 Filed 06/06/24 Page 18 of 23 PageID 18
`
`
`
`51. Also on March 14, ASA submitted a third FOIA request to the SEC:
`
`Please produce all records relating to any credits or benefits that
`were received for “self-reporting, remediating and cooperating”
`with the SEC, as used in the following document: SEC Charges 10
`Firms with Widespread Recordkeeping Failures (Sept. 29, 2023),
`https://perma.cc/2HRQ-EP62.
`
`Produce all such records created within the past three years,
`regardless of whether they are drafts, currently in use by the SEC,
`or previously used by the SEC.
`
`52. On March 15, 2024, the SEC sent ASA letters acknowledging
`
`receipt of these requests and assigning them tracking numbers of 24-01814-
`
`FOIA, 24-01815-FOIA, and 24-01813-FOIA, respectively.
`
`53. The SEC was required to issue its “determination” by April 11,
`
`2024, but it failed to do so within the statutory deadline.
`
`54. The SEC then sent ASA belated letters categorically withholding
`
`all “records that may be responsive” to ASA’s three requests—denying the
`
`third request on April 23, the first request on April 25, and the second request
`
`on May 2. To justify each withholding, the SEC invoked Exemption 7(A),
`
`5 U.S.C. §552(b)(7)(A), but the SEC did not explain why the Exemption applied
`
`or why it justified a blanket withholding of every responsive document.
`
`55. ASA appealed the SEC’s determinations on April 25 and May 2,
`
`exhausting its administrative remedies. See 5 U.S.C. §552(a)(6)(A)(ii). ASA
`
`argued in all three appeals that Exemption 7(A) does not apply because, among
`
`other reasons, (1) the SEC “fail[ed] to identify any law enforcement proceedings
`
`
`
`18
`
`
`
`Case 8:24-cv-01377-SDM-SPF Document 1 Filed 06/06/24 Page 19 of 23 PageID 19
`
`
`
`that are implicated by the request”; (2) the SEC “fail[ed] to explain how
`
`disclosure would interfere with any law enforcement proceedings”; and (3)
`
`“Exemption 7(A) does not apply” to “law enforcement proceedings that have
`
`ended.” ASA also explained that the SEC “fail[ed] to explain how the disclosure
`
`would result in foreseeable harm.” Finally, ASA argued that the SEC failed to
`
`“segregate and produce all nonprivileged and nonexempt material,” and indeed
`
`provided “no analysis of segregability.”
`
`56. On May 22 and 29, the SEC issued three nearly identical decisions
`
`on ASA’s three appeals, declaring that “the FOIA Officer correctly asserted
`
`Exemption 7(A)” in blanket fashion over every responsive document.
`
`57. The SEC recognized that it had “entered into a number of
`
`settlements involving the subject matter of [ASA’s] request[s].” Yet the SEC
`
`concluded that it could withhold documents from these investigations because
`
`its Enforcement staff was “investigat[ing] whether the Commission should
`
`bring an enforcement action against other entities for similar violations of
`
`federal securities laws.” (emphasis added). The SEC never asserted that the
`
`investigations were factually related in any way.
`
`58. The SEC also refused to provide details about how ASA’s FOIA
`
`requests would “interfere with [these] law enforcement proceedings,” merely
`
`asserting that the requests would “generally interfere with enforcement
`
`proceedings.” The SEC hypothesized that responding to ASA’s FOIA requests
`
`
`
`19
`
`
`
`Case 8:24-cv-01377-SDM-SPF Document 1 Filed 06/06/24 Page 20 of 23 PageID 20
`
`
`
`might allow others to “fabricate evidence, influence witness testimony, and/or
`
`destroy or alter certain documents,” or “use the information in the documents
`
`to tailor the information they provide or withhold in negotiating possible
`
`settlements with the Commission.”
`
`59. Finally, the SEC refused to segregate or identify non-exempt
`
`documents because, in its view, “all the documents [ASA] requested are
`
`exempt.” In other words, according to the SEC, every single document that ASA
`
`requested would “reasonably be expected to interfere with enforcement
`
`proceedings” if released to the public. 5 U.S.C. §552(b)(7)(A).
`
`60. Thus, the SEC has produced no documents in response to ASA’s
`
`requests.
`
`COUNT I
`
`Violation of FOIA, 5 U.S.C. §552
`
`61. Plaintiff incorporates the allegations in the foregoing paragraphs.
`
`62. The SEC is an agency of the federal government within the
`
`meaning of 5 U.S.C. §552(f)(1).
`
`63. Plaintiff’s FOIA requests complied with all applicable statutes and
`
`regulations.
`
`64. The requested records are not exempt from disclosure.
`
`65. Exemption 7(A) protects “records or information compiled for law
`
`enforcement purposes . . . only to the extent that the production of such law
`
`
`
`20
`
`
`
`Case 8:24-cv-01377-SDM-SPF Document 1 Filed 06/06/24 Page 21 of 23 PageID 21
`
`
`
`enforcement records or information . . . could reasonably be expected to
`
`interfere with enforcement proceedings.” 5 U.S.C. §552(b)(7)(A). To rely on this
`
`exemption, the SEC must “demonstrate that ‘disclosure (1) could reasonably
`
`be expected to interfere with (2) enforcement proceedings that are (3) pending
`
`or reasonably anticipated.’” CREW v. DOJ, 746 F.3d 1082, 1096 (D.C. Cir.
`
`2014).
`
`66. Because “‘the mandate of the FOIA calls for broad disclosure of
`
`Government records,’ . . . FOIA exemptions are to be narrowly construed.” DOJ
`
`v. Julian, 486 U.S. 1, 8 (1988).
`
`67.
`
`“[C]ourts have held that . . . [Exemption] 7(A) . . . allow[s]
`
`disclosure of closed investigative files.” Ehringhaus v. FTC, 525 F. Supp. 21,
`
`23 (D.D.C. 1980). Because the SEC admits that “the Commission entered into
`
`a number of settlements involving the subject matter of [ASA’s] request,”
`
`documents related to those settlements are part of closed investigative files
`
`and are not exempt.
`
`68. Moreover, Exemption 7(A) does not allow for “‘blanket exemptions’
`
`for Government records simply because they were found in investigatory files.”
`
`NLRB v. Robbins Tire & Rubber Co., 437 U.S. 214, 236 (1978).
`
`69. The SEC made no attempt to determine whether responsive
`
`documents could be segregated from exempt documents. Instead, the SEC
`
`issued “a blanket declaration” that segregation was not possible, which “does
`
`
`
`21
`
`
`
`Case 8:24-cv-01377-SDM-SPF Document 1 Filed 06/06/24 Page 22 of 23 PageID 22
`
`
`
`not constitute a sufficient explanation of non-segregability.” Wilderness Soc. v.
`
`DOI, 344 F. Supp. 2d 1, 18 (D.D.C. 2004).
`
`70. Finally, the SEC has failed to explain how disclosure would result
`
`in foreseeable harm. The SEC’s conclusory assertions fail to satisfy FOIA’s
`
`“‘meaningful burden’” and “heightened standard” of “describing” the harm that
`
`would foreseeably occur, including “both the nature of the harm and the link
`
`between the specified harm and specific information contained in the material
`
`withheld.” Ctr. for Investigative Reporting v. U.S. Customs & Border Prot., 436
`
`F. Supp. 3d 90, 105-06 (D.D.C. 2019). The SEC’s “‘boilerplate statements’ and
`
`‘generic and nebulous articulations of harm’” are plainly inadequate to invoke
`
`Exemption 7(A). Id.
`
`71. Plaintiff has exhausted its administrative remedies by appealing
`
`the SEC’s adverse determinations. See 5 U.S.C. §552(a)(6)(A)(ii).
`
`72. By failing to release any responsive, non-exempt records, or
`
`otherwise offer a reasonable schedule for production, the SEC has violated
`
`FOIA. See 5 U.
Accessing this document will incur an additional charge of $.
After purchase, you can access this document again without charge.
Accept $ Charge
Still Working On It
This document is taking longer than usual to download. This can happen if we need to contact the court directly to obtain the document and their servers are running slowly.
Give it another minute or two to complete, and then try the refresh button.
A few More Minutes ... Still Working
It can take up to 5 minutes for us to download a document if the court servers are running slowly.
Thank you for your continued patience.
This document could not be displayed.
We could not find this document within its docket. Please go back to the docket page and check the link. If that does not work, go back to the docket and refresh it to pull the newest information.
Your account does not support viewing this document.
You need a Paid Account to view this document. Click here to change your account type.
Your account does not support viewing this document.
Set your membership
status to view this document.
With a Docket Alarm membership, you'll
get a whole lot more, including:
- Up-to-date information for this case.
- Email alerts whenever there is an update.
- Full text search for other cases.
- Get email alerts whenever a new case matches your search.
One Moment Please
The filing “” is large (MB) and is being downloaded.
Please refresh this page in a few minutes to see if the filing has been downloaded. The filing will also be emailed to you when the download completes.
Your document is on its way!
If you do not receive the document in five minutes, contact support at support@docketalarm.com.
Sealed Document
We are unable to display this document, it may be under a court ordered seal.
If you have proper credentials to access the file, you may proceed directly to the court's system using your government issued username and password.
Access Government Site
