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Securities and Exchange Commission
File No.: S7-04-03
Ladies and Gentlemen:
I am attorney in the Washington, D.C. office of Foley & Lardner. I am writing to comment on the proposed amendment to the rules of practice. I recognize the need to expedite administrative adjudications. Respondents who have engaged in wrongful conduct must be sanctioned in order to protect investors. Respondents who have not engaged in wrongful conduct need to be exonerated. I am, however, concerned that the proposed rules will further reduce the ability of administrative adjudications to distinguish between the two.
First, the Commission should recognize that short time periods inherently favor the staff. The staff can study the investigative record while the investigation is ongoing, the recommendation is being prepared, on the recommendation memorandum is pending. Indeed, the staff can defer sending the recommendation memorandum to the Commission while it studies the record or defer sending a recommendation to the Commission until it has freed up counsel to litigate the matter. In contrast, the respondent will typically desire to be represented by the attorney who represented the respondent in the investigation. This attorney, however, is unlikely to be in a position to drop everything to focus on the respondent's matter. Moreover, the respondent will often need to raise funds to pay the retainer that the attorney will likely require given that the short timeframe will likely prevent the attorney from withdrawing if the respondent becomes delinquent in paying fees.
In addition, the investigative staff typically is more focused on gathering incriminatory evidence than exculpatory evidence. Thus, defense counsel must not only master the investigative record nearly from scratch, defense counsel must scramble to then gather exculpatory information.
The ALJ's are generally effective at moving cases to a prompt hearing. The significant delays are at the post-hearing phase during which the ALJ writes the initial decision and at the appeals stage. The Commission should move to expedite the administrative process by devoting additional resources to these two areas, rather than denying defense counsel adequate time to prepare a defense.
Truncating the time available for defense counsel to mount an effective defense will impair the integrity of the hearing process. As this Commission recently proclaimed, the Commission has
In the Matter of Clarke T. Blizzard, Admin. Proc. File 3-10007. In Blizzard, the Commission held that the right of a respondent "to counsel of one's choice is outweighed by the necessity of ensuring that our administrative proceeding is conducted with a scrupulous regard for the propriety and integrity of the process." Id. The Commission went on to say that even though its "decision will necessitate further delay in a matter that has already been the subject of lengthy delay," the Commission "nonetheless must maintain the integrity of the proceedings we are empowered to conduct. "
Having recently held that the appearance of integrity outweighs a respondent's right to counsel of one's choice and the need to move matters expeditiously, the Commission should not now determine that the need to move matters expeditiously outweighs a respondent's right to effective assistance of counsel. If the Commission makes this determination it will threaten both the appearance and the reality of the integrity of its proceedings.