Gurbir Grewal, director of the agency’s enforcement division, called out what he described as ‘gamesmanship’ by some corporate lawyers
Although Mr. Grewal said he welcomed zealous advocacy, he added that he was frequently hearing from SEC staff about behavior that crossed the line to what he called “gamesmanship.”
“Too often, we see defense counsel—sometimes even including [SEC enforcement division] alums—engage in conduct that seems to have little purpose other than to delay our investigations,” Mr. Grewal said Thursday at the Securities Enforcement Forum West 2022, which was held in East Palo Alto, Calif.
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Delay tactics aren’t new, Mr. Grewal conceded. He noted that one of his predecessors, Robert Khuzami, voiced similar concerns in a speech in 2011, saying defense lawyers would sometimes deliver a surreptitious kick under the table to a witness’s shins during testimony to get them to answer questions in a certain way. Lawyers today have moved onto more “subtle” behavior, Mr. Grewal said.
One of Mr. Grewal’s top complaints concerns document requests that the SEC imposes on public companies under its supervision. Mr. Grewal said he had recently learned about an entity with billions of dollars in assets that produced a mere 200 documents in a six-month period, after being served with a request for customer account and trading data.
The SEC is also seeing instances where lawyers repeatedly interrupt witness testimony to lodge frivolous objections, and overtly coach witnesses on how to answer certain questions. In some instances, lawyers are representing companies and individuals in cases where they have a conflict of interest, Mr. Grewal said.
And some lawyers are asserting legal privilege to shield documents from the eyes of SEC staff in cases where that privilege doesn’t apply, he added.
Lawyers who do cooperate in a genuine way with the SEC are better positioned to win credit for their clients in the form of a more lenient resolution of the agency’s investigation, Mr. Grewal said.
“You can take steps that enable us to efficiently conduct our investigations, protect investors and rebuild trust in our markets and the law,” he said.
Write to Dylan Tokar at [email protected]
Credit: www.wsj.com /