Amendments to the Commission's Rules of Practice, 50211-50242 [2016-16987]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 81, Number 146 (Friday, July 29, 2016)]
[Rules and Regulations]
[Pages 50211-50242]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-16987]



[[Page 50211]]

Vol. 81

Friday,

No. 146

July 29, 2016

Part IV





Securities and Exchange Commission





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17 CFR Part 201





Amendments to the Commission's Rules of Practice; Final Rule

Federal Register / Vol. 81 , No. 146 / Friday, July 29, 2016 / Rules 
and Regulations

[[Page 50212]]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 201

[Release No. 34-78319; File No. S7-18-15]
RIN 3235-AL87


Amendments to the Commission's Rules of Practice

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: The Securities and Exchange Commission (``Commission'') is 
adopting amendments to its Rules of Practice. These changes concern, 
among other things, the timing of hearings in administrative 
proceedings, depositions, summary disposition, and the contents of an 
answer.

DATES: Effective Date: The final rules are effective September 27, 
2016.
    Applicability Dates: The applicability dates for proceedings 
pending as of July 13, 2016, are discussed in Section Q of this 
release.

FOR FURTHER INFORMATION CONTACT: Adela Choi, Senior Counsel, and Sarit 
Klein, Attorney Advisor, Office of the General Counsel, (202) 551-5150, 
Securities and Exchange Commission, 100 F Street NE., Washington, DC 
20549.

SUPPLEMENTARY INFORMATION: The Commission is adopting amendments to 
Rules 141, 154, 161, 180, 220, 221, 222, 230, 232, 233, 234, 235, 250, 
320, 360, 410, 411, 420, 440, 450 and 900 of its Rules of Practice [17 
CFR 201.141, 201.154, 201.161, 201.180, 201.220, 201.221, 201.222, 
201.230, 201.232, 201.233, 201.234, 201.235, 201.250, 201.320, 201.360, 
201.410, 201.411, 201.420, 201.440, 201.450 and 201.900].

I. Introduction
II. Description of the Final Rules
    A. Rule 360 (Initial Decision of Hearing Officer and Timing of 
Hearing)
    1. Proposed Rule
    2. Comments Received
    3. Final Rule
    B. Rule 233 (Depositions Upon Oral Examination)
    1. Proposed Rule
    2. Comments Received
    3. Final Rule
    C. Rule 232 (Subpoenas)
    1. Proposed Rule
    2. Comments Received
    3. Final Rule
    D. Rule 141 (Orders and Decisions; Service of Orders Instituting 
Proceedings and Other Orders and Decisions)
    E. Rule 161 (Extensions of Time, Postponements and Adjournments)
    F. Rule 180 (Sanctions)
    G. Rule 220 (Answer to Allegations)
    1. Proposed Rule
    2. Comments Received
    3. Final Rule
    H. Rule 221 (Prehearing Conference)
    I. Rule 222 (Prehearing Submissions)
    1. Proposed Rule
    2. Comments Received
    3. Final Rule
    J. Rule 230 (Enforcement and Disciplinary Proceedings: 
Availability of Documents for Inspection and Copying)
    1. Proposed Rule
    2. Comments Received
    3. Final Rule
    K. Rule 234 (Depositions Upon Written Questions)
    L. Rule 235 (Introducing Prior Sworn Statements or Declarations)
    1. Proposed Rule
    2. Comments Received
    3. Final Rule
    M. Rule 250 (Dispositive Motions)
    N. Rule 320 (Evidence: Admissibility)
    1. Proposed Rule
    2. Comments Received
    3. Final Rule
    O. Amendments to Appellate Procedure in Rules 410, 411, 420, 440 
and 450
    1. Proposed Rule
    2. Comments Received
    3. Final Rule
    P. Amendments to Rule 900 Guidelines
    1. Proposed Rule
    2. Comments Received
    3. Final Rule
    Q. Effective Date, Applicability Dates and Transition Period
    1. Proposed Rule
    2. Comments Received
    3. Final Rule
III. Economic Analysis
IV. Administrative Law Matters
V. Statutory Basis

I. Introduction

    On September 24, 2015, the Commission proposed for comment 
amendments to its Rules of Practice. Among other things, we proposed to 
update the Rules of Practice, adjust the timing of hearings and other 
deadlines in administrative proceedings, and provide parties in 
administrative proceedings with the ability to take depositions.\1\ We 
also proposed to clarify and amend certain other rules, including the 
admissibility of hearsay and the requirements for the contents of an 
answer. In addition, we proposed amendments to certain procedures that 
govern appeals to the Commission. The proposed amendments were intended 
to update the Rules of Practice and introduce additional flexibility 
into administrative proceedings, while continuing to provide for the 
timely and efficient disposition of proceedings.\2\
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    \1\ Amendments to the Commission's Rules of Practice, Exchange 
Act Release No. 75976 (Sept. 24, 2015), 80 FR 60091 (Oct. 5, 2015), 
available at https://www.gpo.gov/fdsys/pkg/FR-2015-10-05/pdf/2015-24707.pdf (last visited July 8, 2016).
    \2\ Promoting timeliness and efficiency in administrative 
proceedings has been a longstanding goal of the Commission. See 
Rules of Practice, Exchange Act Release No. 48018 (June 11, 2003), 
68 FR 35787 (June 17, 2003), available at https://www.gpo.gov/fdsys/pkg/FR-2003-06-17/pdf/03-15262.pdf (last visited July 8, 2016) 
(``2003 Release'') (amending Rules of Practice ``to improve the 
timeliness of [the Commission's] administrative proceedings''); 
Rules of Practice, Exchange Act Release No. 35833 (June 9, 1995), 60 
FR 32738 (June 23, 1995), available at https://www.gpo.gov/fdsys/pkg/FR-1995-06-23/pdf/95-14750.pdf (``1995 Release'') (last visited 
July 8, 2016) (amending Rules of Practice to ``better facilitate 
full, fair and efficient proceedings . . .''); see also id., 60 FR 
at 32753, Comment to Rule 161 (``Extensions of Time, Postponements 
and Adjournments'') (``The rule requires the hearing officer to 
consider explicitly the efficient and timely administration of 
justice when determining whether to grant a postponement, 
adjournment or extension of time for filing of papers. The need for 
delay must be balanced against the need to bring each case to a 
timely conclusion, consistent with the public interest.'').
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    We received 13 comment letters in response to the proposal.\3\ 
Commenters generally supported the Commission's efforts to update the 
rules, expand the discovery process and enlarge the timetables in 
administrative proceedings, and in some instances suggested additional 
changes. Some commenters argued that the proposed amendments were too 
incremental.\4\ Others focused on the legitimacy of the Commission's 
administrative forum, and in so doing offered suggestions that went 
beyond the scope of the proposed amendments.\5\ After carefully 
considering the comments, we are adopting amendments to our Rules of 
Practice as described below.
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    \3\ The comment letters are located at https://www.sec.gov/comments/s7-18-15/s71815.shtml (last visited July 8, 2016).
    \4\ See, e.g., David M. Zornow, Christopher J. Gunther and Chad 
E. Silverman letter dated December 4, 2015 (``Zornow/Gunther/
Silverman'').
    \5\ These comments generally expressed opposition to the 
administrative forum. See, e.g., Joseph A. Grundfest letter dated 
December 4, 2015 (``Grundfest'') (recommending the adoption of a 
mechanism to allow respondents in certain cases to remove a 
proceeding filed administratively to federal court); id. (arguing 
that the ability to proceed in an administrative forum creates the 
possibility that the Commission will choose to shield controversial 
cases from the full scrutiny of federal district and appellate 
courts); Zornow/Gunther/Silverman (asserting that conflicts of 
interest preclude the Commission from being perceived as a neutral 
arbiter). Because these comments are outside the scope of the 
proposed amendments, we have not addressed them in the adopting 
release.
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II. Description of the Final Rules

    As with the proposing release, we begin with a discussion of the 
amendments to Rule 360, which sets forth the framework and timing for 
the stages of an administrative proceeding. Next, we discuss Rule 233 
governing depositions, followed by Rule 232, which prescribes standards 
for the issuance of subpoenas and motions to

[[Page 50213]]

quash. The remaining rule amendments are discussed in numerical order.

A. Rule 360 (Initial Decision of Hearing Officer and Timing of Hearing)

1. Proposed Rule
    Rule 360 \6\ governs the time period for the filing of an initial 
decision by the hearing officer and establishes the timing for the 
stages of an administrative proceeding, which include a prehearing 
period, a hearing, a period for reviewing hearing transcripts and 
submitting post-hearing briefs, and a deadline for the hearing officer 
to file an initial decision with the Office of the Secretary of the 
Commission (the ``Secretary''). Rule 360(a)(2) currently designates the 
timeframes for each of these stages based on the date of service of an 
order instituting proceedings (``OIP''). Initial decisions must be 
filed within the number of days prescribed by the Commission in the 
OIP: 120, 210, or 300 days from the date of service of the OIP. The 
prehearing period, start date of the hearing, and period for review of 
the transcript and post-hearing briefing are, in turn, determined by 
the date of the OIP and time periods corresponding to the applicable 
initial decision deadline. Should the hearing officer determine that it 
is not possible to issue the initial decision within the period 
specified in the OIP, the Chief Administrative Law Judge is authorized, 
under current Rule 360(a)(3), to request an extension of time from the 
Commission.
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    \6\ 17 CFR 201.360.
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    We proposed to modify three aspects of the timing of a proceeding 
under Rule 360. First, the proposal modifies the calculation of the 
initial decision deadline by changing the trigger date for the time to 
file an initial decision from the OIP service date to the date of 
completion of post-hearing or dispositive motion briefing or a finding 
of a default. This modification divorces the deadline for the 
completion of an initial decision from other stages of the proceeding, 
and is reflected in an amendment separating current Rule 360(a)(2) into 
two paragraphs, proposed Rule 360(a)(2)(i) covering the initial 
decision deadline and proposed Rule 360(a)(2)(ii) covering the 
prehearing period. Under proposed Rule 360(a)(2)(i), the OIP designates 
the time period for preparation of the initial decision as 30, 75 or 
120 days from the completion of post-hearing or dispositive motion 
briefing or a finding of a default.
    Second, proposed Rule 360(a)(2)(ii) provides a range of time during 
which the hearing must begin. For proceedings with an initial decision 
deadline of 120 days, the proposal doubles the maximum length of the 
prehearing period from the current approximately four months to no more 
than eight months after service of the OIP. Pursuant to the proposal, 
under the 75-day timeline, the hearing would begin approximately two 
and one-half months (but not more than six months) from the date of 
service of the OIP, and for 30-day proceedings, the hearing would begin 
approximately one month (but no more than four months) from the date of 
service of the OIP. Consistent with current practice, the hearing 
officer would issue an order setting the hearing dates following a 
prehearing conference with the parties pursuant to Rule 221. The 
proposed extensions of time were designed to accommodate deposition 
discovery in 120-day cases and generally allow for additional time for 
prehearing preparation and review of documents, while retaining an 
outer time limit to promote timely and efficient resolution of the 
proceedings.
    Proposed Rule 360(a)(2)(ii), like current Rule 360(a)(2), 
contemplated an initial schedule allowing approximately two months for 
review of transcripts and submission of post-hearing briefs.
    Third, the proposal adds a procedure for the hearing officer to 
extend the initial decision deadline. Under proposed Rule 
360(a)(3)(ii), the hearing officer is permitted to certify to the 
Commission the need to extend the initial decision deadline by up to 30 
days for case management purposes. This certification must be issued at 
least 30 days before the expiration of the initial decision deadline, 
and the proposed extension would take effect absent a Commission order 
to the contrary issued within 14 days after it receives the 
certification.
2. Comments Received
    Commenters generally supported extensions of the prehearing period 
under Rule 360, but some suggested that longer or more flexible periods 
be adopted. Several commenters advocated longer prehearing periods of, 
for instance, twelve months or eighteen months,\7\ and one commenter 
argued against any ``pre-determined limit[s]'' on the timing of 
proceedings.\8\ A number of commenters argued that hearing officers 
should be given the discretion to set the prehearing period or to 
authorize extensions of the period on a case-by-case basis.\9\ Several 
commenters suggested alternative methods for calculating the prehearing 
period, for instance, based on the length of the Division of 
Enforcement (the ``Division'') investigation \10\ or the date the 
Division completes production of the investigative file.\11\
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    \7\ See, e.g., Financial Services Roundtable letter dated 
December 4, 2015 (``FSR''); New Jersey State Bar Association letter 
dated December 1, 2015 (``NJSBA'').
    \8\ See Zornow/Gunther/Silverman.
    \9\ See, e.g., Susan E. Brune letter dated November 24, 2015 
(``Brune''); Grundfest; Calfee, Halter & Griswold, LLP letter dated 
November 30, 2015 (``Calfee''); Gibson, Dunn & Crutcher LLP letter 
dated December 4, 2015 (``Gibson'').
    \10\ See Stephen E. Hudson letter dated December 3, 2015 
(``Hudson I'').
    \11\ See Gibson; Calfee.
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    In urging longer prehearing periods, commenters argued that 
respondents need longer discovery periods to review and address 
evidence gathered by the Division during the investigation that 
precedes the institution of proceedings. These commenters generally 
cited the size of the Division's investigative files (including 
electronic document productions) to be reviewed by respondents during 
the period, the time required for respondents to receive the complete 
investigative file during the prehearing period, and the need to 
counter lengthy and extensive Division investigations.\12\ Commenters 
also offered comparisons to the length of discovery and flexible 
scheduling procedures in federal courts and in the administrative 
proceedings of some other agencies.\13\
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    \12\ See, e.g., Navistar International Corporation letter dated 
December 3, 2015 (``Navistar'').
    \13\ See Brune; Gibson; Navistar.
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    Most commenters who addressed this proposed rule focused on the 
maximum prehearing period for proceedings designated as 120-day 
matters. But one commenter urged further extensions to the prehearing 
period for all administrative proceedings and to other time periods 
designated under Rule 360(a)(2)(ii).\14\ This commenter supported the 
proposal to divorce the deadline for the initial decision from the 
other stages of the proceeding but argued that the Commission should 
extend the period for post-hearing briefing to three months, rather 
than the two months allocated under both the current and proposed 
rules. The commenter also suggested modifying the certification process 
for 30-day extensions under Rule 360 to require the hearing officer's 
certification to be issued 45 or 60 days before the deadline, and an 
order from the Commission expressly granting or rejecting the proposed 
extension.\15\
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    \14\ NJSBA.
    \15\ Id.

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[[Page 50214]]

3. Final Rule
    We are adopting Rule 360(a)(2)(i) substantially as proposed, with 
non-substantive modifications intended to clarify that multiple events 
(i.e., completion of post-hearing briefing where a hearing has been 
completed, completion of briefing on a dispositive motion where there 
is no hearing, or the determination of a default) may trigger the 
running of the 30, 75 or 120-day deadline for the initial decision.\16\
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    \16\ We emphasize that, as provided for in current Rule 
360(a)(1), unless the Commission directs otherwise, the hearing 
officer shall prepare an initial decision in any proceeding in which 
the Commission directs a hearing officer to preside at a hearing, 
provided, however, that an initial decision may be waived by the 
parties with the consent of the hearing officer pursuant to Rule 
202.
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    In addition, we believe it is appropriate, consistent with the view 
of commenters suggesting a longer prehearing period under the 120-day 
timeline, to modify the proposed amendments to Rule 360(a)(2)(ii) to 
extend by an additional two months the maximum prehearing period for 
proceedings in this category. As adopted, Rule 360(a)(2)(ii) provides 
that under the 120-day timeline, the hearing officer shall issue an 
order scheduling the hearing to begin approximately four months (but no 
more than ten months, instead of the proposed eight) from the date of 
service of the OIP.\17\ The longer prehearing period is intended to 
provide parties, in appropriate cases, additional time to review the 
investigative record, conduct depositions under amended Rule 233, and 
prepare for a hearing.\18\
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    \17\ The prehearing periods in this rule do not affect the 
statutory hearing requirements in cease-and-desist proceedings. In 
such proceedings, the Commission is required to set a hearing date 
not earlier than 30 days nor later than 60 days after service of the 
OIP, unless an earlier or later date is set by the Commission with 
the consent of any respondent so served. See, e.g., Securities 
Exchange Act of 1934 (``Exchange Act'') Section 21C(b), 15 U.S.C. 
78u-3(b).
    \18\ By lengthening the prehearing period, the Commission does 
not suggest that every 120-day matter will qualify for the maximum 
ten-month period. Proceedings designated for the 120-day timeline 
will range from routine matters involving a single violation of the 
securities laws to matters involving, for example, multiple and 
distinct alleged violations, a particularly voluminous investigative 
record, or a complex set of factual allegations. In setting the 
hearing date, the hearing officer should assess whether the 
proceeding at issue warrants the maximum prehearing period or 
whether a shorter prehearing period would provide the parties with 
adequate preparation time. In keeping with the goal of resolving 
administrative proceedings in an expeditious manner, the maximum 
prehearing period should be the exception rather than the norm.
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    While we recognize that some might view the maximum ten-month 
prehearing period as not long enough, the Commission believes that the 
final rule strikes the appropriate balance between the time needed to 
conduct discovery and prepare for a hearing and the Commission's goal 
of timely and efficiently resolving administrative proceedings.
    In response to commenters urging open-ended prehearing periods as 
determined by hearing officers, we note that the Commission amended 
Rule 360 in 2003 to impose mandatory deadlines for completion of 
initial decisions because of concerns about adherence to the Rule's 
then-existing non-binding goals.\19\ We continue to believe that timely 
completion of proceedings can be achieved more successfully with 
express deadlines for completion of the various steps in the 
administrative proceeding. In designating timeframes for proceedings in 
the OIP, the Commission considers ``the nature, complexity, and urgency 
of the subject matter,'' with due regard for the public interest and 
the protection of investors.\20\
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    \19\ See 2003 Release, 68 FR at 35787.
    \20\ 17 CFR 201.360(a)(2)(i).
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    We are amending Rule 360(a)(2)(ii) in one additional respect to 
resolve an apparent discrepancy with existing Rule 340, which governs 
the timeframes for filing post-hearing briefs. Specifically, we are 
amending Rule 360(a)(2)(ii) to remove the approximately two-month 
timeframe for obtaining transcripts and submitting post-hearing briefs. 
The Commission included these internal timeframes when it amended Rule 
360 in 2003 to address concerns that setting only an outside deadline 
for the issuance of an initial decision by the hearing officer could 
incentivize the hearing officer to curtail the parties' prehearing 
preparation time and post-hearing briefing time while reserving the 
majority of the overall time period for the hearing officer to draft 
the initial decision.\21\ This should not be a concern under amended 
Rule 360, because under the amended rule the deadline for filing the 
initial decision is triggered not by the date of service of the OIP, 
but by the completion of post-hearing briefing (or, if there is no 
hearing, the completion of briefing on a dispositive motion or the 
determination of a default). The ``approximately 2-month'' language 
contained in current and proposed Rule 360 for submission of post-
hearing briefs also may create unnecessary ambiguity in the post-
hearing briefing requirements set forth in Rule 340, which provides 
that the hearing officer shall by order set the deadlines for post-
hearing briefing for a period that shall not exceed 90 days after the 
close of the hearing, unless the hearing officer, for good cause shown, 
permits a different period.\22\
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    \21\ See 2003 Release, 68 FR at 35787.
    \22\ We did not propose, and are not now amending, Rule 340. 
However, given that one of the overall purposes of these amendments 
is to promote efficiency in the adjudication of administrative 
proceedings, the ``good cause'' standard for granting extensions 
beyond the 90-day timeframe set forth in Rule 340 should continue to 
be rarely granted, limited to truly unusual circumstances, and not 
introduce undue delay in the resolution of proceedings.
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    We are adopting Rule 360(a)(2)(ii) as proposed with respect to the 
scheduling of hearings in 75-day and 30-day proceedings, with a 
conforming change to remove the approximate timeframes set forth in the 
rule for obtaining a transcript and submitting post-hearing briefs, for 
the reasons discussed above. The final amendment provides for an outer 
limit of six months for the hearing to commence under the 75-day 
timeline, and an outer limit of four months for the hearing to commence 
in 30-day proceedings. Proceedings in the 75-day category typically 
involve ``follow-on'' proceedings following certain injunctions or 
criminal convictions.\23\ The 30-day designation typically is reserved 
for proceedings under Section 12(j) of the Exchange Act.\24\ We 
continue to believe that the proposed prehearing periods for these 
cases is appropriate since they are by their nature more routine than 
120-day proceedings, and are sometimes uncontested. We therefore 
believe that the prehearing periods for these cases, which we are 
adopting as proposed, will provide adequate preparation time for the 
parties while balancing the need for efficient resolution of 
administrative proceedings.
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    \23\ The Commission is authorized to institute administrative 
proceedings following certain injunctions or convictions of persons 
associated with or seeking to associate in the securities industry. 
See, e.g., Exchange Act Section 15(b), 15 U.S.C. 78o(b); Section 
203(f) of the Investment Advisers Act of 1940, 15 U.S.C. 80b-3(f).
    \24\ Section 12(j) of the Exchange Act authorizes the 
Commission, among other things, to revoke the registration of a 
security if the issuer fails to comply with the federal securities 
laws. See 15 U.S.C. 78l(j).
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    We are adopting Rule 360(a)(3) as proposed. The final rule permits 
the hearing officer presiding over the proceeding to certify to the 
Commission a need to extend the initial decision deadline by up to 30 
days for case management purposes. This certification must be issued no 
later than 30 days prior to the expiration of the initial decision 
deadline. One commenter supported the proposed certification procedure 
but suggested requiring the certification to be issued 45 or 60 days 
prior to the expiration of the initial decision deadline. The 
Commission continues to believe that a 30-day period provides 
sufficient notice

[[Page 50215]]

to the parties of the hearing officer's certification. In response to 
the comment suggesting the Commission issue an order expressly granting 
or rejecting the hearing officer's proposed extension, we do not 
believe this added procedure is necessary. As adopted, the rule 
provides that if the Commission has not issued an order to the contrary 
within 14 days after receiving the certification, the extension sought 
in the hearing officer's certification shall take effect. In the 
Commission's view, the final rule provides sufficient clarity on 
whether the proposed extension has been granted.

B. Rule 233 (Depositions Upon Oral Examination)

 1. Proposed Rule
    Current Rule 233 permits any party to move for permission to take 
the deposition of a witness who likely will be unavailable to attend or 
testify at the hearing. We proposed to amend Rule 233 to permit a 
limited number of additional depositions. As proposed, amended Rule 233 
permits the respondent and the Division in a single-respondent 
proceeding designated as a 120-day proceeding each to notice the 
depositions of three persons. In a multi-respondent 120-day proceeding, 
the Division is permitted to notice five depositions, and the 
respondents collectively can also notice five depositions. Under the 
proposal, the parties could also request that the hearing officer issue 
a subpoena for documents in conjunction with the deposition. Proposed 
Rule 233 also sets forth procedures for deposition practice, including 
a six-hour time limit for depositions, contents of the notice of 
deposition, and other matters.
2. Comments Received
    Most commenters urged that the final rule provide respondents the 
ability to conduct more depositions than the Commission proposed. 
Commenters appeared to be animated by two principal concerns. First, 
commenters believed that the Commission's proposal to limit parties to 
a fixed number of depositions did not accommodate respondents' 
potential need for additional depositions depending on the facts and 
circumstances of the individual case, particularly in complex or multi-
party proceedings.\25\ Second, commenters argued that the Division's 
investigation before the Commission initiates proceedings creates an 
information imbalance that warrants providing respondents with 
additional opportunities to conduct depositions.\26\
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    \25\ Center for Capital Market Competitiveness, U.S. Chamber of 
Commerce letter dated December 4, 2015 (``CCMC''); Calfee; NJSBA; 
Navistar; Hudson I; Zornow/Gunther/Silverman; FSR; Gibson; 
Grundfest.
    \26\ Aegis J. Frumento and Stephanie Korenman letter dated 
December 4, 2015 (``Frumento/Korenman''); Brune; Navistar; Hudson I; 
Zornow/Gunther/Silverman; FSR; CCMC.
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    Commenters suggested a variety of possible parameters for 
additional depositions. Most commenters urged that hearing officers be 
granted discretion to approve requests for additional depositions, 
similar to the practice under Rule 30 of the Federal Rules of Civil 
Procedure.\27\ Commenters criticized the ``one size fits all'' approach 
of the proposed rule,\28\ and argued that hearing officer discretion in 
the matter of depositions is necessary because each case presents 
unique facts and circumstances. Three commenters suggested guidelines 
for exercising such discretion based on limitations found in Rule 26 of 
the Federal Rules of Civil Procedure.\29\
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    \27\ Brune; Calfee; NJSBA; Navistar; Hudson I; Gibson; Frumento/
Korenman; CCMC. One of these commenters further pointed out that the 
adjudication rules of the Federal Trade Commission do not limit the 
number of discovery depositions. Gibson (citing 16 CFR 3.31(a)). 
However, one commenter believed that a limit of ten depositions per 
party would be reasonable. FSR.
    \28\ Stephen E. Hudson letter dated December 4, 2015 (``Hudson 
II'', incorporating anonymous blog); Zornow/Gunther/Silverman.
    \29\ NJSBA (citing Fed.R.Civ.P. 26(b)(2)(C)); Hudson I (same); 
Gibson (citing Fed.R.Civ.P. 26(b)(1)).
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    Commenters differed on the number of depositions they believed the 
rule should permit as a matter of right (i.e., before a party would be 
required to seek leave from the hearing officer to notice the 
deposition). A number of commenters pointed the Commission to Rule 
30(a)(2) of the Federal Rules of Civil Procedure as an appropriate 
model.\30\ Rule 30(a)(2) requires leave of court for a deposition if 
the deposition would result in plaintiffs as a group or defendants as a 
group taking more than ten depositions.\31\ Two of these commenters 
further urged that ten depositions be permitted to each party \32\ or 
each respondent,\33\ rather than to each side. One commenter suggested 
five depositions for each respondent in either a single-respondent or 
multi-respondent proceeding as an appropriate starting point, coupled 
with hearing officer discretion to enlarge the number.\34\
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    \30\ Brune; Navistar; Hudson I; FSR; CCMC.
    \31\ Fed.R.Civ.P. 30(a)(2)(A)(i).
    \32\ FSR.
    \33\ CCMC.
    \34\ Gibson.
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    Three commenters supported the Commission's proposal of three 
depositions in a single-respondent proceeding and five depositions in a 
multi-respondent proceeding, subject, again, to hearing officer 
discretion to enlarge the number, and with certain other caveats.\35\ 
One of these commenters suggested that the three- and five-deposition 
limits proposed by the Commission should be limited to fact witnesses, 
and not include experts.\36\ A second commenter proposed that hearing 
officers be required to grant a party in a single-respondent proceeding 
leave to take more than three depositions, and a party in a multi-
respondent proceeding leave to take more than five depositions.\37\ 
Another of these commenters added that that the Division should not be 
permitted to notice any depositions at all.\38\ Two commenters urged 
that the rule not set any predetermined limits, but rather that the 
number of depositions be left entirely to the discretion of the hearing 
officer.\39\
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    \35\ Calfee; NJSBA; Frumento/Korenman.
    \36\ Calfee; see also CCMC (proposing ten depositions of right 
for each respondent, not including expert depositions, which would 
be separately authorized by the hearing officer).
    \37\ NJSBA.
    \38\ Frumento/Korenman.
    \39\ Zornow/Gunther/Silverman; Grundfest.
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    A number of commenters took issue with the Commission's proposal 
that the respondents in a multi-respondent proceeding share a fixed 
number of depositions.\40\ These commenters generally argued that, 
because respondents may have divergent interests, each respondent 
should be entitled to take the same number of depositions.\41\ In 
addition, several commenters--citing the ability of the Division to 
develop an extensive investigative record before the initiation of the 
proceeding--argued that the Division should not be permitted to take 
any depositions, or that its right to do so should be limited in 
various ways.\42\
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    \40\ Calfee; Hudson II (incorporating anonymous blog); FSR; 
Gibson; CCMC.
    \41\ FSR; CCMC.
    \42\ Brune (Division should be permitted to depose only 
respondents' experts, or fact witnesses with leave); Hudson I 
(same); FSR (Division should not be able to depose witnesses whose 
testimony was taken during the investigation); Frumento/Korenman (no 
depositions at all for Division); CCMC (Division should only be 
permitted to take depositions based upon proffer to hearing officer 
explaining why the staff were unable to take testimony during the 
investigation, or that the deposition is needed because of new 
information obtained after the completion of the investigation).
---------------------------------------------------------------------------

    Finally, two commenters urged that the Commission permit seven 
hours for each deposition, consistent with the practice in federal 
courts, rather than the proposed six hours.\43\
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    \43\ Calfee; FSR; see Fed.R.Civ.P. 30(c).

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[[Page 50216]]

3. Final Rule
    We are adopting the proposed amendments to Rule 233 with certain 
modifications. The proposed amendments to Rule 233, in conjunction with 
increasing the maximum prehearing time period under Rule 360, were 
intended to provide parties with the potential benefits of deposition 
discovery without sacrificing the public interest or the Commission's 
goal of resolving administrative proceedings promptly and efficiently. 
We have weighed commenters' concerns against the need to maintain this 
balance.
    There are sound justifications for limiting the availability of 
depositions in Commission administrative proceedings as compared with 
litigation under the Federal Rules of Civil Procedure. Typically, in a 
federal civil action a complaint is filed, and, because neither party 
can compel testimony prior to the filing of the complaint, oral 
depositions thereafter play a critical role in gathering preliminary 
and background discovery, in addition to gathering evidence for use at 
trial. However, in a Commission enforcement action, the complaint (in a 
federal court action) or the OIP (in an administrative proceeding) is 
premised on an evidentiary record developed through the staff's pre-
filing investigation. The Division produces to respondents various 
materials from the investigative file--i.e., non-privileged documents 
gathered by the Division, transcripts of investigative testimony, and 
disclosure of material, exculpatory facts (Brady material)--that 
provide significant guidance to respondents in determining the most 
important witnesses to depose.\44\ Thus, as some commenters appeared to 
acknowledge, a principal goal of oral depositions in our administrative 
proceedings would be to supplement the record, not create it.\45\ Given 
these different starting points, the fact that rules that govern 
discovery in federal court also apply to Commission federal court 
enforcement actions does not provide a compelling reason for 
incorporating the same deposition discovery rules into our 
administrative practice, in particular given the Commission's strong 
interest in establishing a timely and efficient administrative 
forum.\46\ Accordingly, we do not agree with commenters who advocated 
further expanding the proposed oral deposition rights in our 
administrative proceedings commensurate with Rule 30 of the Federal 
Rules of Civil Procedure, including ten depositions per side (or per 
party) as of right.
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    \44\ Rule 230 requires early production by the Division of non-
privileged documents and transcripts of testimony obtained during 
the investigation. Under Rule 230, which incorporates certain 
criminal process rights derived from criminal cases and statutes, 
respondents receive documents that contain material exculpatory 
evidence under Brady v. Maryland, 373 U.S. 83, 87 (1963). No 
analogous provision is present in the Federal Rules of Civil 
Procedure.
    \45\ See Brune (transcripts of investigative testimony ``can 
reflect no meaningful exploration of important areas. . . .''); 
Hudson I (same); FSR (``[R]espondents did not have an opportunity to 
ask [investigative] witnesses questions or to choose which witnesses 
to examine.'').
    \46\ See supra note 2. In response to the commenter who also 
pointed us to the adjudication rules of the FTC, we note that agency 
practice is varied on this issue. See Gibson. A number of agencies 
do not permit prehearing discovery depositions except with respect 
to witnesses who will be unavailable at the hearing. See, e.g., 12 
CFR 1081.209 and 77 FR 39057, 39073 (June 29, 2012) (Consumer 
Financial Protection Bureau); 17 CFR 10.44 and 41 FR 2508, 2509 
(Jan. 16, 1976) (Commodity Futures Trading Commission); 12 CFR 
308.27 (Federal Deposit Insurance Corporation).
---------------------------------------------------------------------------

    At the same time we recognize, as many commenters noted, that some 
cases may present unique issues or challenges that warrant affording 
the parties additional opportunities to conduct prehearing depositions. 
While the Commission's expectation is that such circumstances will 
rarely be present, we agree that our rules should be flexible enough to 
accommodate reasonable requests for a limited number of additional 
depositions. For this reason, the final rule includes a new provision, 
Rule 233(a)(3), that permits either side to move the hearing officer 
for leave to notice up to two additional depositions.
    Paragraphs (a)(1) and (2) of amended Rule 233 retain the proposed 
rule's limitations on depositions as a matter of right. They provide 
that, in a single-respondent proceeding under the 120-day timeframe set 
forth in Rule 360, the respondent and the Division may each file 
written notices to depose up to three persons; and, in a multi-
respondent 120-day proceeding, the respondents collectively may file 
joint written notices to depose up to five persons and the Division may 
file written notices to depose up to five persons.\47\ However, because 
we are persuaded that a seven-hour limit to depositions, rather than 
the six-hour limit we proposed, balances the Commission's goal of 
timely and efficient administrative proceedings and the benefits of 
allowing parties more time to depose witnesses, we have revised 
paragraph (j)(1) of Rule 233 to provide for a seven-hour limit to 
depositions.\48\ Amended paragraph (a)(5) further makes clear that the 
fact that a witness testified during an investigation does not preclude 
the deposition of that witness.\49\
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    \47\ Federal Rule of Civil Procedure 30(a)(2)(A) similarly sets 
a deposition limit per side, not per party. See 8A Charles Alan 
Wright, Arthur R. Miller & Richard L. Marcus, Federal Practice and 
Procedure section 2104 (3d ed.).
    \48\ This is consistent with the Federal Rules of Civil 
Procedure. See Fed.R.Civ.P. 30(d)(1).
    \49\ This provision has been renumbered from the proposed rule, 
where it was numbered paragraph (a)(4).
---------------------------------------------------------------------------

    The final rule limits depositions to 120-day proceedings as 
proposed. Thus, parties will not be permitted to notice depositions in 
proceedings where the initial decision is placed on either the 30- or 
75-day timeline under amended Rule 360. As adopted, Rule 360 provides 
for the hearing in proceedings placed on the 120-day timeline to 
commence between four and ten months from the date of service of the 
OIP. We anticipate that this extended period will provide sufficient 
time for parties to take the allotted number of depositions, along with 
any additional depositions that may be permitted under new paragraph 
(a)(3) of the Rule (discussed below), and to complete their other 
prehearing preparation. Further, as discussed below, and as reflected 
in amended Rule 221, we expect that the depositions each party plans to 
notice, including the identities of the proposed deponents, will be one 
of the topics discussed at any initial prehearing conference.\50\
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    \50\ See infra discussion at section H.
---------------------------------------------------------------------------

    We disagree with commenters who urged that the Division not be 
permitted to notice depositions (or have its deposition rights limited) 
in view of the Division's ability to take investigative testimony 
before the proceedings are instituted. Investigative testimony 
generally is directed at ascertaining facts in order for the staff to 
determine whether to recommend that the Commission authorize an action 
for violations of the federal securities laws. Once the investigative 
record has been sifted through and the Commission has instituted an 
administrative proceeding, issues relevant to a claim or defense may 
become clarified and warrant new or additional focus in discovery.\51\ 
Thus, the prehearing discovery context is sufficiently different from 
the investigation such that the Division should be entitled to the same 
discovery rights as respondents in order to prepare

[[Page 50217]]

its case for the hearing.\52\ Moreover, information gathered from 
depositions taken by the respondents might reveal the need for the 
Division to depose other persons. Also, in some instances, witnesses 
decline to answer questions in investigative testimony based upon 
assertion of attorney-client privilege or the Fifth Amendment, but 
those protections might no longer apply by the time of depositions in 
an administrative proceeding. Thus, many reasons support the need for 
the Division to have the same rights as respondents to conduct 
depositions.
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    \51\ As just one example, the Commission's experience has been 
that issues relating to possible reliance on professionals are not 
always clarified during the investigation. Today the Commission is 
also amending Rule 220 to require that respondents state in an 
answer whether they relied on professionals. This early statement 
will enable the Division to consider this issue in formulating its 
deposition plan.
    \52\ See SEC v. Saul, 133 FRD. 115 (N.D. Ill. 1990); SEC v. 
Espuelas, 699 F. Supp. 2d 655 (S.D.N.Y. 2010). ``There is no 
authority which suggests that it is appropriate to limit the SEC's 
right to take discovery based upon the extent of its previous 
investigation into the facts underlying the case.'' SEC v. Sargent, 
229 F.3d 68, 80 (1st Cir. 2000) (relying on Saul).
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    New paragraph (a)(3) of amended Rule 233 permits the hearing 
officer in a 120-day proceeding to grant either side leave to take up 
to two additional depositions beyond those permitted under paragraphs 
(a)(1) and (2). This means that, in proceedings involving a single 
respondent, the hearing officer may permit up to a maximum of five 
depositions for the respondent and five depositions for the Division. 
In proceedings involving multiple respondents, the hearing officer may 
permit up to a maximum of seven depositions for all respondents, 
collectively, and seven depositions for the Division.
    Paragraph (a)(3) is intended to permit a limited number of 
additional depositions in compelling circumstances without 
significantly increasing the burdens for all the parties or undermining 
the goal of providing a prompt and efficient administrative forum. As 
discussed above, we have increased the prehearing period in 120-day 
proceedings to a maximum of ten months. As amended, Rule 233 will now 
permit parties to notice up to seven depositions of witnesses from 
among the categories set forth in amended Rule 232(e), compared with no 
depositions permitted under the current rule (except for witnesses 
likely to be unavailable at the hearing). We believe that these new 
deposition opportunities will afford respondents and the Division 
additional opportunities to develop the record without compromising the 
hearing schedule.
    A motion for additional depositions under paragraph (a)(3) must be 
filed no later than 90 days prior to the hearing date. We anticipate 
that this deadline will give the parties sufficient time at the outset 
of a proceeding to identify additional witnesses they wish to depose, 
and to confer with other parties to determine whether they intend also 
to file a motion and, in a multi-respondent proceeding, whether there 
are any common putative deponents, before moving the hearing officer 
for leave. This deadline should also enable any motions to be resolved 
and additional depositions to be taken in a timely manner, consistent 
with the needs of the parties to prepare for the hearing.
    To support a prompt determination on a motion for additional 
depositions, paragraph (a)(3)(i) establishes a simplified motion 
practice leading to an expedited decision from the hearing officer. Any 
party opposing the motion must file its opposition, if any, within five 
days; the motion and any oppositions are each limited to seven pages; 
and neither separate points and authorities nor replies are 
permitted.\53\ The proceeding will not automatically be stayed during 
the pendency of a motion. Further, under paragraph (a)(3)(iii), if the 
moving party proposes to take the additional depositions upon written 
questions, as provided for in Rule 234, the motion must state that 
fact, and the written questions must be submitted with the motion for 
additional depositions.
---------------------------------------------------------------------------

    \53\ We have made separate conforming amendments to Rule 154 
(Motions), whereby the requirements of that rule do not apply where 
another rule expressly applies to a particular motion.
---------------------------------------------------------------------------

    Paragraph (a)(3)(ii) establishes two requirements for a grant of 
additional depositions. First, the additional depositions must satisfy 
the requirements of Rule 232(e). Amended Rule 232(e), among other 
things, requires the hearing officer, upon application, to quash or 
modify a deposition if the deposition would be unreasonable, 
oppressive, unduly burdensome, would unduly delay the hearing, or if 
the proposed deponent does not fall within one of the three categories 
of witnesses authorized for depositions under Rule 232(e)(3). By 
requiring that any additional depositions satisfy the requirements of 
Rule 232(e), we intend to incorporate the standards under that Rule 
into the motion practice under paragraph (a)(3); opposing parties do 
not need to file a separate application to quash.\54\ However, for any 
depositions a party may take as a matter of right, the Commission or a 
hearing officer may quash such a deposition notice following the filing 
of a motion made pursuant to Rule 232(e).
---------------------------------------------------------------------------

    \54\ This does not preclude proposed deponents or other persons 
described in Rule 232(e)(1) from filing an application under that 
rule to quash or modify a notice of deposition or a subpoena.
---------------------------------------------------------------------------

    If the requested additional depositions satisfy the threshold 
requirements of Rule 232(e), the moving side must also demonstrate that 
it has a compelling need to take the additional depositions. To make 
this showing the moving side must, in its motion, identify each witness 
that it intends to depose as of right and the additional witnesses that 
it seeks to depose; describe the role of each witness and each proposed 
additional witness; describe the matters concerning which each witness 
and each proposed additional witness is expected to be questioned and 
why each deposition is necessary to the side's arguments, claims, or 
defenses; and show that the additional depositions requested will not 
be cumulative or duplicative.
    Paragraph (b) of amended Rule 233 retains the existing procedure 
whereby a party may seek leave of the hearing officer to take the 
deposition of a witness who will likely be unavailable to attend or 
testify at the hearing. A deposition granted under paragraph (b) does 
not count against the moving side's permissible number of depositions 
by right or additional depositions under paragraph (a). Nothing in the 
rules as amended changes the current practices or standards for 
obtaining leave to depose individuals under paragraph (b). As before, a 
deposition under Rule 233(b) is available only upon a showing that the 
prospective witness will likely give testimony that is material to the 
hearing; that it is likely the prospective witness will be unable to 
attend or testify at the hearing because of age, sickness, infirmity, 
imprisonment, other disability, or absence from the United States 
(unless it appears that absence of the witness was procured by the 
moving party); and that the taking of the deposition will serve the 
interests of justice. These standards should prevent this provision 
from being used as a means to circumvent the number of depositions 
allowed under Rule 233(a).
    We received no comments on the remaining proposed amendments to 
Rule 233, with the exception, as noted above, of the six-hour length of 
depositions. The final rule changes this to seven hours.\55\
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    \55\ We note that we have made certain other minor changes to 
this rule from the proposed rule, including: (1) Deleting the 
requirement that a notice of deposition describe the scope of the 
testimony to be taken; (2) requiring that each party bear its own 
transcription costs; (3) clarifying that the deposition officer must 
furnish a copy of the transcript to any party or the deponent, as 
directed by the party or person paying the charges; and (4) 
providing that any party may seek relief from the hearing officer 
with respect to disputes over the conduct of a deposition. These 
changes are generally intended to simplify the rule text or to 
clarify minor procedural matters.

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[[Page 50218]]

C. Amendments to Rule 232 (Subpoenas)

1. Proposed Rule
    Current Rule 232 addresses the availability of, and standards for 
issuing, subpoenas requiring the attendance of witnesses at hearings 
and the production of documents. We proposed amendments to Rule 232 to 
correspond with the new provisions on depositions in Rule 233. As 
proposed, amended Rule 232(e)(1) permits a person who is subject to a 
deposition notice, or a party, to move to quash or modify the notice. 
This proposed amendment is intended to promote efficiency in the 
discovery process by allowing persons to move at the notice stage, 
rather than waiting for a party to request the issuance of a subpoena 
to compel attendance. Proposed paragraphs (e)(2) and (3) of the rule 
establish additional standards governing the hearing officer's decision 
on an application to quash or modify a notice of deposition or 
subpoena. Proposed paragraph (e)(2) adds undue delay of the hearing as 
a ground for quashing or modifying a deposition notice or subpoena (to 
the existing grounds that compliance would be unreasonable, oppressive, 
or unduly burdensome). This amendment requires the hearing officer or 
the Commission to consider the delaying effect of compliance with a 
subpoena or notice of deposition, and is intended to promote the 
efficient use of time for discovery during the prehearing period.
    Proposed paragraph (e)(3) requires that the hearing officer or the 
Commission quash or modify the subpoena unless the requesting party 
demonstrates that the proposed deponent is a fact witness (except that 
those witnesses whose only knowledge of relevant facts arose from the 
Division's investigation or the proceeding may not be deposed), an 
expert witness designated pursuant to Rule 222(b), or a document 
custodian (except those Division or Commission personnel who have 
custody of documents or data that were produced by the Division to the 
respondent), and that the notice or subpoena otherwise satisfies the 
requirements of Rule 233(a). This provision is intended to foster use 
of depositions where appropriate and promote meaningful discovery, 
within the limits of the number of depositions provided per side 
pursuant to proposed Rule 233(a).
    Proposed Rule 232(f) requires each party to pay the fees and 
expenses of its own expert witnesses.
2. Comments Received
    One commenter submitted for our consideration several links to a 
securities blog that criticized many of the proposed changes to our 
Rules of Practice.\56\ With respect to Rule 232, the author of the blog 
made two principal comments. The author took issue with the requirement 
of Rule 232 that a subpoena be issued by the hearing officer, as 
compared with Rule 45 of the Federal Rules of Civil Procedure, which 
permits parties to issue subpoenas without the judge acting as a 
``gatekeeper.'' The author asserted that hearing officers, ``at the 
prodding of'' the Division, permit only limited discovery in 
administrative proceedings, and criticized the proposed changes to Rule 
232 for not addressing this situation. The author also objected to the 
requirement of proposed Rule 232(e)(3) that a subpoena be quashed or 
modified unless the requesting party demonstrates that the proposed 
deponent is a fact witness, an expert witness, or a document custodian. 
The author argued that, instead, respondents should be permitted to use 
their allotted number of depositions to notice persons they deem 
important to their defense irrespective of such limitations.
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    \56\ Hudson II.
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3. Final Rule
    We are adopting amended Rule 232 substantially as proposed, with 
one change to correspond to changes we have made to Rule 220 (``Answer 
to Allegations''). As is discussed below, we have adopted an amendment 
to Rule 220 that requires respondents to state in the answer whether 
they relied on professionals. In conjunction with this change, we have 
amended Rule 232(e)(3)(i) to clarify that a proposed deponent may 
include a fact witness relative to any claim of the Division, any 
defense, or anything else required to be included in an answer pursuant 
to Rule 220(c).
    With regard to the one comment referenced above, we note, first, 
that Rule 232 is based on Section 555(d) of the Administrative 
Procedure Act (``APA''),\57\ which does not contemplate that parties to 
agency proceedings would themselves issue subpoenas.\58\ The grounds 
for a hearing officer denying a request to issue a subpoena under Rule 
232--that it is ``unreasonable, oppressive, excessive in scope, or 
unduly burdensome''--are also consistent with well-established judicial 
standards,\59\ and we have no evidence that hearing officers are not 
acting diligently and in good faith in their consideration of current 
requests for subpoenas, or that they would not do so in implementing 
the standards for quashing or modifying deposition subpoenas set forth 
under the amended rule.
---------------------------------------------------------------------------

    \57\ 1995 Release, 60 FR at 32764.
    \58\ 5 U.S.C. 555(d); Attorney General's Manual on the 
Administrative Procedure Act, section 6(c) (1947) (``Attorney 
General's Manual'').
    \59\ Attorney General's Manual, section 6(c) (``[A]gencies may 
refuse to issue to private parties subpoenas which appear to be so 
irrelevant or unreasonable that a court would refuse to enforce 
them.''); Wiwa v. Royal Dutch Petroleum Co., 392 F.3d 812 (5th Cir. 
2004) (under Federal Rule of Civil Procedure 45, a court has the 
power to quash or modify a subpoena if it is unreasonable and 
oppressive, and subjects a party to undue burden).
---------------------------------------------------------------------------

    Second, depositions impose costs and burdens not just on the party 
taking the deposition but on all other parties to the proceeding and 
upon the deponent. The proposed rule was based on the Commission's 
experience that fact witnesses, expert witnesses, and document 
custodians are the individuals most likely to have information relevant 
to the issues to be decided.\60\ We are not aware of, nor did any 
commenter suggest, any other categories of witnesses whose deposition 
would be necessary in administrative proceedings. If there are 
instances in which a party requires the testimony of a witness who does 
not fit within the three categories to testify, the party may seek to 
call that witness at the hearing, either by voluntary appearance or by 
subpoena of the witness, if otherwise permitted under the Rules.
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    \60\ In contrast to Federal Rule of Civil Procedure 30(b)(6), 
neither current Rule 232(e)(3) nor Rule 233 permits depositions of a 
public or private corporation, partnership, association, 
governmental agency, or other entity. Such depositions are not 
permitted under the amended Rules of Practice.
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D. Rule 141 (Orders and Decisions; Service of Orders Instituting 
Proceedings and Other Orders and Decisions)

1. Proposed Rule
    Rule 141(a)(2)(iv) \61\ contains the requirements for serving an 
OIP on a person in a foreign country. The current rule allows for 
service of an OIP on persons in foreign countries by any method 
specified in the rule, or ``by any other method reasonably calculated 
to give notice, provided that the method of service used is not 
prohibited by the law of the foreign country.''
---------------------------------------------------------------------------

    \61\ 17 CFR 201.141(a)(2)(iv).
---------------------------------------------------------------------------

    We proposed to amend this rule so that service reasonably 
calculated to give notice includes any method

[[Page 50219]]

authorized by the Hague Convention on the Service Abroad of Judicial 
and Extrajudicial Documents; methods prescribed by the foreign 
country's law for service in that country in an action in its courts of 
general jurisdiction; or as the foreign authority directs in response 
to a letter rogatory or letter of request. In addition, under the 
proposed rule, unless prohibited by the foreign country's law, service 
can be made by delivering a copy of the OIP to the individual 
personally, or using any form of mail that the Secretary or the 
interested division addresses and sends to the individual and that 
requires a signed receipt. The proposed rule also allows service by any 
other means not prohibited by international agreement, as the 
Commission or hearing officer orders. Like the similar provision in the 
Federal Rules of Civil Procedure, this provision covers situations 
where existing agreements do not apply, or efforts to serve under such 
agreements are or would be unsuccessful.
    We also proposed to amend Rule 141(a)(3), which requires the 
Secretary to maintain a record of service on parties, to make clear 
that in instances where a division of the Commission (rather than the 
Secretary) serves an OIP, the division must file with the Secretary 
either an acknowledgement of service by the person served or proof of 
service.
2. Final Rule
    We did not receive comments on this aspect of the proposal and are 
adopting the amendments as proposed. In addition to clarifying that 
proper service on persons in foreign countries may be made by any of 
the above methods, the rule provides certainty regarding whether 
service of an OIP has been effected properly and allows the Commission 
to rely on international agreements in which foreign countries have 
agreed to accept certain forms of service as valid. The final amendment 
provides that a division that serves an OIP must file with the 
Secretary either an acknowledgement of service by the person served or 
proof of service consisting of a statement by the person who made 
service certifying the date and manner of service; the names of the 
persons served; and their mail or electronic addresses, facsimile 
numbers, or the addresses of the places of delivery, as appropriate for 
the manner of service.

E. Rule 161 (Extensions of Time, Postponements and Adjournments)

    Rule 161 \62\ governs extensions of time, postponements, and 
adjournments requested by parties. Under current Rule 161(c)(2), a 
hearing officer may stay a proceeding pending the Commission's 
consideration of offers of settlement under certain limited 
circumstances, but that stay does not affect any of the deadlines in 
Rule 360. In recognition of the important role of settlement in 
administrative proceedings, we proposed to amend Rule 161(c)(2) to 
allow a stay pending Commission consideration of settlement offers to 
also stay the timelines set forth in Rule 360.\63\ All the other 
requirements for granting a stay under the current rule would remain 
unchanged. The Commission did not receive any comments on this aspect 
of the proposal. We are adopting the amendments as proposed.
---------------------------------------------------------------------------

    \62\ 17 CFR 201.161.
    \63\ We are also adopting a conforming amendment to Rule 
360(a)(2)(ii) to include a cross-reference to amended Rule 
161(c)(2).
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F. Rule 180 (Sanctions)

    Current Rule 180 allows the Commission or a hearing officer to 
exclude a person from a hearing or conference, or summarily suspend a 
person from representing others in a proceeding, if the person engages 
in contemptuous conduct before either the Commission or a hearing 
officer. The exclusion or summary suspension can last for the duration 
or any portion of a proceeding, and the person may seek review of the 
exclusion or suspension by filing a motion to vacate with the 
Commission. We proposed to amend Rule 180 to allow the Commission or a 
hearing officer to exclude or summarily suspend a person for any 
portion of a deposition, as well as the proceeding, a conference, or a 
hearing. The person would have the same right to review of the 
exclusion or suspension by filing a motion to vacate with the 
Commission. We did not receive any comments on this aspect of the 
proposal and are adopting the rule as proposed, with the addition of 
one ministerial edit to Rule 180(c).
    As currently drafted, Rule 180(c) provides that the Commission or 
hearing officer may enter a default pursuant to Rule 155, dismiss the 
case, decide the particular matter at issue against that person, or 
prohibit the introduction of evidence or exclude testimony concerning 
that matter if a person fails to (1) make a filing required under the 
Rules of Practice; or (2) cure a deficient filing within the time 
specified by the Commission or the hearing officer pursuant to Rule 
180(b).\64\ We are amending the Rule to substitute the phrase ``one or 
more claims'' for the phrase ``the case,'' and to substitute the word 
``claim'' for the word ``matter.'' These non-substantive changes are 
designed to more accurately reflect the terminology used in 
administrative proceedings but are not intended to, and do not, change 
the substance of the Rule.
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    \64\ Emphasis added.
---------------------------------------------------------------------------

G. Rule 220 (Answer to Allegations)

1. Proposed Rule
    Current Rule 220 sets forth the requirements for filing answers to 
allegations in an OIP.\65\ Among other things, it requires a respondent 
to state in the answer whether the respondent is asserting any 
defenses, including res judicata and statute of limitations.\66\ We 
proposed amendments to Rule 220 to emphasize that a respondent must 
affirmatively state in an answer whether the respondent is asserting 
any avoidance or affirmative defenses, including but not limited to res 
judicata, statute of limitations or reliance even if such theories are 
``not technically considered affirmative defenses.'' \67\ Timely 
assertion of such theories, we explained, ``would focus the use of 
prehearing discovery, foster early identification of key issues and, as 
a result, make the discovery process more effective and efficient.'' 
\68\
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    \65\ 17 CFR 201.220.
    \66\ Id.
    \67\ 80 FR at 60095. Compare Fed. R. Civ. P. 8(c) (``In 
responding to a pleading, a party must affirmatively state any 
avoidance or affirmative defense.'') ``Generally speaking,'' Federal 
Rule of Civil Procedure 8(c)'s reference to ``an avoidance or 
affirmative defense'' ``encompasses two types of defensive 
allegations: Those that admit the allegations of the complaint but 
suggest some other reason why there is no right of recovery, and 
those that concern allegations outside of the plaintiff's prima 
facie case that the defendant therefore cannot raise by a simple 
denial in the answer.'' 5 Charles Alan Wright, Arthur R. Miller & 
Edward H. Cooper, Federal Practice and Procedure section 1271 (3d 
ed.). As discussed below, in the final rule we have clarified the 
reference to ``reliance'' in the proposed rule.
    \68\ 80 FR at 60095.
---------------------------------------------------------------------------

2. Comments Received
    Commenters generally opposed the proposed amendment and requested 
that it be withdrawn. Commenters' principal contention was that 
``reliance on counsel is not a defense required to be raised in an 
answer, but simply goes to the evidence of whether a respondent acted 
in good faith.'' \69\ Commenters also

[[Page 50220]]

argued that the proposed amendment prejudices respondents, provides an 
unfair advantage to Division staff in administrative proceedings, 
improperly requires respondents to disclose their trial strategy, and 
infringes on the attorney work-product privilege.\70\
---------------------------------------------------------------------------

    \69\ NJSBA (citing Howard v. SEC, 376 F.3d 1136, 1147 (D.C. Cir. 
2004) (holding that ``reliance on the advice of counsel need not be 
a formal defense'')); see also Hudson II (citing anonymous blog 
post) and infra note 72.
    \70\ NJSBA; Hudson II.
---------------------------------------------------------------------------

3. Final Rule
    We continue to believe that timely assertion of reliance would 
focus the use of prehearing discovery and foster early identification 
of key issues, so that they may be explored in discovery and 
depositions, and, as a result, make the discovery process more 
effective and efficient. We therefore are adopting the amended Rule 
substantially as proposed, with one clarifying modification. The final 
rule is not intended to change the substantive law regarding reliance 
or any of the securities laws. The Commission recognizes that, in cases 
involving scienter-based misconduct, the Division bears the burden of 
proof on demonstrating that the respondent acted with scienter.
    However, we have modified the final rule to give more content to 
and clarify the requirement that respondents disclose ``reliance.'' As 
adopted, the final rule now requires a respondent to state in the 
answer ``whether the respondent relied on the advice of counsel, 
accountants, auditors, or other professionals, in connection with any 
claim, violation alleged, or remedy sought.'' The reference to 
accountants, auditors, and other professionals reflects that, in 
addition to arguing that they relied on the advice of counsel, 
respondents in Commission administrative proceedings (and defendants in 
Commission civil enforcement actions) often assert that the respondent 
(or defendant) relied on such professionals in connection with the 
conduct alleged.\71\ The amended rule therefore requires respondents to 
state in their answer whether they intend to raise the issue of 
reliance on professional advice in the proceeding, whether as part of 
an assertion of a formal affirmative defense or an argument in response 
to the claims alleged in the OIP on which the Division retains the 
burden of proof. The amended rule provides that failure to do so may be 
deemed a waiver.
---------------------------------------------------------------------------

    \71\ See, e.g., Answer of Respondent Jim Hopkins at 25, ] 4, In 
re Flannery, No. 3-14081 (Oct. 26, 2010); Answer of John Patrick 
(``Sean'') Flannery to Order Instituting Administrative and Cease-
and-Desist Proceedings at 12, ]] 5, 6, In re Flannery, No. 3-14081 
(Oct. 26, 2010); Answer of Defendant Samuel E. Wyly, Doc. 58 at 29, 
SEC v. Wyly, 10-cv-5760 (S.D.N.Y.) (Apr. 28, 2011) (``Plaintiff's 
claims are barred in whole or in part because Defendant relied in 
good faith upon the judgment, advice, and counsel of 
professionals.''); see also NJSBA.
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    Contrary to the comments discussed above, the Commission believes 
this change will not materially alter current practice and will not 
unfairly advantage the Division because, as noted, even in the absence 
of this clarification, respondents often assert reliance in their 
answers to Commission OIPs.\72\ Finally, this amendment would align 
administrative proceedings with civil litigation in generally aiming to 
eliminate surprise and identifying the issues for the hearing.\73\
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    \72\ Whether, and to what extent, the assertion of reliance on 
advice or involvement of counsel in the answer to the OIP results in 
the waiver of the attorney-client privilege depends on the facts of 
any given proceeding. As a general matter, ``the attorney-client 
privilege cannot at once be used as a shield and a sword.'' United 
States v. Bilzerian, 926 F.2d 1285, 1292 (2d Cir. 1991). In 
determining whether the privilege is waived, hearing officers should 
consider how respondents have framed their reliance on counsel in 
the answer, the allegations in the OIP, and the facts and 
circumstances underlying the assertion of reliance. The parties may 
discuss these issues at the prehearing conference pursuant to Rule 
221.
    \73\ See Pierce v. Pierce, 5 F.R.D. 125 (D.D.C. 1946); cf. 
Fed.R.Civ.P. 1.
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H. Rule 221 (Prehearing Conference)

    Rule 221 permits a hearing officer to direct the parties to meet 
for an initial prehearing conference and includes a list of subjects to 
be discussed.\74\ We proposed amendments to Rule 221(c) to add 
depositions and expert witness disclosures or reports to the list of 
subjects to be discussed at the prehearing conference. We received no 
comments on this aspect of the proposal.
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    \74\ 17 CFR 201.221(b).
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    We are adopting the amendment as proposed with respect to 
depositions and expert witness disclosures. The addition of depositions 
to certain proceedings will potentially raise issues, including the 
identity of the persons to be deposed and the timing of any 
depositions, that will benefit from early discussion between the 
parties and with the hearing officer. At a prehearing conference, the 
parties and the hearing officer may discuss the timing of depositions, 
the proposed deponents, whether any party will be making a motion 
seeking leave to conduct additional depositions pursuant to amended 
Rule 233, and any issues any party foresees arising in connection with 
the proposed depositions.
    In addition, we are modifying Rule 221(c) in two other respects. 
First, in response to comments advocating amendments that would require 
a date certain by which the Division should complete its document 
production under Rule 230,\75\ we are amending Rule 221(c) to include 
in the list of subjects to be discussed at a prehearing conference the 
timing for completion of production of documents as set forth in Rule 
230. The Commission expects that the Division will continue its 
practice of timely producing documents, and any potential concerns 
surrounding the completion of document production should be discussed 
with the hearing officer at a prehearing conference.\76\
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    \75\ See Calfee (suggesting rule should require production to be 
completed not later than seven days prior to the deadline for filing 
an answer); Gibson (suggesting a time period of 45 days from 
initiation of a proceeding).
    \76\ Rule 230(d) provides, inter alia, unless otherwise ordered 
by the Commission or the hearing officer, the Division shall 
commence making documents available to a respondent for inspection 
and copying pursuant to the section no later than 7 days after 
service of the order instituting proceedings. 17 CFR 201.230(d).
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    Second, we are amending Rule 221(c)(8) to clarify that the subjects 
to be discussed at the prehearing conference include the filing of any 
motion pursuant to Rule 250. As amended, Rule 250 contemplates the 
filing of various types of dispositive motions (i.e., motion for a 
ruling on the pleadings, motion for summary disposition, and motion for 
a ruling as a matter of law following completion of a case in chief). 
Parties may discuss at a prehearing conference whether they anticipate 
filing any motions pursuant to amended Rule 250, and the timing of such 
motions.\77\
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    \77\ See infra discussion of Rule 250 at Section M.
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I. Rule 222 (Prehearing Submissions)

1. Proposed Rule
    Rule 222(b) \78\ provides that a party who intends to call an 
expert witness shall disclose information related to the expert's 
background, including qualifications, prior testimony, and 
publications. We proposed amendments to current Rule 222(b)'s 
requirement that parties submit a list of other proceedings in which 
their expert witness has given expert testimony and a list of 
publications authored or co-authored by their expert witness. As 
proposed, Rule 222(b) limits the list of proceedings to the previous 
four years, and limits the list of publications to the previous ten 
years.
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    \78\ 17 CFR 201.222.
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    The proposed amendment requires disclosure of a written report for 
a witness retained or specially employed to provide expert testimony in 
the case, or for an employee of a party whose duties regularly involve 
giving expert

[[Page 50221]]

testimony. The proposed amendment outlines the elements of that written 
report, including a complete statement of all opinions the witness will 
express and the basis and reasons for them, the facts or data 
considered by the witness in forming them, any exhibits that will be 
used to summarize or support them, and a statement of the compensation 
to be paid for the expert's study and testimony in the case.
    As proposed, the amendment provides for two categories of 
information protected from discovery: (1) Drafts of any report or other 
disclosure required to be submitted in final form; and (2) 
communications between a party's attorney and the party's expert 
witness who would be required to submit a report under the rules, 
unless the communications related to the expert's compensation, or 
certain facts, information, or assumptions provided by the attorney to 
the expert.
2. Comments Received
    We received one comment on this aspect of the proposal. The 
commenter generally supported the amendment in light of the similarity 
of the proposed rule to Rule 26(b) of the Federal Rules of Civil 
Procedure but urged the Commission to adopt a rule allowing the parties 
to present direct expert testimony at all hearings.\79\
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    \79\ Gibson.
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3. Final Rule
    We are adopting the rule substantially as proposed, with one 
ministerial edit. As proposed, the rule text provided that 
communications between a party's attorney and the party's expert 
witness who is identified under this section need not be furnished, 
subject to certain exceptions. Consistent with the requirements for 
expert witness disclosures and expert reports in the Federal Rules of 
Civil Procedure, and to align the rule text with the description of the 
amendments in the proposing release, we have revised the rule to 
clarify that the protections afforded to communications between a 
party's attorney and the party's expert witness under section (b)(2) 
apply to communications with experts who are required to provide a 
report under the rule.\80\
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    \80\ Section (b) only addresses experts whom a party intends to 
call at the hearing. The rule does not cover consulting experts, 
i.e., experts who have been retained or specially employed in 
anticipation of litigation or to prepare for the hearing, but who 
are not expected to be called as witnesses at the hearing.
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    We believe the amendments to Rule 222 will promote efficiency in 
both prehearing discovery and the hearing.\81\ Moreover, the final rule 
comports with current practices of some hearing officers, who have 
required such expert reports in proceedings before them.\82\
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    \81\ See Fed.R.Civ.P. 26(b)(4), (a)(2), respectively.
    \82\ See, e.g., ZPR Investment Management, Inc., Admin Proc. 
Ruling Rel. No. 775 (Aug. 6, 2013), available at https://www.sec.gov/alj/aljorders/2013/ap-775.pdf (last visited July 11, 2016) (general 
prehearing order stating that ``expert reports should be as specific 
and detailed as those presented in federal district court pursuant 
to Federal Rule of Civil Procedure 26.'').
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    The final rule requires each party who intends to call an expert 
witness to submit a statement of the expert's qualifications, a listing 
of other proceedings in which the expert has given expert testimony 
during the previous four years, and a list of publications authored or 
co-authored by the expert in the previous ten years. Additionally, if 
the witness is one retained or specially employed to provide expert 
testimony in the case or one whose duties as the party's employee 
regularly involve giving expert testimony, then the party must include 
in the disclosure a written report--prepared and signed by the witness. 
The report must contain: (i) A complete statement of all opinions the 
witness will express and the basis and reasons for them; (ii) the facts 
or data considered by the witness in forming them; (iii) any exhibits 
that will be used to summarize or support them; and (iv) a statement of 
the compensation to be paid for the study and testimony in the case. 
Consistent with the proposal, amended Rule 222 protects from disclosure 
(1) draft reports or other disclosure required to be submitted in final 
form, and (2) communications between a party's attorney and the party's 
expert witness required to provide a report under the rule, except if 
the communications relate to compensation for the expert's study or 
testimony, identify facts or data that the party's attorney provided 
and that the expert considered in forming the opinions to be expressed, 
or identify assumptions that the party's attorney provided and that the 
expert relied on in forming the opinions to be expressed.
    We disagree with the comment suggesting that the rule be altered to 
require that expert witnesses testify at the hearing in all cases. 
Hearing officers currently use expert reports as evidence and permit 
direct examination as necessary,\83\ a practice that we understand 
comports with the practice followed by a number of district judges in 
federal court bench trials. We believe that the final rule furthers the 
goal of efficiency without compromising a respondent's ability to 
present direct expert testimony.
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    \83\ See, e.g., Leslie A. Arouh, Admin Proc. File No. 3-10884, 
2003 SEC LEXIS 3210 (Feb. 19, 2003) (ordering production of 
respondent's expert report as evidence, ``to be fleshed out as 
needed by further direct testimony, and subject to cross 
examination.''); Reliance Financial Advisors, LLC, Admin Proc. 
Ruling Rel. No. 2627, 2015 SEC LEXIS 1703 (May 4, 2015) (order 
following prehearing conference stating that a hearing officer 
``will accept the Division's expert report as testimony but will 
expect brief direct testimony by the expert during the hearing as 
well''); Ambassador Capital Management, LLC, Admin Proc. Ruling Rel. 
No. 1149 n.1, 2014 SEC LEXIS 45 (Jan. 7, 2014) (order setting 
prehearing schedule stating, ``[a]t the prehearing conference, it 
was established that any party offering expert testimony shall be 
prepared to conduct direct examination of the expert for no more 
than forty-five minutes at the hearing'').
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J. Rule 230 (Enforcement and Disciplinary Proceedings: Availability of 
Documents for Inspection and Copying)

1. Proposed Rule
    After the institution of proceedings, Rule 230(a) \84\ requires the 
Division to make available to respondents certain documents obtained by 
the Division in connection with an investigation. Rule 230(b) \85\ 
provides a list of documents that may be withheld from this production. 
We proposed to amend Rule 230(b) to provide that the Division may 
redact certain sensitive personal information from documents that will 
be made available, unless the information concerns the person to whom 
the documents are being produced. We also proposed to amend Rule 230(b) 
to clarify that the Division may withhold or redact documents that 
reflect settlement negotiations with persons or entities who are not 
respondents in the proceeding at issue.
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    \84\ 17 CFR 201.230(a).
    \85\ 17 CFR 201.230(b).
---------------------------------------------------------------------------

2. Comments Received
    One commenter supported the proposal but advocated additional 
amendments to Rule 230.\86\ The commenter argued that, in addition to 
the categories of documents listed in Rule 230(a)(1)(i), the rule 
should require disclosure by the Division of all persons that the 
Division interviewed or took testimony from during the investigation, 
including a summary of the factual topics covered in each 
interview.\87\ The commenter also advocated amendments to Rule 230(b) 
that would preclude Division staff from introducing, as evidence in 
administrative proceedings, any Wells submissions, pre-Wells 
submissions and white papers submitted by a party to the proceeding. 
This commenter argued that the same

[[Page 50222]]

policy arguments supporting an exclusion of settlement negotiations 
from disclosure also apply to the content of Wells submissions.\88\
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    \86\ CCMC.
    \87\ Id.
    \88\ Id.
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3. Final Rule
    We are adopting Rule 230 as proposed, with one ministerial change 
unrelated to the proposal.\89\ The final rule permits the Division to 
redact an individual's social security number, an individual's date-of-
birth, the name of an individual known to be a minor, or a financial 
account number, taxpayer-identification number, credit card or debit 
card number, passport number, driver's license number, or state-issued 
identification number other than the last four digits of the number. We 
believe this amendment provides an important safeguard that should 
enhance the protection afforded to sensitive personal information. It 
is also consistent with privacy rules of some federal district 
courts.\90\ In addition, final Rule 230(b) provides that the Division 
may withhold or redact documents that reflect settlement negotiations 
with persons or entities who are not respondents in the proceeding at 
issue. As we explained in the proposal, this amendment is consistent 
with the important public policy interest in candid settlement 
negotiations,\91\ and we believe it will help to preserve the 
confidentiality of settlement discussions and safeguard the privacy of 
potential respondents with whom the Division has negotiated.
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    \89\ Specifically, we are amending the reference in current Rule 
230(a)(1)(vi) to the Division of Market Regulation to reflect the 
current name of the Division--i.e., the Division of Trading and 
Markets.
    \90\ See, e.g., Fed.R.Civ.P. 5.2(a); DDC Local Civ. R. 5.4(f).
    \91\ See generally, Federal Rule of Evidence 408 (``Compromise 
Offers and Negotiations''), Advisory Committee Notes; 2 McCormick on 
Evid. section 266 (7th ed.).
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    We decline to expand Rule 230 to require the Division to disclose 
all persons interviewed during the investigation, or to require the 
staff to produce summaries of all such interviews, as suggested by one 
commenter. Rule 230(a) generally requires the Division to make 
available for inspection and copying documents obtained by the Division 
from persons not employed by the Commission during the course of its 
investigation prior to the institution of proceedings.\92\ This 
includes each subpoena issued during the investigation, all other 
written requests to persons not employed by the Commission to provide 
documents or to be interviewed, the documents turned over in response 
to any such subpoenas or other written requests, all transcripts and 
transcript exhibits, and any other documents obtained from persons not 
employed by the Commission.\93\ Rule 232 permits a party to request the 
issuance of subpoenas requiring the production of documents and 
subpoenas compelling the testimony of witnesses. The Commission 
believes that, taken together, these discovery tools will enable the 
parties to identify witnesses who may possess relevant information and 
to determine who should be deposed prior to the hearing.\94\
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    \92\ See 17 CFR 201.230(a).
    \93\ 17 CFR 201.230(a)(1)(i)-(v).
    \94\ We do not believe it is necessary or appropriate to require 
disclosure by the Division of every person interviewed or deposed 
during an investigation, or to require the Division to prepare 
summaries of all such interviews, as suggested by the commenter. In 
its fact-gathering role, Division staff may interview dozens of 
potential witnesses in the course of an investigation that can span 
many months. Such interviews often serve to narrow the scope of an 
investigation, and the persons interviewed ultimately may bear no 
relevance to the proceedings instituted by the Commission.
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    With the exception of certain final inspection or examination 
reports that the Division intends to use at the hearing, documents 
prepared by Commission staff are treated as attorney work-product, and 
are not required to be produced pursuant to Rule 230.\95\ The 
Commission believes it appropriate to continue the current practice of 
allowing the hearing officer to evaluate attorney work-product 
production disputes on a case-by-case basis.\96\ This comports with 
federal district court practice for resolving discovery disputes 
concerning the production of attorney work-product under Federal Rule 
of Civil Procedure 26(b).\97\
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    \95\ See 17 CFR 201.230(b)(1)(ii); see also 1995 Release, 60 FR 
at 32762 (comments (a) and (b) to Rule 230). Work product includes 
any notes, working papers, memoranda or other similar materials, 
prepared by an attorney in anticipation of litigation. See Hickman 
v. Taylor, 329 U.S. 495 (1947); see also Fed. R. Civ. P. 26(b)(3) 
and (b)(5).
    \96\ Rule 230(c) authorizes the hearing officer to review any 
documents withheld by the Division pursuant to Rule 230(b)(1)(i)-
(iv). See, e.g., Piper Capital Management, Inc. et al., Admin. Proc. 
Rel. No. 577, 1999 SEC LEXIS 301 at *20 (Jan. 15, 1999) (granting 
motion for in camera inspection of documents comprising, reflecting 
or summarizing off-record interviews which Division conducted with 
one witness''); Jeffrey R. Patterson, et al. Admin. Proc. File No. 
3-10936, 2003 SEC LEXIS 3217 (finding, following in camera review, 
that staff's handwritten notes of witness's interview did not 
contain exculpatory evidence and thus were not required to be made 
available under Rule 230).
    \97\ See, e.g., SEC v. NIR Group, 283 FRD. 127; 2012 U.S. Dist. 
LEXIS 116062 at *21, *23 (E.D.N.Y. Aug. 17, 2012) (denying, in part, 
defendant's motion to compel following in camera review of sample 
Division interview notes and memoranda relating to same); SEC v. 
Treadway, et al., 229 FRD. 454, 455-56, 2005 U.S. Dist. LEXIS 15167, 
at *4-5 (S.D.N.Y. July 26, 2005) (following in camera review, 
upholding Magistrate Judge determination that proffer session notes 
prepared by Division attorneys were protected attorney work-
product).
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    The final rule will not, as one commenter suggested, prohibit the 
use of Wells submissions and white papers as evidence in administrative 
proceedings. A Wells notice provided to a respondent by the Division 
states that the Commission may use the information contained in such a 
submission as an admission, or in any other manner permitted by the 
Federal Rules of Evidence, or for any of the Routine Uses of 
Information described in Form 1662, ``Supplemental Information for 
Persons Requested to Supply Information Voluntarily or Directed to 
Supply Information Pursuant to a Commission Subpoena.'' \98\ A 
respondent is therefore given notice prior to providing any Wells 
submissions of the various uses the Division may make of the 
information included therein.
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    \98\ Form 1662 can be found at: https://www.sec.gov/about/forms/sec1662.pdf.
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    The Commission does not treat Wells submissions as settlement 
materials.\99\ The procedures for submitting offers of settlement to 
the Commission are governed by Rule 240.\100\ Those procedures require, 
among other things, an offer of settlement signed by the person making 
the offer, as well as a waiver by the person of, among other things, 
the right to claim bias or prejudgment by the Commission based on the 
consideration of or discussions concerning settlement of all or any 
part of the proceeding.\101\ In contrast, the Wells submission process 
is governed by Rule 5(c) of the Commission's Informal and Other 
Procedures, which provides persons who become involved in preliminary 
or formal investigations the opportunity to voluntarily submit ``a 
written statement to the Commission setting forth their interests and 
position in regard to the subject matter of the investigation.'' \102\
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    \99\ Cf. In re IPO Securities Litig., 2003 U.S. Dist. LEXIS 
23102 at *13 (S.D.N.Y. Jan 12, 2004) (``Wells submissions are not in 
themselves settlement materials, although they may sometimes contain 
offers of settlement'').
    \100\ 17 CFR 201.240.
    \101\ 17 CFR 201.240(b) and (c)(5).
    \102\ 17 CFR 202.5(c).
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    The Commission's longstanding view has been that Wells submissions 
``will normally prove most useful in connection with questions of 
policy, and on occasion, questions of law, bearing upon the question of 
whether a proceeding should be initiated, together with considerations 
relevant to a particular prospective defendant or respondent that might 
not otherwise be brought clearly to the Commission's

[[Page 50223]]

attention.'' \103\ We believe this approach remains sound because it 
furthers the Commission's goal of having before it the position of 
persons under investigation at the time it is asked to consider 
initiating an enforcement action. In addition, we believe that the 
credibility of a respondent's Wells submission could be diminished if 
the final rule restricted the use of such submissions in subsequent 
administrative proceedings. Such a rule could enable a potential 
respondent to freely deny, or make arguments fundamentally inconsistent 
with, statements or claims made in prior Wells submissions. We 
therefore believe it is appropriate not to treat Wells submissions as 
settlement materials. Rather, hearing officers may continue the current 
practice of determining whether, under the facts and circumstances, a 
Wells submission should be excluded from a proceeding.
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    \103\ See Procedures Relating to the Commencement of Enforcement 
Proceedings and Termination of Staff Investigations, Securities Act 
Rel. No. 5310, 1972 SEC LEXIS 238 (Sept. 27, 1972) (emphasis added).
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K. Rule 234 (Depositions Upon Written Questions)

    Current Rule 234 contains procedures for taking depositions through 
written questions. Under Rule 234, a party may make a motion to take a 
deposition on written questions by filing the questions with the 
motion. We proposed to amend the rule to provide that the moving party 
may take a deposition on written questions either by stipulation of the 
parties or by filing a motion demonstrating good cause. We did not 
receive any comments on this aspect of the proposal and are adopting 
the amendment as proposed, with one ministerial change to paragraph 
(a), which in the proposal inadvertently referred to Rule 232 instead 
of Rule 233. The amendment is intended to provide a clear standard 
under which the hearing officer or Commission would review such a 
motion. The amendment replaces the standard under the current rule, 
which references current Rule 233(b)'s limit on depositions to 
witnesses unable to appear or testify at a hearing.

L. Rule 235 (Introducing Prior Sworn Statements or Declarations)

1. Proposed Rule
    Current Rule 235 \104\ allows the introduction of certain prior 
sworn statements into the record. Current Rule 235(a) sets forth the 
standards for persons making a motion to introduce prior sworn 
statements of non-party witnesses. We proposed to amend Rule 235(a) to 
include in the list of prior sworn statements depositions taken 
pursuant to Rules 233 or 234, as well as investigative testimony and 
declarations taken under penalty of perjury pursuant to 28 U.S.C. 1746. 
In addition, we proposed to add new paragraph (b) to Rule 235 to permit 
the use of statements made by a party or a party's officers, directors, 
or managing agents, and to clarify that such statements may be used by 
an adverse party for any purpose. Consistent with the proposed 
amendments to Rule 235(a), the amendments to new Rule 235(b) included 
depositions taken pursuant to Rules 233 or 234, as well as 
investigative testimony and declarations taken under penalty of perjury 
pursuant to 28 U.S.C. 1746.
---------------------------------------------------------------------------

    \104\ 17 CFR 201.235.
---------------------------------------------------------------------------

2. Comments Received
    We received one comment on this aspect of the proposal. A 
securities blog entry cited by the commenter objected to the 
introduction of sworn statements under current Rule 235.\105\ The 
author of the blog asserted, without providing support, that hearing 
officers currently admit unreliable investigative testimony into the 
record and that the proposal endorses this practice. The author opposed 
the admission of investigative testimony and declarations and argued 
that the proposal would unfairly benefit the Division.
---------------------------------------------------------------------------

    \105\ See Hudson II (citing anonymous blog).
---------------------------------------------------------------------------

3. Final Rule
    We are adopting the amendments as proposed. We believe that current 
Rule 235 contains sufficient safeguards to prevent the introduction of 
unreliable testimony. For instance, to introduce a prior sworn 
statement under current Rule 235(a), a person must make a motion 
setting forth reasons for introducing the statement. The standard for 
granting such a motion focuses on the admissibility and relevance of 
the statement, the availability of the witness for the hearing, and the 
presumption favoring oral testimony of witnesses in an open hearing. 
The statements that will be admissible pursuant to amended Rule 
235(a)--including statements made pursuant to 28 U.S.C. 1746, 
deposition testimony, investigative testimony, and other sworn 
statements--will be subject to these standards.
    Amended Rule 235(b) will permit an adverse party to seek the 
admission of statements made by a party or the party's officer, 
director, or managing agent. A party opposing the introduction or use 
of such statements may still object to their admission under amended 
Rule 320 to the extent such evidence is ``irrelevant, immaterial, 
unduly repetitious, or unreliable.'' \106\
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    \106\ See infra discussion at Section N.
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M. Rule 250 (Dispositive Motions)

    Rule 250 currently provides that a party may move for summary 
disposition after a respondent's answer is filed and documents have 
been made available to the respondent and sets forth the procedures and 
standards governing such a motion. If the ``interested division,'' 
e.g., the Division of Enforcement, has not completed its case in chief, 
a motion for summary disposition may be made only with leave of the 
hearing officer. Rule 250 has been used by parties in our proceedings 
in a manner analogous to the summary judgment procedure in the Federal 
Rules of Civil Procedure. It also has been used as a means of seeking a 
ruling on the pleadings or seeking dismissal as a matter of law either 
early in a proceeding or following the Division's completion of its 
evidentiary presentation at the hearing.
    A principal purpose of Rule 250 is to facilitate the efficient 
resolution of proceedings by disposing of issues prior to the hearing, 
where appropriate, without introducing unnecessary delays or costs into 
the proceeding. As we have previously explained, the rule ``balances 
the potential efficiency gained by allowing the hearing officer to 
eliminate unnecessary hearings in some cases against the costs of 
allowing additional motions, prehearing procedures and the attendant 
delay in cases where a hearing in which all evidence can be presented 
and witness demeanor can be observed is warranted.'' \107\
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    \107\ See 1995 Release, 60 FR at 32767-68; see also id. at 32767 
(``Summary disposition is a procedure that can resolve issues prior 
to hearing, thereby reducing the costs of hearing and expediting 
resolution of the proceeding.'').
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    We did not propose to amend Rule 250. However, one commenter 
suggested that the Commission modify the current rule to permit a 
respondent to challenge the Division's ``legal theories . . . as of 
right'' \108\ prior to the hearing. As discussed below, we are amending 
Rule 250 both to respond to the commenter's suggestion and to clarify 
how summary disposition motions will operate in conjunction with the 
amendments to Rules 233 and 360 that permit parties to take depositions 
and that provide for a longer maximum prehearing period in 120-day 
proceedings. Consistent with the Commission's prior commentary on Rule 
250, these amendments are

[[Page 50224]]

intended to maintain the balance between encouraging more streamlined 
proceedings while protecting against unwarranted delays and costs.\109\
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    \108\ Gibson.
    \109\ As noted supra at n.16 and pursuant to current Rule 
360(a)(1), unless the Commission directs otherwise, the hearing 
officer shall prepare an initial decision in any proceeding in which 
the Commission directs a hearing officer to preside at a hearing, 
provided, however, that an initial decision may be waived by the 
parties with the consent of the hearing officer pursuant to Rule 
202. These amendments do not alter this requirement.
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    Amended Rule 250 provides that three types of dispositive motions 
may be filed at different stages of an administrative proceeding and 
sets forth the standards and procedures governing each type of motion. 
These motions--described in paragraphs (a)-(d) of the amended rule--
generally correspond to certain dispositive motions that may be filed 
in federal court under the Federal Rules of Civil Procedure.
    Paragraph (a) of amended Rule 250 governs the filing of motions for 
a ruling on the pleadings. It provides that, no later than 14 days 
after a respondent's answer has been filed, any party may move for a 
ruling on the pleadings on one or more claims or defenses, asserting 
that, even accepting all of the non-movant's factual allegations as 
true and drawing all reasonable inferences in the non-movant's favor, 
it is entitled to a ruling as a matter of law. Paragraph (a) thus 
permits a respondent to seek a ruling as a matter of law based on the 
factual allegations in the OIP and permits either party to seek a 
ruling as a matter of law after the filing of an answer.\110\ 
Consistent with the commenter's suggestion, we believe that obtaining 
leave of the hearing officer prior to filing such a motion is 
unnecessary; a motion under paragraph (a) is, therefore, available to 
any party as a matter of right. Additionally, paragraph (a) provides 
that a hearing officer shall promptly grant or deny the motion. This is 
intended to help ensure that such motions do not serve to delay 
proceedings.\111\
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    \110\ This is analogous to Rules 12(b)(6) and 12(c) of the 
Federal Rules of Civil Procedure. See Fed.R.Civ.P. 12(b)(6) (failure 
to state a claim upon which relief can be granted); 12(c) (judgment 
on the pleadings).
    \111\ The same commenter suggested that the Commission be 
required to promptly hear and resolve all appeals from hearing 
officer denials of prehearing motions for summary disposition that 
attack the statutory or regulatory basis for the proceeding, or that 
challenge the constitutionality thereof. See Gibson. The Commission 
has not adopted this suggestion because we believe the existing 
mechanism for review is appropriate and is consistent with the 
overall goal of ensuring an efficient resolution of proceedings. See 
generally Gary L. McDuff, Exchange Act Release No. 78066, 2016 WL 
3254513 (June 14, 2016). Under Rule 400(a), we ``may, at any time, 
on [our] own motion, direct that any matter be submitted to [us] for 
review.'' Consistent with Rule 400(a), a respondent may seek review 
of issues such as those raised by the commenter at any point in an 
administrative proceeding. We have likewise not adopted the 
commenter's suggestion that we adopt a rule providing that an 
administrative proceeding will be automatically stayed pending final 
resolution of a respondent's challenge to the legality of the 
proceeding. See Gibson. We decline to adopt such a blanket rule 
because, among other things, it would unduly delay proceedings where 
the underlying legal challenge lacks merit. Moreover, any respondent 
may seek a stay of the administrative proceeding and, where 
appropriate, the Commission in its discretion may issue such a stay.
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    Paragraph (b) of amended Rule 250 governs the filing of motions for 
summary disposition in proceedings designated as 30- and 75-day 
proceedings pursuant to amended Rule 360. It provides that after a 
respondent's answer has been filed and documents have been made 
available to that respondent pursuant to Rule 230, any party may move 
for summary disposition on one or more claims or defenses, asserting 
that the undisputed pleaded facts, declarations, affidavits, 
documentary evidence or facts officially noted pursuant to Rule 323 
show (1) that there is no genuine issue with regard to any material 
fact and (2) that the movant is entitled to summary disposition as a 
matter of law.\112\ If it appears that a party, for good cause shown, 
cannot present prior to the hearing facts essential to oppose the 
motion, paragraph (b) provides that the hearing officer shall deny or 
defer the motion. Leave of the hearing officer is not required to file 
such a motion in 30- and 75-day cases. This is consistent with existing 
practice in the proceedings we have designated for shorter timeframes--
including, for example, proceedings pursuant to Exchange Act Section 
12(j) \113\ as well as follow-on proceedings \114\--where we have 
repeatedly observed that summary disposition is typically appropriate 
because the issues to be decided are narrowly focused and the facts not 
genuinely in dispute.
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    \112\ This is analogous to Federal Rule of Civil Procedure 56. 
See Fed.R.Civ.P. 56 (summary judgment). To streamline amended Rule 
250, we have deleted the portion of current Rule 250(a) that 
provided that, the facts of the pleadings of the party against whom 
the motion is made shall be taken as true, except as modified by 
stipulations or admissions made by that party, by uncontested 
affidavits, or by facts officially noted pursuant to Rule 323. This 
is not intended to be a substantive change. Consistent with current 
Commission opinions regarding summary disposition motions, the facts 
should be construed in the light most favorable to the non-moving 
party. See, e.g., Jay T. Comeaux, Exchange Act Release No. 72896, 
2014 WL 4160054, at *2 (Aug. 21, 2014). Importantly, a non-moving 
party ``may not rely on bare allegations or denials but instead must 
present specific facts showing a genuine issue of material fact for 
resolution at a hearing.'' Id.; see also Kornman v. SEC, 592 F.3d 
173, 182 (D.C. Cir. 2010) (finding that summary disposition was 
properly granted where the respondent ``proffered no evidence to 
contradict either his admissions or the Division's evidence''); 
Conrad P. Seghers, Advisers Act Release No. 2656, 2007 WL 2790633 at 
*4 n.25 (Sept. 26, 2007) (``[Respondent] must set forth specific 
facts establishing a genuine issue of material fact and may not rely 
upon mere allegations in his pleadings to the law judge to create a 
genuine issue.''), petition denied, 548 F.3d 129, 136 (D.C. Cir. 
2008).
    \113\ See, e.g., China Biotics, Inc., Exchange Act Release No. 
70800, 2013 WL 5883342, at *16 (Nov. 4, 2013) (explaining that 
summary disposition in a proceeding pursuant to Section 12(j) was 
appropriate when the respondent ``still has not identified any 
evidence demonstrating a genuine issue of material fact''); Citizens 
Capital Corp., Exchange Act Release No. 67313, at 16 (June 19, 2012) 
(``We have found that summary disposition is appropriate in 
proceedings like this one brought pursuant to Exchange Act Section 
12(j), where the issuer has not disputed the facts that constitute 
the violation.'').
    \114\ See, e.g., Jeffrey L. Gibson, Exchange Act Release No. 
57266, 2008 SEC LEXIS 236, at *19-20 (Feb. 4, 2008) (``Use of the 
summary disposition procedure has been repeatedly upheld in cases 
such as this one where the respondent has been enjoined or 
convicted, and the sole determination concerns the appropriate 
sanction.'') petition denied, 561 F.3d 548, 555 (6th Cir. 2009); 
Adoption of Amendments to the Rules of Practice and Related 
Provisions and Delegations of Authority of the Commission, Exchange 
Act Release No. 52846 (Nov. 29, 2005), 70 FR 72566, 72567 (Dec. 5, 
2005), available at https://www.sec.gov/rules/final/34-52846.pdf 
(last visited July 8, 2016) (``Motions for summary dispositions are 
often made in cases where a respondent has been criminally convicted 
or an injunction has been entered and the conviction or injunction 
provides the basis for an administrative order against the 
respondent.'').
---------------------------------------------------------------------------

    Paragraph (c) of amended Rule 250 governs the filing of motions for 
summary disposition in proceedings designated as 120-day proceedings 
pursuant to amended Rule 360. It provides that after a respondent's 
answer has been filed and documents have been made available to that 
respondent pursuant to Rule 230, any party may make a motion for 
summary disposition on one or more claims or defenses, asserting that 
the undisputed pleaded facts, declarations, affidavits, deposition 
transcripts, documentary evidence or facts officially noted pursuant to 
Rule 323 show (1) that there is no genuine issue with regard to any 
material fact and (2) that the movant is entitled to summary 
disposition as a matter of law.\115\ If it appears that a party, for 
good cause shown, cannot present prior to the hearing facts essential 
to justify opposition to the motion, paragraph (c) provides that the 
hearing officer shall deny or defer the motion.
---------------------------------------------------------------------------

    \115\ This is analogous to Federal Rule of Civil Procedure 56 
(summary judgment); see also supra note 112.
---------------------------------------------------------------------------

    Leave of the hearing officer must be obtained in order to file a 
Rule 250(c) motion. Leave may be granted only if the moving party 
establishes good cause and if consideration of the motion will not 
delay the scheduled start of the

[[Page 50225]]

hearing. Paragraph (c) further provides that the hearing officer shall 
promptly grant or deny the motion for summary disposition or shall 
defer decision on the motion.
    The requirement that leave be obtained to make a motion under 
paragraph (c) is consistent with the Commission's long-held view that 
because ``[t]ypically, Commission proceedings that reach litigation 
involve basic disagreement as to material facts . . . [t]he 
circumstances when summary disposition prior to hearing could be 
appropriately sought or granted will be comparatively rare.'' \116\ In 
contrast to matters like 12(j) proceedings that are amenable to 
resolution on summary disposition,\117\ we have noted that the 
proceedings designated for the longest timeline may not be 
``appropriate vehicle[s]'' for summary disposition.\118\ This is so 
because, as a general matter, hearings are necessary in 120-day 
proceedings for evidence to be taken on fact-intensive issues such as a 
respondent's state of mind that generally are not susceptible to 
summary disposition.
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    \116\ 1995 Release, 60 FR at 32768.
    \117\ See supra note 113.
    \118\ Comeaux, 2014 WL 4160054, at *4 n.30 (``We urge parties in 
the future to consider whether, if the Commission has determined 
that a particular matter is not an appropriate vehicle for the 120- 
or 210-day time periods [under current Rule 360], it is an 
appropriate vehicle for a motion for summary disposition.'').
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    Consequently, we have previously stated in discussing Rule 250 that 
``leave to file such a motion shall be granted only for good cause 
shown, and if consideration of the motion will not delay the scheduled 
start of the hearing.'' \119\ We now codify this as the two-part 
standard for a hearing officer to grant leave for a party to file a 
motion for summary disposition under amended Rule 250(c).\120\ It is 
the Commission's view that good cause may generally be demonstrated 
where there is a substantial likelihood that the party seeking leave to 
file a motion under paragraph (c) will be successful on the merits of 
the motion.\121\ Additional factors the hearing officer generally 
should consider in assessing whether a party has demonstrated good 
cause include, but are not limited to, whether (1) there is agreement 
among the parties on the operative facts that are the basis of the 
motion; (2) the motion, if granted, would obviate the need to conduct a 
substantial portion, or all, of the final hearing; and (3) the motion 
would not impose undue expense or harassment on the opposing party. 
Consideration of these factors is intended to further the goal of Rule 
250 to promote efficient resolution of proceedings, without introducing 
unnecessary costs or delays. Consistent with the Commission's prior 
statements regarding summary disposition in proceedings designated for 
the longest timeframe, we believe that the good cause standard under 
paragraph (c) will rarely be satisfied.\122\ Granting leave to file a 
motion for summary disposition only in exceptional cases where good 
cause is established, and limiting summary disposition to the rare 
cases where it is appropriate, promotes efficiency by avoiding the 
attendant delays that may ensue if a hearing officer grants summary 
disposition and the Commission subsequently remands the case for an 
evidentiary hearing.\123\
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    \119\ See 1995 Release, 60 FR at 32768.
    \120\ Hearing officers have cited to this standard in assessing 
whether to grant leave to file a summary disposition motion under 
current Rule 250. See, e.g., Arthur F. Jacob, CPA, Admin. Proc. 
Ruling No. 3370, 2015 SEC LEXIS 4945, at *3 (Dec. 4, 2015).
    \121\ See 1995 Release, 60 FR at 32768, Comment to Rule 250 
(``Where a genuine issue as to material facts clearly exists as to 
an issue, it would be inappropriate for a party to seek leave to 
file a motion for summary disposition or for a hearing officer to 
grant the motion.'').
    \122\ We note that we have removed the provision in current Rule 
250(b) stating that denial of leave to file a summary disposition 
motion ``is not subject to interlocutory appeal.'' The denial of 
leave to file a motion pursuant to paragraph (c) in amended Rule 250 
is subject to Commission review, consistent with the Commission's 
plenary authority over our administrative proceedings. See supra 
note 111.
    \123\ See, e.g., Diane M. Keefe, Exchange Act Release No. 61928, 
2010 SEC LEXIS 1122, at *4-5 (Apr. 16, 2010) (reversing grant of 
summary disposition, remanding for a hearing, and noting ``[w]e have 
reviewed the limited record before us and believe that the record 
would benefit from direct and cross-examination of any relevant 
witnesses and the fact-finding determinations of a law judge'' and 
``that amplification of the current record with facts supporting 
either party's position on the issue of materiality would aid any 
decisional process''); Joseph P. Doxey, Exchange Act Release No. 
77773, 2016 WL 2593988 (May 5, 2016) (finding evidence did not 
support grant of summary disposition as to Division's allegations of 
antifraud and registration violations and remanding claims to the 
law judge).
---------------------------------------------------------------------------

    Paragraph (d) of amended Rule 250 governs the filing of motions for 
a ruling following completion of the Division's case in chief at a 
hearing. It provides that following the interested division's 
presentation of its case in chief, any party may make a motion, 
asserting that it is entitled to a ruling as a matter of law on one or 
more claims or defenses.\124\ Leave from the hearing officer is not 
required to file such a motion. But as with the motion for summary 
disposition discussed in paragraph (c), it is the Commission's view 
that proceedings designated for the longest timeframe will rarely be 
amenable to resolution based solely on the Division's case in chief, 
and prior to the respondent's presentation of evidence, and therefore 
we believe that Rule 250(d) motions should be granted in only the 
rarest of cases.\125\
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    \124\ This is analogous to Federal Rule of Civil Procedure 50(a) 
(judgment as a matter of law).
    \125\ In Rita Villa, Exchange Act Release No. 39518, 1998 WL 
4530 (Jan. 6, 1998), the Commission stated that it did not favor an 
``abbreviated procedure'' in which a hearing officer orally granted 
a motion for summary disposition following the presentation of the 
Division's case in chief. We clarify today that Rita Villa, which 
interpreted a prior Rule of Practice, should not be read to apply to 
amended Rule 250(d) to suggest that a party may never make a motion 
for summary disposition after a hearing has begun. Such a motion is 
available as of right: Under amended Rule 250(d), a party may move 
for a ruling as a matter of law following completion of the 
Division's case in chief.
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    Paragraph (e) of amended Rule 250 provides the length limitations 
applicable to dispositive motions under paragraphs (a)-(d) of amended 
Rule 250.\126\ It provides that dispositive motions, together with any 
supporting memorandum of points and authorities (exclusive of any 
declarations, affidavits, deposition transcripts or other attachments), 
shall not exceed 9,800 words and that requests for leave to file 
motions and accompanying documents in excess of 9,800 words are 
disfavored.\127\ A party should not circumvent this length limitation 
by filing or appending a separate document, incorporated by reference 
into the supporting memorandum, that contains a recitation of any 
allegedly undisputed facts. To the extent that a party does incorporate 
a separate statement of facts by reference in its memorandum, such a 
document counts towards the length limitations in paragraph (e). A 
motion that does not, together with any accompanying memorandum of 
points and authorities, exceed 35, double-spaced pages in length, 
inclusive of pleadings incorporated by reference (but excluding any 
declarations, affidavits, deposition transcripts or attachments) is 
presumptively considered to contain no more than 9,800 words. Any 
motion that exceeds this page limit must include a certificate by the 
attorney, or an unrepresented party, stating that the

[[Page 50226]]

brief complies with the word limit set forth in this paragraph and 
stating the number of words in the motion. The person preparing the 
certificate may rely on the word count of a word-processing program to 
prepare the document.
---------------------------------------------------------------------------

    \126\ Motions made pursuant to amended Rule 250(d) may be made 
orally, or in writing, but such motions should not be used as a 
means of delaying completion of the hearing. Should the hearing 
officer decide that a motion made pursuant to Rule 250(d) requires 
briefing, the hearing officer may require the parties to brief the 
motion while the hearing continues to proceed.
    \127\ We note that paragraph (e) of amended Rule 250 contains 
the same length limitations as were applicable to summary 
disposition motions under current Rule 250(c). We have added the 
term ``deposition transcripts'' to the list of documents excluded 
from the page count to comport with the language of amended Rule 
250(d) and the amendments to Rule 233.
---------------------------------------------------------------------------

    Paragraph (f) of amended Rule 250 provides the length limitations 
and response times for opposition and reply briefs pertaining to 
motions under paragraphs (a)-(d) of amended Rule 250. Paragraph (f)(1) 
provides that the length limitations in paragraph (e) apply to any 
opposition to a motion under paragraphs (a)-(d) of amended Rule 250. 
This reflects the Commission's belief that, in the context of summary 
disposition motions, affording the responding party the same page 
limitation as the moving party should help to ensure that the 
responding party has a sufficient opportunity to respond to all of the 
positions advanced in the motion. Paragraph (f)(1) further provides 
that the length limitations in Rule 154(c) apply to any reply; this is 
consistent with current practice. Paragraph (f)(2)(i) provides that the 
response times in Rule 154(b) apply to all opposition and reply briefs 
pertaining to motions under paragraphs (a), (b), and (d) of amended 
Rule 250. Paragraph (f)(2)(ii) provides that, for any motion for which 
leave has been granted consistent with the standard in paragraph (c), 
any opposition must be filed within 21 days after service of a Rule 
250(c) motion and that any reply shall be filed within seven days after 
the service of any opposition. These expanded response times for 
oppositions and replies pertaining to summary disposition motions 
pursuant to paragraph (c) are intended to provide sufficient time to 
respond to the motion in those rare instances where good cause to file 
such a motion has been established.

N. Rule 320 (Evidence: Admissibility)

1. Proposed Rule
    Rule 320 provides the standards for admissibility of evidence. 
Under the current rule, the Commission or hearing officer may receive 
relevant evidence and shall exclude all evidence that is irrelevant, 
immaterial, or unduly repetitious. We proposed to amend the rule to add 
``unreliable'' to the list of evidence that shall be excluded. In 
addition, we proposed adding new Rule 320(b) to clarify that hearsay 
may be admitted if it is relevant, material, and bears satisfactory 
indicia of reliability so that its use is fair.
2. Comments Received
    Commenters raised a number of concerns about the admissibility of 
hearsay under proposed Rule 320(b). Most commenters argued that the 
Commission should incorporate Federal Rules of Evidence governing 
hearsay into the Commission's administrative proceedings.\128\ 
Commenters, focusing on the importance of cross-examination to test 
``credibility, memory, [and] bias,'' argued for limiting the admission 
of hearsay.\129\ Commenters also argued that applying the federal court 
hearsay rules would ensure consistency and objectivity in 
administrative proceedings,\130\ and suggested that allowing hearsay 
evidence in administrative proceedings incentivizes forum selection 
based on the quality and nature of the evidence and witnesses rather 
than other more appropriate considerations.\131\ Some commenters 
contended that the Commission had not, or could not, ``establish a 
principled basis for adopting a different standard'' than the federal 
rules or other rules requiring ``greater scrutiny of hearsay 
evidence.'' \132\
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    \128\ FSR; Gibson; Hudson II (citing anonymous blog); Brune; 
Grundfest; NJSBA.
    \129\ Gibson; CCMC.
    \130\ Calfee.
    \131\ Gibson.
    \132\ FSR; see also Brune; NJSBA.
---------------------------------------------------------------------------

    Other commenters acknowledged the longstanding admissibility of 
hearsay in administrative proceedings,\133\ but argued that the 
proposed hearsay standards are nevertheless insufficient.\134\ One such 
commenter argued that the Commission should be bound by the federal 
rules, and advocated the exclusion of hearsay evidence in proceedings 
involving civil monetary penalties or bars from association in the 
securities industry.\135\ The other commenter advocated various other 
limitations on hearsay, including heightened standards for admitting 
hearsay; notice requirements; and provisions allowing additional 
depositions to counter proposed hearsay.\136\
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    \133\ Gibson; CCMC.
    \134\ Gibson; CCMC.
    \135\ Gibson.
    \136\ CCMC.
---------------------------------------------------------------------------

    A number of the commenters argued that the proposed standards 
provide insufficient guidance and are prone to unfair application.\137\ 
One commenter argued that hearing officers currently ``err on the side 
of admitting hearsay'' and apply the reliability standard 
inconsistently.\138\ Commenters further objected that the proposed 
standards will ``fail to offer any meaningful protection'' or improve 
current practices.\139\ Commenters claimed that the absence of more 
bright-line guidance or procedural hurdles to introducing hearsay 
creates an undue burden on hearing officers and parties.\140\
---------------------------------------------------------------------------

    \137\ FSR; Brune.
    \138\ Gibson.
    \139\ Gibson; Grundfest.
    \140\ Brune; FSR.
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3. Final Rule
    We are adopting the amendments to Rule 320 as proposed. As the 
proposing release explained, the standard for excluding unreliable 
evidence is consistent with the APA. The admission of hearsay evidence 
that satisfies a threshold showing of relevance, materiality, and 
reliability also is consistent with the APA, and the ``indicia of 
reliability'' standard for admitting such evidence is grounded in well-
established interpretations of administrative law.\141\
---------------------------------------------------------------------------

    \141\ See 5 U.S.C. 556(d) (stating that any oral or documentary 
evidence may be received, but the agency as a matter of policy shall 
provide for the exclusion of irrelevant, immaterial or unduly 
repetitious evidence); see, e.g., J.A.M. Builders, Inc. v. Herman, 
233 F.3d 1350, 1354 (11th Cir. 2000) (hearsay admissible in 
administrative proceedings if ``reliable and credible''); Calhoun v. 
Bailar, 626 F.2d 145, 148 (9th Cir. 1980) (hearsay admissible if 
``it bear[s] satisfactory indicia of reliability'' and is 
``probative and its use fundamentally fair''). Courts also have held 
that hearsay can constitute substantial evidence that satisfies the 
APA requirement. See, e.g., Echostar Communications Corp. v. FCC, 
292 F.3d 749, 753 (D.C. Cir. 2002) (hearsay evidence is admissible 
in administrative proceedings if it ``bear[s] satisfactory indicia 
of reliability'' and ``can constitute substantial evidence if it is 
reliable and trustworthy''); see generally Richardson v. Perales, 
402 U.S. 389, 407-08 (1971) (holding that a medical report, though 
hearsay, could constitute substantial evidence in social security 
disability claim hearing); cf. Federal Rule of Evidence 403 (stating 
that relevant, material, and reliable evidence shall be admitted).
---------------------------------------------------------------------------

    We are not persuaded of the need to incorporate federal court 
hearsay rules or the other suggested standards for pre-emptively 
excluding or challenging hearsay.\142\ We believe that Rule 320(b) 
appropriately focuses on the relevance, materiality, reliability and 
fairness of proposed hearsay evidence. Nor are we persuaded that the 
proposed admissibility standards provide insufficient guidance or 
impose an undue burden on hearing officers or the parties. Hearsay 
evidence is currently evaluated on a case-by-case basis in light of, 
among other things, the motives or potential bias of the declarant; the 
availability and credibility of the declarant; whether the statements 
are contradicted or consistent with direct

[[Page 50227]]

testimony; the type of hearsay (e.g., sworn, written, attributable to 
an identified person); the availability of the missing witness and any 
attempts to compel witness testimony; and whether or not the hearsay is 
corroborated by other evidence in the record.\143\ We continue to 
believe that a case-by-case determination of the admissibility of 
hearsay evidence is more appropriate than the broad exclusionary rules 
and procedures proposed by the commenters, and therefore adopt the rule 
as proposed.
---------------------------------------------------------------------------

    \142\ The Supreme Court has stated that ``. . . it has long been 
settled that the technical rules for the exclusion of evidence 
applicable in jury trials [the Federal Rules of Evidence] do not 
apply to proceedings before federal administrative agencies in the 
absence of a statutory requirement that such rules are to be 
observed.'' Opp. Cotton Mills v. Administrator, 312 U.S. 126, 155 
(1941).
    \143\ See, e.g., Guy P. Riordan, Exchange Act Release No. 61153, 
2009 WL 4731397, at *14 (Dec. 11, 2009); Edgar B. Alacan, Exchange 
Act Release No. 49970, 2004 WL 1496843, at *6 (July 6, 2004); Wheat, 
First Securities, Inc., Exchange Act Release No. 48378, 2003 WL 
21990950, at *12 (Aug. 20, 2003); Harry Gliksman, Exchange Act 
Release No. 42255, 1999 WL 1211765 (Dec. 20, 1999); Carlton Wade 
Fleming, Jr., Exchange Act Release No. 36215, 1995 WL 539462 (Sept. 
11, 1995). The Commission and hearing officers have declined to 
credit hearsay evidence based on these standards. See, e.g., Wheat, 
2003 WL 21990950, at *12 (noting that hearing officer declined to 
admit statements that ``had no bearing on'' the relevant issue and 
concluding they were ``unreliable,'' were not ``written, signed, or 
made under oath'' and ``[t]here was no showing that any of the 
officials was unavailable to testify at the hearing''); Mark James 
Hankoff, Exchange Act Release No. 30778, 1992 WL 129520, at *3 
(finding an affidavit and hearsay statement an unreliable basis for 
the NASD's finding of fact); Gary L. Greenberg, Exchange Act Release 
No. 28076, 1990 WL 1104065, at *3 (June 1, 1990) (noting that the 
record as a whole did not provide ``sufficient assurance'' of the 
truthfulness or reliability of hearsay evidence to ``justify [ ] 
crediting it over the first-hand testimony'' of the respondent).
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O. Amendments to Appellate Procedure in Rules 410, 411, 420, 440, and 
450

1. Proposed Rules
    We proposed amendments to Rules 410 (Appeal of Initial Decisions by 
Hearing Officers),\144\ 411 (Commission Consideration of Initial 
Decisions by Hearing Officers),\145\ 420 (Appeal of Determinations by 
Self-Regulatory Organizations),\146\ 440 (Appeal of Determinations by 
the Public Company Accounting Oversight Board),\147\ and 450 (Briefs 
Filed with the Commission),\148\ which govern appeals to the 
Commission.
---------------------------------------------------------------------------

    \144\ 17 CFR 201.410.
    \145\ 17 CFR 201.411.
    \146\ 17 CFR 201.420.
    \147\ 17 CFR 201.440.
    \148\ 17 CFR 201.450.
---------------------------------------------------------------------------

    Rule 410(b) currently requires petitioners to set forth all the 
specific findings and conclusions of the initial decision to which 
exception is taken, and provides that an exception that is not stated 
in the notice may be deemed to have been waived by the petitioner.\149\ 
We proposed to amend Rule 410(b) to state, instead, that a petitioner 
is required to set forth only a summary statement of the issues 
presented for review.\150\ In addition, we proposed to amend Rule 
410(c) to limit the length of petitions for review to three pages and 
to bar incorporation of pleadings or filings by reference.\151\ We 
reasoned that these changes would be consistent with Federal Rule of 
Appellate Procedure 3(c), which requires only notice pleading and 
filing where an appellant may appeal as of right.\152\
---------------------------------------------------------------------------

    \149\ 17 CFR 201.410(b).
    \150\ 80 FR at 60096.
    \151\ Id.
    \152\ Id. at n.36.
---------------------------------------------------------------------------

    To help effectuate the amendments to Rule 410(b), we also proposed 
an amendment to Rule 411(d).\153\ Current Rule 411(d) provides that 
Commission review of an initial decision is limited to the issues 
specified in the petition for review and any issues specified in the 
order scheduling briefs.\154\ We proposed to amend Rule 411(d) to state 
that Commission review of an initial decision is limited to the issues 
specified in an opening brief and that any exception to an initial 
decision not supported in an opening brief may be deemed to have been 
waived by the petitioner.\155\
---------------------------------------------------------------------------

    \153\ Id. at 60096.
    \154\ 17 CFR 201.411(d).
    \155\ 80 FR at 60096.
---------------------------------------------------------------------------

    We also proposed to amend Rule 450(c) to no longer allow parties to 
incorporate pleadings or filings by reference.\156\ We explained that, 
as a practical matter, it is difficult to enforce a word count that 
allows for incorporation by reference.\157\ In addition, we reasoned 
that current Rule 450(c) encouraged parties to rely on pleadings or 
filings from the hearing below, rather than addressing the relevant 
evidence or developing the arguments central to the appeal before the 
Commission.\158\ We explained that prohibiting incorporation by 
reference was intended to sharpen the arguments and require parties to 
provide specific support for each assertion.\159\
---------------------------------------------------------------------------

    \156\ Id.
    \157\ Id. at 60097.
    \158\ Id.
    \159\ Id.
---------------------------------------------------------------------------

    Finally, we proposed amendments to Rules 420(c) and 440(b) to make 
them consistent with the proposed amendments to Rules 410(b) and 
450(b).\160\ Rule 420 governs appeals of determinations by self-
regulatory organizations (SROs), and Rule 440 governs appeals of 
determinations by the Public Company Accounting Oversight Board 
(PCAOB).\161\ We proposed to amend Rule 440(b) to include a two-page 
limit for the application for review from a PCAOB decision, which is 
consistent with the current page limit under Rule 420(c) for 
applications from SROs.\162\ We also proposed to amend both Rule 420(c) 
and Rule 440(b) to include a provision stating that any exception to a 
determination that is not supported in an opening brief may be deemed 
to have been waived by the applicant.\163\ We explained that these 
proposed amendments to Rules 420 and 440 would align these rules with 
the rules governing appeals from initial decisions issued by Commission 
hearing officers.\164\
---------------------------------------------------------------------------

    \160\ Id. at 60097.
    \161\ Id.
    \162\ Id.
    \163\ Id.
    \164\ Id.
---------------------------------------------------------------------------

2. Comments Received
    Two commenters generally supported the proposed amendment to Rule 
410(b) insofar as the amended rule would adopt a notice standard for 
filing appeals with the Commission.\165\ But both commenters opposed 
the proposed limit of the notice of appeal to three pages.\166\
---------------------------------------------------------------------------

    \165\ FSR; NJSBA.
    \166\ FSR; NJSBA.
---------------------------------------------------------------------------

    One of the commenters argued that, because the notice of appeal 
will provide for a caption and other identifying information, three 
pages may not be sufficient to accurately describe the issues even in a 
summary format. This commenter suggested that the Commission increase 
the page limit for notices to five pages.\167\
---------------------------------------------------------------------------

    \167\ NJSBA.
---------------------------------------------------------------------------

    The second commenter argued that the Commission's analogy to 
Federal Rule of Appellate Practice 3(c) was misplaced because, the 
commenter reasoned, appeals of initial decisions are not as of 
right.\168\ This commenter suggested that, if the Commission were to 
limit petitions for review to three pages, it should also adopt one or 
more of the following proposals: (i) Extend the word limit to opening 
briefs to 16,000 words; (ii) permit pleadings to be incorporated by 
reference, without counting their contents against any word limit; or 
(iii) remove language in Rule 450(c) providing that motions to file 
oversized briefs are disfavored.\169\
---------------------------------------------------------------------------

    \168\ FSR.
    \169\ FSR.
---------------------------------------------------------------------------

3. Final Rules
    We are adopting the rules as proposed. We continue to believe that 
a three-page limit for petitions for review is sufficient to allow 
petitioners to provide notice of the issues that they are

[[Page 50228]]

appealing. Based on the Commission's experience with appeals from 
initial decisions, we continue to believe that a default limit of 
14,000 words is reasonable, that allowing briefs to incorporate 
pleadings by reference would be impractical, and that motions to file 
oversized briefs should be disfavored.
    Finally, and in response to the comment regarding appeals from 
initial decisions not being as of right, we note that we are unaware of 
any case in which the Commission has declined to grant a procedurally 
proper petition for review.\170\ As we explained when we eliminated the 
filing of oppositions to petitions for review, such oppositions are 
``pointless'' because `` `the Commission has long had a policy of 
granting petitions for review, believing that there is a benefit to 
Commission review when a party takes exception to a decision.' '' \171\ 
We therefore do not find persuasive the argument that ``the content and 
length of a petition for review should be compared to that described by 
Federal Rules of Appellate Practice Rule 5 (governing discretionary 
appeals).'' \172\
---------------------------------------------------------------------------

    \170\ See David F. Bandimere, Exchange Act Release No. 76308, 
2015 WL 6575665, at *20, n.110 (Oct. 29, 2015).
    \171\ Id. (quoting Exchange Act Release No. 48832, 2003 WL 
22827684, at *13 (Nov. 23, 2003)).
    \172\ FSR.
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P. Amendments to Rule 900 Guidelines

1. Proposed Rule
    Rule 900 sets forth guidelines for the timely completion of 
proceedings, and provides for status reports to the Commission on 
pending cases and the publication of information concerning the pending 
case docket.\173\ As noted in the proposing release, these guidelines 
are examined periodically for readjustment in light of changes in the 
pending caseload and staff resources. Consistent with such examination, 
we proposed to amend Rule 900(a) to state that a decision by the 
Commission with respect to an appeal from the initial decision of a 
hearing officer, a review of a determination by an SRO or the PCAOB, or 
a remand of a prior Commission decision by a court of appeals 
ordinarily will be issued within eight months from the completion of 
briefing on the petition for review, application for review, or remand 
order. Under the proposed rule, if the Commission determines that the 
complexity of the issues presented in an appeal warrant additional 
time, the decision of the Commission may be issued within ten months of 
the completion of briefing. If a decision cannot be issued within the 
specified eight or ten-month period, the proposed rule provides that 
the Commission may issue orders extending the period as it deems 
appropriate in its discretion.
---------------------------------------------------------------------------

    \173\ 17 CFR 201.900.
---------------------------------------------------------------------------

    We also proposed to amend Rule 900(c), which sets forth the 
information to be included in a semi-annual published report concerning 
the pending case docket. The current rule requires that the report 
show, among other things, the number of pending cases before the 
administrative law judges and the Commission, changes in the caseload, 
the median age of cases at resolution, and the number of cases decided 
within the guidelines. Proposed Rule 900(c) provides that the report 
for each time period would include, in addition to the information 
currently provided, the median number of days from the completion of 
briefing to the Commission's decision for each appeal resolved.
2. Comments Received
    One commenter objected to the proposed changes to the Commission 
review timeframes under Rule 900(a), arguing that the length of 
Commission review undermines the efficiency of administrative 
proceedings.\174\ This commenter argued that the proposed amendments 
improperly relaxed the guidelines. Another commenter raised similar 
concerns about the length of time required to resolve Commission 
appeals.\175\
---------------------------------------------------------------------------

    \174\ CCMC.
    \175\ Grundfest.
---------------------------------------------------------------------------

3. Final Rule
    We are adopting the amendments as proposed. We believe that the 
amendments appropriately balance the public interest in efficient 
resolution of litigated matters with the public interest in carefully 
considered decision-making, particularly in resolving complex matters. 
Moreover, we believe that the final amendments balance these revised 
timeframes with mechanisms for enhancing the efficiency, transparency, 
and oversight of administrative proceedings, including through the 
mechanism for Commission orders extending periods for review in 
individual cases under Rule 900(a)(1)(iv) and the enhanced disclosure 
required under Rule 900(c).

Q. Effective Date, Applicability Dates and Transition Period

1. Proposed Rule
    We proposed that amendments govern any proceeding commenced after 
the effective date of the final rules.\176\ We solicited comments as to 
whether the amendments as proposed should be applied, in whole or in 
part, to proceedings that are pending or have been docketed before or 
on the effective date, and, if so, the standard for applying any 
amended rules to such pending proceedings.\177\
---------------------------------------------------------------------------

    \176\ 80 FR at 60097.
    \177\ Id.
---------------------------------------------------------------------------

2. Comments Received
    Commenters generally agreed that certain of the amended rules 
should apply to at least some pending proceedings. But commenters 
offered different standards for determining when and how the amended 
rules should apply.
    One commenter, for instance, suggested that the amended rules apply 
``in whole to cases pending as of the effective date where possible.'' 
\178\ Another commenter proposed that any changes that ``enhance the 
rights of respondents, no matter how small, should apply to proceedings 
pending on their effective date.'' \179\ A third commenter, citing the 
general practice in federal court, argued that ``[i]nstead of 
implementing a uniform prospective application,'' the Commission should 
require that the amendments apply to pending cases ``insofar as just 
and practicable''--that is, to ``pending cases which have yet to 
proceed to an evidentiary hearing.'' \180\
---------------------------------------------------------------------------

    \178\ Navistar.
    \179\ Zornow/Gunther/Silverman.
    \180\ Hudson I (citing Landgraf v. USI Film Prods., 511 U.S. 
244, 275 n.29 (1994)).
---------------------------------------------------------------------------

    Finally, one commenter suggested that the amended rules apply to 
pending matters ``to the fullest extent possible,'' and provided 
specific examples of how the various rules would apply to pending 
proceedings, depending on the phase of the proceeding.\181\ 
Specifically, this commenter suggested that ``the new rules for timing 
and depositions should apply at least to proceedings for which the 
prehearing conference has not yet taken place, and the new evidentiary 
rules should apply to any matter for which no hearing has yet taken 
place.'' \182\
---------------------------------------------------------------------------

    \181\ Gibson.
    \182\ Gibson.
---------------------------------------------------------------------------

3. Final Rule
    The amended rules will become effective 60 days after publication 
in the Federal Register and shall apply to proceedings initiated on or 
after that date.\183\ For proceedings instituted on or

[[Page 50229]]

after the date of these amended rules \184\ but before the effective 
date, there will be a transition period. The parties may elect to have 
these amended rules apply to such proceedings. Specifically, in 
proceedings that are instituted on or after the date of these amended 
rules but before the effective date, all of the amended rules (except 
the amendments to Rule 141, governing service of OIPs) shall apply to 
such proceedings if, within 14 days of service of the OIP, every party 
to the proceeding, including the Division, submits a request in writing 
to the Secretary that the proceedings be conducted under the amended 
rules. This approach is similar to the approach we took in the 1995 
amendments to the Rules of Practice.\185\ If any party does not submit 
such a request, the former rules shall apply, except as provided below.
---------------------------------------------------------------------------

    \183\ See 5 U.S.C. 553(d).
    \184\ For purposes of this section, the ``date of these amended 
rules'' means the date on the last page of this release.
    \185\ See 1995 Release, 60 FR at 32738 (``Any proceeding 
docketed by the Commission after the date of this Federal Register 
publication but prior to the effective date shall be conducted under 
the former Rules of Practice unless, within 30 days of the effective 
date, each respondent in the proceeding submits a request in writing 
to the Secretary that the proceeding be conducted under the Rules of 
Practice adopted today.'').
---------------------------------------------------------------------------

    For all other proceedings instituted before the effective date of 
these rules, the applicability of the amended rules is described more 
fully below.
    There are many rational ways to implement amendments to procedural 
rules. When we amended the Rules of Practice in 1995, the new rules 
became effective one month after publication in the Federal Register, 
and the former rules continued to apply in full to pending 
administrative proceedings.\186\ Other agencies take varying 
approaches; sometimes they apply amendments to rules 
prospectively,\187\ and at other times they apply such amendments to 
pending proceedings.\188\ Finally, as commenters observed, amendments 
to the Federal Rules of Civil Procedure generally apply to pending 
proceedings ``insofar as just and practicable.'' \189\
---------------------------------------------------------------------------

    \186\ See 1995 Release, 60 FR at 32738.
    \187\ See, e.g., Department of Labor, Rules of Practice and 
Procedure for Administrative Hearings Before the Office of 
Administrative Law Judges, 80 FR 28767 (May 19, 2015), providing 
that the rules would be effective 30 days after publication.
    \188\ See, e.g., Federal Trade Commission, Revisions to Rules of 
Practice, 80 FR 25940 (May 6, 2015), providing that the rules would 
generally apply to pending proceedings, as well as to newly 
instituted proceedings.
    \189\ Federal Rules of Civil Procedure, 2015 Amendments.
---------------------------------------------------------------------------

    We conclude that the amended evidentiary rules should apply to 
proceedings where the hearing has not begun as of the effective date, 
and that other amended rules should sometimes apply, depending on the 
stage of the proceeding, as set forth in detail below.\190\ For 
example, amended Rules 221, 233, and 360 shall apply to proceedings 
where the prehearing conference has not been held as of the effective 
date of these rules, as well as to proceedings that are stayed (other 
than pursuant to consideration of a settlement offer under Rule 
161(c)(2)(i)),\191\ whether by court or Commission order, as of the 
effective date. Based on the Commission's experience with 
administrative proceedings, we believe that applying the amended rules 
in such proceedings would not unduly disrupt pending proceedings.
---------------------------------------------------------------------------

    \190\ Gibson.
    \191\ Under current Rule 161(c)(2)(i), proceedings may be stayed 
upon notification by the parties that they have agreed in principle 
to a settlement on all major terms. In the interest of prompt 
resolution of such proceedings, we are excluding such proceedings 
from the application of amended Rules 221, 233 and 360. Such 
proceedings would have been operating under the current rules, and 
should a stay in such a proceeding be lifted, we believe that 
application of these amended rules could result in unnecessary 
delays.
---------------------------------------------------------------------------

    With respect to a commenter's suggestion of using a ``just and 
practicable'' standard to determine whether the amended rules should 
apply in a given proceeding, the tables below reflect the Commission's 
determinations of what is just and practicable.
    The tables below provide whether and how the amended rules apply: 
\192\
---------------------------------------------------------------------------

    \192\ All of the amended rules apply to proceedings instituted 
on or after the effective date of these amendments.

 Rules Regarding Initial Filings--Apply to Proceedings Instituted on or
              After the Effective Date of These Amendments
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Rule 141.............................  Requirements for serving OIP.
Rule 220.............................  Requirements for answers to OIP.
Rule 230.............................  Documents that may be withheld or
                                        redacted by the Division.
------------------------------------------------------------------------


   Rules Regarding Depositions, Timing of Proceedings and Dispositive
 Motions--Apply to Those Proceedings Where, as of the Effective Date of
These Amendments: (i) the Initial Prehearing Conference Pursuant to Rule
 221 Has Not Been Held; or (ii) the Proceedings Have Been Stayed, Except
          for Proceedings Stayed Pursuant To Rule 161(c)(2)(i)
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Rule 221.............................  Rule amended to add depositions,
                                        expert witness disclosures or
                                        reports, and timing for
                                        completion of production of
                                        documents by the Division to the
                                        list of subjects to be discussed
                                        at the prehearing conference.
Rule 222.............................  Rule amended to change
                                        information that is required to
                                        be submitted in conjunction with
                                        expert reports.
Rule 233.............................  Rule amended to expand use of
                                        depositions.
Rule 234.............................  Rule amended to provide that
                                        moving party may take a
                                        deposition on written questions
                                        either by stipulation of the
                                        parties or by filing a motion
                                        demonstrating good cause.
Rule 250.............................  Dispositive motions.
Rule 360.............................  Rule amended to change timing of
                                        proceedings.
------------------------------------------------------------------------


Evidentiary Rules and Rules Governing Hearings--Apply to All Proceedings
Where Hearing Has Not Begun as of the Effective Date of These Amendments
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Rule 180.............................  Rule amended to allow the
                                        Commission or a hearing officer
                                        to exclude or summarily suspend
                                        a person for any portion of a
                                        deposition if the person engages
                                        in contemptuous conduct before
                                        either the Commission or a
                                        hearing officer.

[[Page 50230]]

 
Rule 232.............................  Rule amended to clarify standards
                                        for the issuance of subpoenas
                                        and motions to quash.
Rule 235.............................  Standard for granting a motion to
                                        introduce prior sworn statement
                                        of a non-party witness.
Rule 320.............................  Standard for admissibility of
                                        evidence.
------------------------------------------------------------------------


   Rule Governing Motions--Apply to All Proceedings Pending as of the
                   Effective Date of These Amendments
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Rule 154.............................  Rule governing motions and
                                        related filings, except where
                                        another rule expressly governs.
------------------------------------------------------------------------


  Rule Governing Extensions of Time, Postponements, and Adjournments--
   Apply to All Proceedings Pending As of the Effective Date of These
                               Amendments
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Rule 161.............................  Rule governing extensions of
                                        time, postponements, and
                                        adjournments requested by
                                        parties--amended to allow a stay
                                        pending Commission consideration
                                        of settlement offers to also
                                        stay timelines set forth in Rule
                                        360.
------------------------------------------------------------------------


  Amendments to Appellate Procedure Rules--Apply to Appeals Filed on or
              After the Effective Date of These Amendments
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Rule 410.............................  Procedure for filing petition for
                                        review.
Rule 411.............................  Standards for granting petition
                                        for review and limitation on
                                        matters reviewed.
Rule 420.............................  Appeals from SRO determinations.
Rule 440.............................  Appeals from PCAOB
                                        determinations.
Rule 450.............................  Briefs filed with the Commission.
Rule 900.............................  Guidelines for timely completion
                                        of proceedings.
------------------------------------------------------------------------

III. Economic Analysis

    The Commission is sensitive to the economic effects that could 
result from the final rules, including the benefits and costs of the 
final rules, as well as effects on efficiency, competition, and capital 
formation. These quantitative and qualitative economic effects are 
discussed below.
    In adopting these amendments, we seek to enhance flexibility in the 
conduct of administrative proceedings while maintaining the ability to 
timely and efficiently resolve administrative proceedings. The 
amendments include changes or clarifications to, among other things, 
the timing of hearings, the use of depositions, the filing of motions 
for summary disposition, and the submission of expert reports. The 
current rules governing administrative proceedings serve as the 
baseline against which we assess these final rules.
    We continue to believe that there will not be significant economic 
consequences stemming from the amendments to Rules 141, 154, 161, 220, 
230, 235, 320, 410, 411, 420, 440, 450, and 900. Thus, those sections 
are not discussed below. As explained in further detail below, we 
expect the amendments to Rules 222, 232, 233, 250, and 360 will have an 
impact on the costs and efficiency of administrative proceedings, but 
we do not expect them to significantly affect the efficiency of 
securities markets, competition, or capital formation.

A. Benefits, Costs, and Effects on Efficiency, Competition, and Capital 
Formation

    As discussed in further detail above, the amendments to Rule 360 
concern the timing for the various stages of an administrative 
proceeding, providing additional time for discovery. The amendments to 
Rule 233 permit a limited number of depositions, while the amendments 
to Rule 232 support this change by providing standards governing 
motions to quash or modify deposition notices or subpoenas. The 
amendments to Rule 222 concern requirements for a written report for 
expert witnesses. The amendments to Rule 250 clarify how dispositive 
motions will operate with the amendments to Rules 233 and 360 and 
provide the procedures and standards governing the various types of 
dispositive motions.
    Current Commission rules set the prehearing period of a proceeding 
at approximately four months for a 300-day proceeding and do not permit 
parties to take depositions solely for the purpose of discovery. In 
addition, rules governing the testimony of expert witnesses have not 
previously been formalized, but some hearing officers require expert 
reports in proceedings before them.
    We continue to believe that the aggregate benefits and costs of the 
final rules will depend, among other things, on the expected volume of 
administrative proceedings. For example, Rule 360 adjusts the potential 
timing of administrative proceedings, and an increase or a decrease in 
the number of administrative proceedings will scale up or down, 
respectively, the total magnitude of costs and benefits of the new 
timeline for administrative proceedings. Similarly, Rules 232 and 233 
provide the framework for expanded use of depositions in administrative 
proceedings, and an increase or a decrease in the number of 
administrative proceedings may scale up or down, respectively, the 
total magnitude of the costs and benefits of the expanded use of 
depositions.
    However, we are unable to precisely predict the economic effect of 
the final rules on administrative proceedings, as the number and type 
of proceedings can vary based on many factors unrelated to the Rules of 
Practice. Over the last three completed fiscal years, the number of new 
administrative proceedings initiated and not immediately settled has 
ranged from approximately 170 to approximately 230 proceedings, only a 
portion of which would be impacted by certain of the amended 
rules.\193\ As a

[[Page 50231]]

result, we are unable to quantify the overall costs and benefits 
expected to flow from the amended rules.
---------------------------------------------------------------------------

    \193\ The total number of administrative proceedings initiated 
and not immediately settled each fiscal year encompasses various 
types of proceedings. These include proceedings under Section 12(j) 
of the Exchange Act and ``follow-on'' proceedings following certain 
injunctions or criminal convictions, which constitute the vast 
majority of all proceedings instituted. On average, approximately 
20% of all administrative proceedings initiated over the last three 
completed fiscal years were designated as 300-day proceedings.
---------------------------------------------------------------------------

1. Amendments to Rules Governing Depositions and the Timing of Hearings 
in Administrative Proceedings
    The amendments to Rules 232, 233, and 360, as described above, may 
benefit both respondents and the Division by providing them with 
additional time and tools to potentially discover additional relevant 
facts. Specifically, the amendments to Rule 233 permit respondents and 
the Division to notice the oral depositions of fact witnesses, expert 
witnesses and document custodians. The amendments to Rule 232 
correspond with the new provisions for depositions in Rule 233 and 
establish the requirement that a proposed deponent be a fact witness, 
an expert witness, or a document custodian. The amendments to Rule 360 
enlarge the potential maximum prehearing period. We anticipate that the 
potential for a longer maximum prehearing period would allow, in 
appropriate cases, additional time to review investigative records, 
conduct depositions under amended Rule 233, and prepare for a hearing.
    These amendments may facilitate information acquisition during the 
prehearing stage, ultimately resulting in more focused hearings. We are 
unable to quantify these benefits, however, because any potential cost 
savings would depend on multiple factors, including the specific 
claims, facts, and defenses in a particular proceeding.
    The depositions and a longer prehearing period will, however, 
impose additional costs compared to the current practice in 
administrative proceedings where, with limited exception, depositions 
are not permitted and maximum prehearing periods are shorter. We 
continue to believe that the costs of the adopted amendments will be 
borne by the Division as well as by respondents and deponents who 
provide deposition testimony. These costs will primarily stem from the 
potential costs of depositions and the extension of the maximum 
prehearing period.
    Aggregate costs stemming from depositions depend on the number of 
depositions that respondents and the Division take and assume they 
attend depositions of third parties noticed by another party to the 
proceeding. Costs of depositions may include travel expenses, 
attorney's fees, and reporter and transcription expenses. Based on 
Commission staff experience, we estimate the cost to a respondent of 
conducting one non-expert deposition to be approximately $45,640, and 
the cost of conducting one expert witness deposition to be 
approximately $75,696.\194\ This cost estimate has been increased 
relative to the cost estimate in the proposal to reflect the increased 
time-limit for depositions in amended Rule 233 from six hours to seven 
hours and to include the costs associated with expert depositions. In 
single-respondent proceedings, if both the Division and the respondent 
each take three depositions, one of which is of an expert witness, and 
each attend each other's depositions, then respondents may incur the 
cost of conducting or attending up to six depositions plus expert 
witness fees and costs--an estimated total of $303,896. Similarly, in 
multi-respondent proceedings, respondents may incur the cost of 
conducting or attending up to ten depositions plus expert witness fees 
and costs--an estimated total of $486,456. We recognize that 
respondents and the Division play a large role in managing their own 
costs by determining, for example, whether to take depositions or 
participate in the depositions of others, and whether to mitigate 
attorney costs, including by adjusting the number of attorneys 
attending each deposition, contracting with a competitively priced 
reporter, or arranging for less expensive travel. We note that 
determinations regarding the approach to requesting depositions will 
likely reflect parties' beliefs regarding the potential benefits they 
expect to realize from taking or attending depositions. However, the 
costs of depositions are borne by all attendees of the deposition, 
including not only the deposing party, but also the other parties to 
the proceeding, the deponent, and third parties, in the form of lost 
wages, travel, preparation, and attorney costs.\195\
---------------------------------------------------------------------------

    \194\ The $45,640 estimate is comprised of the following 
expenses: (i) Travel expenses: $4,000; (ii) reporter/videographer: 
$8,200; and (iii) professional costs for two attorneys (including 
reasonable preparation for the deposition): 40 hours x $504/hr and 
40 hours x $332/hr = $33,440. The hourly rates for the attorneys and 
paralegal are based on the 2015-2016 Laffey Matrix. The Laffey 
Matrix is a matrix of hourly rates for attorneys of varying 
experience levels and paralegals that is prepared annually by the 
Civil Division of the United States Attorney's Office for the 
District of Columbia. See Laffey Matrix--2015-2016, available at 
https://www.justice.gov/usao-dc/file/796471/download (last visited 
July 8, 2016) (the ``Laffey Matrix''). In addition, if the deponent 
is an expert witness, we estimate the expert's fees and travel 
expenses will be approximately $30,056 per deposition, for a 
combined total of $75,696. This includes (i) file review and 
preparation costs estimated at 80 hours, at a rate of $333/hr, which 
totals $26,640; and (ii) expert fees incurred with appearing for the 
deposition, 8 hours x $427/hr = $3,416. The hourly rate for expert 
witnesses is based on survey data of expert witness fees from the 
SEAK, Inc. 2014 Survey of Expert Witness Fees. See SEAK, Inc. 2014 
Survey of Expert Witness Fees, which can be found at https://www.seak.com/wp-content/uploads/2014/07/Expert-Witness-Fee-Data.pdf 
(last visited July 8, 2016). These estimates exclude transcription 
costs, which are estimated at $3.65 per page, based on the Federal 
Court Maximum Transcription Rates for Court Reporters, available at 
https://www.uscourts.gov/services-forms/federal-court-reporting-program (last visited July 8, 2016).
    \195\ Some witnesses who are deposed might bear little if any 
out-of-pocket cost if, for example, the deposition is conducted in 
the city in which they live or work, and they choose not be 
represented by counsel at the deposition. Moreover, the party 
seeking the deposition might choose to reimburse the witness for 
some costs.
---------------------------------------------------------------------------

    Relative to the proposed amendments to Rule 233, the adopted 
amendments expand the potential use of depositions by allowing each 
side to request an additional two depositions from a hearing officer. 
This would place the ultimate limit on depositions at five depositions 
for each side in a single-respondent proceeding, and seven depositions 
for each side in a proceeding against multiple respondents. In single-
respondent proceedings, if the Division and the respondent each take 
five depositions, one of which is of an expert witness, and each attend 
each other's depositions, then respondents may incur the cost of 
conducting or attending as many as ten depositions plus expert witness 
fees and costs--an estimated total of $486,456. Similarly, in multi-
respondent proceedings, respondents may incur the cost of conducting or 
attending as many as fourteen depositions plus expert witness fees and 
costs--an estimated total of $669,016.\196\ Although the total number 
of depositions increases, we believe that parties will make the 
decision to request an additional deposition by considering the 
expected costs and benefits of acquiring information from the deponent. 
To the extent that additional depositions may reveal important 
information or evidence relevant to the proceeding and thus lead to 
more focused hearings, this provision may improve the efficiency of 
administrative proceedings. However, neither the parties to a 
proceeding nor the hearing officer can predict whether additional 
depositions will ultimately have such an effect, and in situations 
where additional depositions ultimately prove to be unhelpful or 
unnecessary,

[[Page 50232]]

permitting those additional depositions may impose delays and costs 
that can have an adverse effect on efficiency.
---------------------------------------------------------------------------

    \196\ See supra note 194.
---------------------------------------------------------------------------

    Similarly, the longer maximum prehearing periods permitted by the 
amendment to Rule 360 may impose costs on the parties. Based on our 
estimates of staffing requirements and corresponding hourly rates, we 
estimate that the potential to lengthen the overall timeline in 120-day 
proceedings by up to six months to allow more time for discovery may 
result in additional costs to respondents of up to $754,080.\197\ We 
thus estimate that the combined costs of the lengthened prehearing 
period and the availability of depositions could cost respondents in a 
single-respondent 120-day proceeding $1,240,536.\198\ Similar combined 
costs for respondents in a 120-day multi-respondent proceeding could be 
as high as $1,423,096.\199\ Again, however, we recognize that while a 
party is likely to take actions under the amended rules that result in 
these costs only to the extent that the party expects to receive 
benefits from a longer maximum prehearing period and the availability 
of depositions, actions taken by one party to a proceeding during the 
additional time for discovery may result in costs incurred by the other 
parties to the proceeding.
---------------------------------------------------------------------------

    \197\ The $754,080 estimate is comprised of the following 
expenses: (i) 1 senior attorney x 40 hours per week x 24 weeks x 
$504/hr = $483,840; (ii) 1 mid-level attorney x 20 hours per week x 
24 weeks x $332/hr = $159,360; (iii) 1 paralegal x 30 hours per week 
x 24 weeks x $154/hr = $110,880. The hourly rates for the attorneys 
and paralegal are based on the Laffey Matrix. We do not anticipate 
the amendments to Rule 360 concerning the timing of hearings in 75-
day and 30-day proceedings will generally result in a significant 
departure from current practice in the length of time necessary for 
completion of such proceedings, which often are resolved by default 
or summary disposition.
    \198\ $754,080 + $486,456 = $1,240,536. This estimate is 
comprised of the potential costs associated with the maximum 
lengthening of the prehearing period in 120-day proceedings and the 
total estimated costs of depositions in single-respondent 
proceedings. To the extent the hours spent during the prehearing 
period are used to prepare and/or respond to depositions, this may 
overestimate the total costs of a single-respondent proceeding.
    \199\ $754,080 + $669,016 = $1,423,096. As explained supra, this 
figure may overestimate the total costs in multi-respondent 
proceedings to the extent there is overlap with the hourly rate 
calculations associated with depositions.
---------------------------------------------------------------------------

    The amendments related to the timing of hearings and the use of 
depositions may also affect the efficiency of proceedings. To the 
extent that the adopted amendments facilitate the discovery of relevant 
facts and information through depositions and the extension of the 
maximum prehearing periods, they may lead to more expeditious 
resolution of proceedings. For example, for cases that may benefit 
significantly from the additional information, there could be 
efficiency gains from the final rules if the costs associated with the 
use of depositions are smaller than the value of the information gained 
from depositions. However, we note that because parties may not take 
into account the costs that depositions may impose on other individuals 
and/or entities, a potential consequence of the adopted amendments to 
Rule 233 is that parties may engage in more discovery than is 
efficient. For example, for proceedings that may not benefit 
significantly from information gained from a deposition, requesting 
depositions may result in inefficiency by imposing costs on all 
attendees of the deposition, including the deposing party, the other 
parties to the proceeding, the deponent, and third parties, without any 
significant informational benefit. However, we believe that the 
amendments to Rules 232 and 233 may mitigate the risk of this 
efficiency loss by setting forth standards for the issuance of 
subpoenas and motions to quash deposition notices and subpoenas, and 
setting a limit on the maximum number of depositions each side may 
notice.
    Ultimately, it is difficult to predict with any certainty the 
economic efficiency gains, if any, from the addition of depositions, a 
longer prehearing period, and associated rule changes. At the same 
time, we recognize that there are necessarily cost increases from 
longer hearing periods and additional discovery tools, and as we have 
explained, those costs are borne by respondents and the Division, as 
well as other attendees of depositions, including deponents, and third 
parties. We continue to believe that any such costs are appropriate 
given the benefits of such rule changes.
2. Amendments Concerning Expert Reports and Testimony
    The final amendments to Rule 222 specify a set of submissions and 
disclosures that hearing officers may require from parties to a 
proceeding, and require parties to a proceeding who intend to call 
expert witnesses to submit information about these expert witnesses. 
Though producing submissions and disclosures may cause parties to 
proceedings to incur costs, these amendments may yield benefits by 
facilitating access to information that may aid in interpreting 
statements, evidence, and testimony during hearings. We are aware that 
some hearing officers may currently require submissions and disclosures 
similar to those referenced in amended Rule 222, so the final rule will 
impose costs and yield benefits only to the extent that they result in 
additional information being submitted to hearing officers beyond that 
submitted under current practice.
3. Amendments Concerning Dispositive Motions
    As discussed above, Rule 250 has been amended to provide that both 
sides to a proceeding shall be permitted, as a matter of right, to make 
certain dispositive motions in certain types of proceedings. The 
amendments to Rule 250 clarify how dispositive motions will operate in 
conjunction with the amendments to Rules 233 and 360, which permit 
parties to take depositions and provide for a longer maximum prehearing 
period.
    Amended Rule 250 may improve the efficiency of administrative 
proceedings by eliminating unnecessary hearings. The ability of either 
side to bring a dispositive motion serves several functions, including 
those attendant to potential early resolution of claims. For example, 
in proceedings where the underlying facts are not in dispute, the 
granting of a dispositive motion may reduce the costs borne by all 
parties by narrowing the focus of or entirely eliminating the need for 
a hearing. On the other hand, where motions are filed in proceedings 
not susceptible to resolution via dispositive motion, the decision to 
allow dispositive motions could delay proceedings or otherwise result 
in inefficiencies. For example, if the hearing officer grants summary 
disposition, delays could result if the Commission subsequently remands 
the case for an evidentiary hearing. Such delays could result in costs 
to parties to the proceeding.
    Because the amendments to Rule 250 largely clarify how pre-existing 
motion practice will operate alongside the amendments to Rules 233 and 
360, the rule change may not result in a significant departure from 
current practice. Further, we cannot predict with certainty how 
practice will change in response to the availability of dispositive 
motions filed pursuant to amended Rules 250(a), (b), and (d) as a 
matter of right--rather than with leave of the hearing officer--given 
that parties will respond based on the individual facts of each case 
and their own cost estimates of filing the motions. We are thus unable 
to estimate the total potential costs associated with these amendments. 
Moreover, to the extent a party files a motion under amended Rule 250 
where it would not have filed under previous Rule 250, we do not have 
sufficient information to quantify the individual costs associated with

[[Page 50233]]

such a motion because the scope of each motion may vary significantly 
depending on the facts and circumstances of each case and the approach 
of the filing party.

B. Alternatives

    As mentioned previously, although commenters generally supported 
extensions of the prehearing period previously proposed under Rule 360, 
some suggested that longer periods be adopted. Longer prehearing 
periods for discovery, whether restricted only to 120-day proceedings, 
or permitted for all proceedings as one commenter suggested, would 
allow parties more time to prepare for a hearing, but might adversely 
affect the timely and efficient resolution of administrative 
proceedings.
    As alternatives to the final rule amending Rule 233, we could 
continue to permit depositions only when a witness is likely to be 
unable to attend or testify at a hearing, or we could authorize other 
limited discovery tools, such as the use of interrogatories or requests 
for admissions in lieu of depositions. Although alternatives such as 
interrogatories or admissions might reduce some of the costs of the 
discovery process (i.e., the cost of depositions), they might entail 
other costs (resulting from the time attorneys and parties need to 
prepare responses) and also might yield less useful information for the 
administrative proceeding given the limited nature of questioning and 
information these forms permit. Therefore, regardless of their lower 
cost, interrogatories and other discovery tools may not provide the 
same qualitative benefits.
    Commenters also suggested that the Commission allow even more 
depositions per side than proposed. As we have noted previously, 
permitting parties to the proceedings to take additional depositions 
may result in both benefits and costs for all parties. Additional 
depositions could lead to more focused hearings, but may impose costs 
on entities involved in the depositions, and ultimate resolution of the 
proceeding may be delayed. We believe that the final amendments to Rule 
233 that permit the hearing officer to grant an additional two 
depositions to a side will make administrative proceedings flexible 
enough to realize the benefits of additional depositions when they are 
necessary, while avoiding unnecessarily delaying proceedings for 
additional depositions.
    Another alternative to amended Rule 233 would be to adopt the 
proposed limit of three depositions per side for single-respondent 
proceedings and five depositions per side for multi-respondent 
proceedings and not permit the hearing officer to allow two additional 
depositions per side. As discussed previously, the informational 
benefit of each additional deposition would depend on the particulars 
of the administrative proceeding, and some proceedings may present 
unique challenges that warrant affording the parties additional 
opportunities to conduct prehearing depositions. The Commission 
believes that providing an opportunity for two additional depositions 
strikes a balance between the potential benefits from additional fact-
finding and the corresponding impact on the overall goal of timely 
resolving administrative proceedings.

IV. Administrative Law Matters

    The Commission finds, in accordance with Section 553(b)(3)(A) of 
the Administrative Procedure Act,\200\ that these revisions relate 
solely to agency organization, procedure, or practice. They are 
therefore not subject to the provisions of the Administrative Procedure 
Act requiring notice, opportunity for public comment, and publication. 
The Regulatory Flexibility Act \201\ therefore does not apply.\202\ 
Nonetheless, we previously determined that it would be useful to 
publish the rules for notice and comment before adoption. The 
Commission has considered all comments received. To the extent these 
rules relate to agency information collections during the conduct of 
administrative proceedings, they are exempt from review under the 
Paperwork Reduction Act.\203\
---------------------------------------------------------------------------

    \200\ 5 U.S.C. 553(b)(3)(A).
    \201\ 5 U.S.C. 601-612.
    \202\ See 5 U.S.C. 604.
    \203\ See 44 U.S.C. 3518(c)(1)(B)(ii); 5 CFR 1320.4 (exempting 
collections during the conduct of administrative proceedings or 
investigations).
---------------------------------------------------------------------------

VI. Statutory Basis

    These amendments to the Rules of Practice are being adopted 
pursuant to statutory authority granted to the Commission, including 
section 3 of the Sarbanes-Oxley Act of 2002, 15 U.S.C. 7202; section 19 
of the Securities Act, 15 U.S.C. 77s; sections 4A, 19, and 23 of the 
Exchange Act, 15 U.S.C. 78d-1, 78s, and 78w; section 319 of the Trust 
Indenture Act of 1939, 15 U.S.C. 77sss; sections 38 and 40 of the 
Investment Company Act, 15 U.S.C. 80a-37 and 80a-39; and section 211 of 
the Investment Advisers Act, 15 U.S.C. 80b-11.

List of Subjects in 17 CFR Part 201

    Administrative practice and procedure.

Text of the Amendments

    For the reasons set out in the preamble, 17 CFR part 201 is amended 
as follows:

PART 201--RULES OF PRACTICE

Subpart D--Rules of Practice

0
1. The authority citation for part 201, subpart D, continues to read as 
follows:

    Authority: 5 U.S.C. 77f, 77g, 77h, 77h-1, 77j, 77s, 77u, 77sss, 
77ttt, 78c(b), 78d-1, 78d-2, 78l, 78m, 78n, 78o(d), 78o-3, 78s, 78u-
2, 78u-3, 78v, 78w, 80a-8, 80a-9, 80a-37, 80a-38, 80a-39, 80a-40, 
80a-41, 80a-44, 80b-3, 80b-9, 80b-11, 80b-12, 7202, 7215, and 7217.


0
2. Section 201.141 is amended by revising paragraphs (a)(2)(iv) and (v) 
and (a)(3) to read as follows:


Sec.  201.141  Orders and decisions: Service of orders instituting 
proceedings and other orders and decisions.

    (a) * * *
    (2) * * *
    (iv) Upon persons in a foreign country. Notice of a proceeding to a 
person in a foreign country may be made by any of the following 
methods:
    (A) Any method specified in paragraph (a)(2) of this section that 
is not prohibited by the law of the foreign country; or
    (B) By any internationally agreed means of service that is 
reasonably calculated to give notice, such as those authorized by the 
Hague Convention on the Service Abroad of Judicial and Extrajudicial 
Documents; or
    (C) Any method that is reasonably calculated to give notice:
    (1) As prescribed by the foreign country's law for service in that 
country in an action in its courts of general jurisdiction; or
    (2) As the foreign authority directs in response to a letter 
rogatory or letter of request; or
    (3) Unless prohibited by the foreign country's law, by delivering a 
copy of the order instituting proceedings to the individual personally, 
or using any form of mail that the Secretary or the interested division 
addresses and sends to the individual and that requires a signed 
receipt; or
    (D) By any other means not prohibited by international agreement, 
as the Commission or hearing officer orders.
    (v) In stop order proceedings. Notwithstanding any other provision 
of paragraph (a)(2) of this section, in proceedings pursuant to 
Sections 8 or 10 of the Securities Act of 1933, 15 U.S.C. 77h or 77j, 
or Sections 305 or 307 of the Trust Indenture Act of 1939, 15 U.S.C. 
77eee or 77ggg, notice of the

[[Page 50234]]

institution of proceedings shall be made by personal service or 
confirmed telegraphic notice, or a waiver obtained pursuant to 
paragraph (a)(4) of this section.
* * * * *
    (3) Record of service. The Secretary shall maintain a record of 
service on parties (in hard copy or computerized format), identifying 
the party given notice, the method of service, the date of service, the 
address to which service was made, and the person who made service. If 
a division serves a copy of an order instituting proceedings, the 
division shall file with the Secretary either an acknowledgement of 
service by the person served or proof of service consisting of a 
statement by the person who made service certifying the date and manner 
of service; the names of the persons served; and their mail or 
electronic addresses, facsimile numbers, or the addresses of the places 
of delivery, as appropriate for the manner of service. If service is 
made in person, the certificate of service shall state, if available, 
the name of the individual to whom the order was given. If service is 
made by U.S. Postal Service certified or Express Mail, the Secretary 
shall maintain the confirmation of receipt or of attempted delivery, 
and tracking number. If service is made to an agent authorized by 
appointment to receive service, the certificate of service shall be 
accompanied by evidence of the appointment.
* * * * *

0
3. Section 201.154 is amended by adding introductory text and revising 
the first sentence of paragraph (b) to read as follows:


Sec.  201.154.  Motions.

    The requirements in this section apply to motions and related 
filings except where another rule expressly governs.
* * * * *
    (b) * * * Briefs in opposition to a motion shall be filed within 
five days after service of the motion. * * *
* * * * *

0
4. Section 201.161 is amended by revising paragraph (c)(2)(iii) to read 
as follows:


Sec.  201.161  Extensions of time, postponements and adjournments.

* * * * *
    (c) * * *
    (2) * * *
    (iii) The granting of any stay pursuant to this paragraph (c) shall 
stay the timeline pursuant to Sec.  201.360(a).

0
5. Section 201.180 is amended by revising paragraphs (a)(1) 
introductory text, (a)(1)(i), (a)(2), and (c) introductory text to read 
as follows:


Sec.  201.180  Sanctions.

    (a) * * *
    (1) Subject to exclusion or suspension. Contemptuous conduct by any 
person before the Commission or a hearing officer during any 
proceeding, including at or in connection with any conference, 
deposition or hearing, shall be grounds for the Commission or the 
hearing officer to:
    (i) Exclude that person from such deposition, hearing or 
conference, or any portion thereof; and/or
* * * * *
    (2) Review procedure. A person excluded from a deposition, hearing 
or conference, or a counsel summarily suspended from practice for the 
duration or any portion of a proceeding, may seek review of the 
exclusion or suspension by filing with the Commission, within three 
days of the exclusion or suspension order, a motion to vacate the 
order. The Commission shall consider such motion on an expedited basis 
as provided in Sec.  201.500.
* * * * *
    (c) Failure to make required filing or to cure deficient filing. 
The Commission or the hearing officer may enter a default pursuant to 
Sec.  201.155, dismiss one or more claims, decide the particular 
claim(s) at issue against that person, or prohibit the introduction of 
evidence or exclude testimony concerning that claim if a person fails:
* * * * *

0
6. Revise Sec.  201.220 to read as follows:


Sec.  201.220  Answer to allegations.

    (a) When required. In its order instituting proceedings, the 
Commission may require any respondent to file an answer to each of the 
allegations contained therein. Even if not so ordered, any respondent 
in any proceeding may elect to file an answer. Any other person granted 
leave by the Commission or the hearing officer to participate on a 
limited basis in such proceedings pursuant to Sec.  201.210(c) may be 
required to file an answer.
    (b) When to file. Except where a different period is provided by 
rule or by order, a respondent required to file an answer as provided 
in paragraph (a) of this section shall do so within 20 days after 
service upon the respondent of the order instituting proceedings. 
Persons granted leave to participate on a limited basis in the 
proceeding pursuant to Sec.  201.210(c) may file an answer within a 
reasonable time, as determined by the Commission or the hearing 
officer. If the order instituting proceedings is amended, the 
Commission or the hearing officer may require that an amended answer be 
filed and, if such an answer is required, shall specify a date for the 
filing thereof.
    (c) Contents; effect of failure to deny. Unless otherwise directed 
by the hearing officer or the Commission, an answer shall specifically 
admit, deny, or state that the party does not have, and is unable to 
obtain, sufficient information to admit or deny each allegation in the 
order instituting proceedings. When a party intends in good faith to 
deny only a part of an allegation, the party shall specify so much of 
it as is true and shall deny only the remainder. A statement of a lack 
of information shall have the effect of a denial. Any allegation not 
denied shall be deemed admitted. A respondent must affirmatively state 
in the answer any avoidance or affirmative defense, including but not 
limited to res judicata and statute of limitations. In this regard, a 
respondent must state in the answer whether the respondent relied on 
the advice of counsel, accountants, auditors, or other professionals in 
connection with any claim, violation alleged or remedy sought. Failure 
to do so may be deemed a waiver.
    (d) Motion for more definite statement. A respondent may file with 
an answer a motion for a more definite statement of specified matters 
of fact or law to be considered or determined. Such motion shall state 
the respects in which, and the reasons why, each such matter of fact or 
law should be required to be made more definite. If the motion is 
granted, the order granting such motion shall set the periods for 
filing such a statement and any answer thereto.
    (e) Amendments. A respondent may amend its answer at any time by 
written consent of each adverse party or with leave of the Commission 
or the hearing officer. Leave shall be freely granted when justice so 
requires.
    (f) Failure to file answer: Default. If a respondent fails to file 
an answer required by this section within the time provided, such 
respondent may be deemed in default pursuant to Sec.  201.155(a). A 
party may make a motion to set aside a default pursuant to Sec.  
201.155(b).

0
7. Section 201.221 is amended by revising paragraph (c) to read as 
follows.


Sec.  201.221  Prehearing conference.

* * * * *
    (c) Subjects to be discussed. At a prehearing conference 
consideration may be given and action taken with respect to any and all 
of the following:

[[Page 50235]]

    (1) Simplification and clarification of the issues;
    (2) Exchange of witness and exhibit lists and copies of exhibits;
    (3) Timing of expert witness disclosures and reports, if any;
    (4) Stipulations, admissions of fact, and stipulations concerning 
the contents, authenticity, or admissibility into evidence of 
documents;
    (5) Matters of which official notice may be taken;
    (6) The schedule for exchanging prehearing motions or briefs, if 
any;
    (7) The method of service for papers other than Commission orders;
    (8) The filing of any motion pursuant to Sec.  201.250;
    (9) Settlement of any or all issues;
    (10) Determination of hearing dates;
    (11) Amendments to the order instituting proceedings or answers 
thereto;
    (12) Production, and timing for completion of the production, of 
documents as set forth in Sec.  201.230, and prehearing production of 
documents in response to subpoenas duces tecum as set forth in Sec.  
201.232;
    (13) Specification of procedures as set forth in Sec.  201.202;
    (14) Depositions to be conducted, if any, and date by which 
depositions shall be completed; and
    (15) Such other matters as may aid in the orderly and expeditious 
disposition of the proceeding.
* * * * *

0
8. Section 201.222 is amended by revising the section heading and 
paragraph (b) to read as follows:


Sec.  201.222  Prehearing submissions and disclosures.

* * * * *
    (b) Expert witnesses--(1) Information to be supplied; reports. Each 
party who intends to call an expert witness shall submit, in addition 
to the information required by paragraph (a)(4) of this section, a 
statement of the expert's qualifications, a listing of other 
proceedings in which the expert has given expert testimony during the 
previous four years, and a list of publications authored or co-authored 
by the expert in the previous ten years. Additionally, if the witness 
is one retained or specially employed to provide expert testimony in 
the case or one whose duties as the party's employee regularly involve 
giving expert testimony, then the party must include in the disclosure 
a written report--prepared and signed by the witness. The report must 
contain:
    (i) A complete statement of all opinions the witness will express 
and the basis and reasons for them;
    (ii) The facts or data considered by the witness in forming them;
    (iii) Any exhibits that will be used to summarize or support them; 
and
    (iv) A statement of the compensation to be paid for the study and 
testimony in the case.
    (2) Drafts and communications protected. (i) Drafts of any report 
or other disclosure required under this section need not be furnished 
regardless of the form in which the draft is recorded.
    (ii) Communications between a party's attorney and the party's 
expert witness who is required to provide a report under this section 
need not be furnished regardless of the form of the communications, 
except if the communications relate to compensation for the expert's 
study or testimony, identify facts or data that the party's attorney 
provided and that the expert considered in forming the opinions to be 
expressed, or identify assumptions that the party's attorney provided 
and that the expert relied on in forming the opinions to be expressed.

0
9. Section 201.230 is amended by:
0
a. In paragraph (a)(1)(vi), removing the term ``Division of Market 
Regulation'' and adding in its place ``Division of Trading and 
Markets'';
0
b. Revising the paragraph (b) heading;
0
c. Removing ``or'' at the end of paragraph (b)(1)(iii);
0
d. Redesignating paragraph (b)(1)(iv) as paragraph (b)(1)(v) and adding 
a new paragraph (b)(1)(iv);
0
e. Redesignating paragraph (b)(2) as paragraph (b)(3) and adding a new 
paragraph (b)(2); and
0
f. In paragraph (c), removing the term ``(b)(1)(i) through (b)(1)(iv)'' 
and adding in its place ``(b)(1)(i) through (v)'' wherever it occurs.
    The revision and additions read as follows:


Sec.  201.230  Enforcement and disciplinary proceedings: Availability 
of documents for inspection and copying.

* * * * *
    (b) Documents that may be withheld or redacted.
    (1) * * *
    (iv) The document reflects only settlement negotiations between the 
Division of Enforcement and a person or entity who is not a respondent 
in the proceeding; or
* * * * *
    (2) Unless the hearing officer orders otherwise upon motion, the 
Division of Enforcement may redact information from a document if:
    (i) The information is among the categories set forth in paragraphs 
(b)(1)(i) through (v) of this section; or
    (ii) The information consists of the following with regard to a 
person other than the respondent to whom the information is being 
produced:
    (A) An individual's social-security number;
    (B) An individual's birth date;
    (C) The name of an individual known to be a minor; or
    (D) A financial account number, taxpayer-identification number, 
credit card or debit card number, passport number, driver's license 
number, or state-issued identification number other than the last four 
digits of the number.
* * * * *

0
10. Section 201.232 is amended by revising paragraphs (a) introductory 
text, (c), (d), (e), and (f) to read as follows:


Sec.  201.232  Subpoenas.

    (a) Availability; procedure. In connection with any hearing ordered 
by the Commission or any deposition permitted under Sec.  201.233, a 
party may request the issuance of subpoenas requiring the attendance 
and testimony of witnesses at such depositions or at the designated 
time and place of hearing, and subpoenas requiring the production of 
documentary or other tangible evidence returnable at any designated 
time or place. Unless made on the record at a hearing, requests for 
issuance of a subpoena shall be made in writing and served on each 
party pursuant to Sec.  201.150. A person whose request for a subpoena 
has been denied or modified may not request that any other person issue 
the subpoena.
* * * * *
    (c) Service. Service shall be made pursuant to the provisions of 
Sec.  201.150(b) through (d). The provisions of this paragraph (c) 
shall apply to the issuance of subpoenas for purposes of 
investigations, as required by 17 CFR 203.8, as well as depositions and 
hearings.
    (d) Tender of fees required. When a subpoena ordering the 
attendance of a person at a hearing or deposition is issued at the 
instance of anyone other than an officer or agency of the United 
States, service is valid only if the subpoena is accompanied by a 
tender to the subpoenaed person of the fees for one day's attendance 
and mileage specified by paragraph (f) of this section.
    (e) Application to quash or modify--(1) Procedure. Any person to 
whom a subpoena or notice of deposition is directed, or who is an 
owner, creator or the subject of the documents that are to be produced 
pursuant to a subpoena, or any party may, prior to the time

[[Page 50236]]

specified therein for compliance, but in no event more than 15 days 
after the date of service of such subpoena or notice, request that the 
subpoena or notice be quashed or modified. Such request shall be made 
by application filed with the Secretary and served on all parties 
pursuant to Sec.  201.150. The party on whose behalf the subpoena or 
notice was issued may, within five days of service of the application, 
file an opposition to the application. If a hearing officer has been 
assigned to the proceeding, the application to quash shall be directed 
to that hearing officer for consideration, even if the subpoena or 
notice was issued by another person.
    (2) Standards governing application to quash or modify. If 
compliance with the subpoena or notice of deposition would be 
unreasonable, oppressive, unduly burdensome or would unduly delay the 
hearing, the hearing officer or the Commission shall quash or modify 
the subpoena or notice, or may order a response to the subpoena, or 
appearance at a deposition, only upon specified conditions. These 
conditions may include but are not limited to a requirement that the 
party on whose behalf the subpoena was issued shall make reasonable 
compensation to the person to whom the subpoena was addressed for the 
cost of copying or transporting evidence to the place for return of the 
subpoena.
    (3) Additional standards governing application to quash deposition 
notices or subpoenas filed pursuant to Sec.  201.233(a). The hearing 
officer or the Commission shall quash or modify a deposition notice or 
subpoena filed or issued pursuant to Sec.  201.233(a) unless the 
requesting party demonstrates that the deposition notice or subpoena 
satisfies the requirements of Sec.  201.233(a), and:
    (i) The proposed deponent was a witness of or participant in any 
event, transaction, occurrence, act, or omission that forms the basis 
for any claim asserted by the Division of Enforcement, any defense, or 
anything else required to be included in an answer pursuant to Sec.  
201.220(c) by any respondent in the proceeding (this excludes a 
proposed deponent whose only knowledge of these matters arises from the 
Division of Enforcement's investigation or the proceeding);
    (ii) The proposed deponent is a designated as an ``expert witness'' 
under Sec.  201.222(b); provided, however, that the deposition of an 
expert who is required to submit a written report under Sec.  
201.222(b) may only occur after such report is served; or
    (iii) The proposed deponent has custody of documents or electronic 
data relevant to the claims or defenses of any party (this excludes 
Division of Enforcement or other Commission officers or personnel who 
have custody of documents or data that was produced by the Division to 
the respondent).
    (f) Witness fees and mileage. Witnesses summoned before the 
Commission shall be paid the same fees and mileage that are paid to 
witnesses in the courts of the United States, and witnesses whose 
depositions are taken and the persons taking the same shall severally 
be entitled to the same fees as are paid for like services in the 
courts of the United States. Witness fees and mileage shall be paid by 
the party at whose instance the witnesses appear. Except for such 
witness fees and mileage, each party is responsible for paying any fees 
and expenses of the expert witnesses whom that party designates under 
Sec.  201.222(b), for appearance at any deposition or hearing.

0
11. Section 201.233 is revised to read as follows:


Sec.  201.233  Depositions upon oral examination.

    (a) Depositions upon written notice. In any proceeding under the 
120-day timeframe designated pursuant to Sec.  201.360(a)(2), 
depositions upon written notice may be taken as set forth in this 
paragraph. No other depositions shall be permitted except as provided 
in paragraph (b) of this section.
    (1) If the proceeding involves a single respondent, the respondent 
may file written notices to depose no more than three persons, and the 
Division of Enforcement may file written notices to depose no more than 
three persons.
    (2) If the proceeding involves multiple respondents, the 
respondents collectively may file joint written notices to depose no 
more than five persons, and the Division of Enforcement may file 
written notices to depose no more than five persons. The depositions 
taken under this paragraph (a)(2) shall not exceed a total of five 
depositions for the Division of Enforcement, and five depositions for 
all respondents collectively.
    (3) Additional depositions upon motion. Any side may file a motion 
with the hearing officer seeking leave to notice up to two additional 
depositions beyond those permitted pursuant to paragraphs (a)(1) and 
(2) of this section.
    (i) Procedure. (A) A motion for additional depositions must be 
filed no later than 90 days prior to the hearing date. Any party 
opposing the motion may submit an opposition within five days after 
service of the motion. No reply shall be permitted. The motion and any 
oppositions each shall not exceed seven pages in length. These 
limitations exclusively govern motions under this section; 
notwithstanding Sec.  201.154(a), any points and authorities shall be 
included in the motion or opposition, with no separate statement of 
points and authorities permitted, and none of the requirements in Sec.  
201.154(b) or (c) shall apply.
    (B) Upon consideration of the motion and any opposing papers, the 
hearing officer will issue an order either granting or denying the 
motion. The hearing officer shall consider the motion on an expedited 
basis.
    (C) The proceeding shall not automatically be stayed pending the 
determination of the motion.
    (ii) Grounds and standards for motion. A motion under this 
paragraph (a)(3) shall not be granted unless the additional depositions 
satisfy Sec.  201.232(e) and the moving side demonstrates a compelling 
need for the additional depositions by:
    (A) Identifying each of the witnesses whom the moving side plans to 
depose pursuant to paragraph (a)(1) or (2) of this section as well as 
the additional witnesses whom the side seeks to depose;
    (B) Describing the role of each witness and proposed additional 
witness;
    (C) Describing the matters concerning which each witness and 
proposed additional witness is expected to be questioned, and why the 
deposition of each witness and proposed additional witness is necessary 
for the moving side's arguments, claims, or defenses; and
    (D) Showing that the additional deposition(s) requested will not be 
unreasonably cumulative or duplicative.
    (iii) If the moving side proposes to take and submit the additional 
deposition(s) on written questions, as provided in Sec.  201.234, the 
motion shall so state. The motion for additional depositions shall 
constitute a motion under Sec.  201.234(a), and the moving party is 
required to submit its questions with its motion under this rule. The 
procedures for such a deposition shall be governed by Sec.  201.234.
    (4) A deponent's attendance may be ordered by subpoena issued 
pursuant to the procedures in Sec.  201.232; and
    (5) The Commission or hearing officer may rule on a motion that a 
deposition noticed under paragraph (a)(1) or (2) of this section shall 
not be taken upon a determination under Sec.  201.232(e). The fact that 
a witness testified during an investigation does not preclude the 
deposition of that witness.
    (b) Depositions when witness is unavailable. In addition to 
depositions permitted under paragraph (a) of this

[[Page 50237]]

section, the Commission or the hearing officer may grant a party's 
request to file a written notice of deposition if the requesting party 
shows that the prospective witness will likely give testimony material 
to the proceeding; that it is likely the prospective witness, who is 
then within the United States, will be unable to attend or testify at 
the hearing because of age, sickness, infirmity, imprisonment, other 
disability, or absence from the United States, unless it appears that 
the absence of the witness was procured by the party requesting the 
deposition; and that the taking of a deposition will serve the 
interests of justice.
    (c) Service and contents of notice. Notice of any deposition 
pursuant to this section shall be made in writing and served on each 
party pursuant to Sec.  201.150. A notice of deposition shall designate 
by name a deposition officer. The deposition officer may be any person 
authorized to administer oaths by the laws of the United States or of 
the place where the deposition is to be held. A notice of deposition 
also shall state:
    (1) The name and address of the witness whose deposition is to be 
taken;
    (2) The time and place of the deposition; provided that a subpoena 
for a deposition may command a person to attend a deposition only as 
follows:
    (i) Within 100 miles of where the person resides, is employed, or 
regularly transacts business in person;
    (ii) Within the state where the person resides, is employed, or 
regularly transacts business in person, if the person is a party or a 
party's officer;
    (iii) At such other location that the parties and proposed deponent 
stipulate; or
    (iv) At such other location that the hearing officer or the 
Commission determines is appropriate; and
    (3) The manner of recording and preserving the deposition.
    (d) Producing documents. In connection with any deposition pursuant 
to this section, a party may request the issuance of a subpoena duces 
tecum under Sec.  201.232. The party conducting the deposition shall 
serve upon the deponent any subpoena duces tecum so issued. The 
materials designated for production, as set out in the subpoena, must 
be listed in the notice of deposition.
    (e) Method of recording--(1) Method stated in the notice. The party 
who notices the deposition must state in the notice the method for 
recording the testimony. Unless the hearing officer or Commission 
orders otherwise, testimony may be recorded by audio, audiovisual, or 
stenographic means. The noticing party bears the recording costs. Any 
party may arrange to transcribe a deposition, at that party's expense. 
Each party shall bear its own costs for obtaining copies of any 
transcripts or audio or audiovisual recordings.
    (2) Additional method. With prior notice to the deponent and other 
parties, any party may designate another method for recording the 
testimony in addition to that specified in the original notice. That 
party bears the expense of the additional record or transcript unless 
the hearing officer or the Commission orders otherwise.
    (f) By remote means. The parties may stipulate--or the hearing 
officer or Commission may on motion order--that a deposition be taken 
by telephone or other remote means. For the purpose of this section, 
the deposition takes place where the deponent answers the questions.
    (g) Deposition officer's duties--(1) Before the deposition. The 
deposition officer designated pursuant to paragraph (c) of this section 
must begin the deposition with an on-the-record statement that 
includes:
    (i) The deposition officer's name and business address;
    (ii) The date, time, and place of the deposition;
    (iii) The deponent's name;
    (iv) The deposition officer's administration of the oath or 
affirmation to the deponent; and
    (v) The identity of all persons present.
    (2) Conducting the deposition; avoiding distortion. If the 
deposition is recorded non-stenographically, the deposition officer 
must repeat the items in paragraphs (g)(1)(i) through (iii) of this 
section at the beginning of each unit of the recording medium. The 
deponent's and attorneys' appearance or demeanor must not be distorted 
through recording techniques.
    (3) After the deposition. At the end of a deposition, the 
deposition officer must state on the record that the deposition is 
complete and must set out any stipulations made by the attorneys about 
custody of the transcript or recording and of the exhibits, or about 
any other pertinent matters.
    (h) Order and record of the examination--(1) Order of examination. 
The examination and cross-examination of a deponent shall proceed as 
they would at the hearing. After putting the deponent under oath or 
affirmation, the deposition officer must record the testimony by the 
method designated under paragraph (e) of this section. The testimony 
must be recorded by the deposition officer personally or by a person 
acting in the presence and under the direction of the deposition 
officer. The witness being deposed may have counsel present during the 
deposition.
    (2) Form of objections stated during the deposition. An objection 
at the time of the examination--whether to evidence, to a party's 
conduct, to the deposition officer's qualifications, to the manner of 
taking the deposition, or to any other aspect of the deposition--must 
be noted on the record, but the examination shall still proceed and the 
testimony shall be taken subject to any objection. An objection must be 
stated concisely in a nonargumentative and nonsuggestive manner. A 
person may instruct a deponent not to answer only when necessary to 
preserve a privilege, to enforce a limitation ordered by the hearing 
officer or the Commission, or to present a motion to the hearing 
officer or the Commission for a limitation on the questioning in the 
deposition.
    (i) Waiver of objections--(1) To the notice. An objection to an 
error or irregularity in a deposition notice is waived unless promptly 
served in writing on the party giving the notice.
    (2) To the deposition officer's qualification. An objection based 
on disqualification of the deposition officer before whom a deposition 
is to be taken is waived if not made:
    (i) Before the deposition begins; or
    (ii) Promptly after the basis for disqualification becomes known 
or, with reasonable diligence, could have been known.
    (3) To the taking of the deposition--(i) Objection to competence, 
relevance, or materiality. An objection to a deponent's competence--or 
to the competence, relevance, or materiality of testimony--is not 
waived by a failure to make the objection before or during the 
deposition, unless the ground for it might have been corrected at that 
time.
    (ii) Objection to an error or irregularity. An objection to an 
error or irregularity at an oral examination is waived if:
    (A) It relates to the manner of taking the deposition, the form of 
a question or answer, the oath or affirmation, a party's conduct, or 
other matters that might have been corrected at that time; and
    (B) It is not timely made during the deposition.
    (4) To completing and returning the deposition. An objection to how 
the deposition officer transcribed the testimony--or prepared, signed, 
certified, sealed, endorsed, sent, or otherwise dealt with the 
deposition--is waived unless a motion to suppress is made promptly 
after the error or irregularity becomes known or, with reasonable 
diligence, could have been known.

[[Page 50238]]

    (j) Duration; cross-examination; motion to terminate or limit--(1) 
Duration. Unless otherwise stipulated or ordered by the hearing officer 
or the Commission, a deposition is limited to one day of seven hours, 
including cross-examination as provided in this subsection. In a 
deposition conducted by or for a respondent, the Division of 
Enforcement shall be allowed a reasonable amount of time for cross-
examination of the deponent. In a deposition conducted by the Division, 
the respondents collectively shall be allowed a reasonable amount of 
time for cross-examination of the deponent. The hearing officer or the 
Commission may allow additional time if needed to fairly examine the 
deponent or if the deponent, another person, or any other circumstance 
impedes or delays the examination.
    (2) Motion to terminate or limit--(i) Grounds. At any time during a 
deposition, the deponent or a party may move to terminate or limit it 
on the ground that it is being conducted in bad faith or in a manner 
that unreasonably annoys, embarrasses, or oppresses the deponent or 
party. If the objecting deponent or party so demands, the deposition 
must be suspended for the time necessary to present the motion to the 
hearing officer or the Commission.
    (ii) Order. Upon a motion under paragraph (j)(2)(i) of this 
section, the hearing officer or the Commission may order that the 
deposition be terminated or may limit its scope. If terminated, the 
deposition may be resumed only by order of the hearing officer or the 
Commission.
    (k) Review by the witness; changes--(1) Review; statement of 
changes. On request by the deponent or a party before the deposition is 
completed, and unless otherwise ordered by the hearing officer or the 
Commission, the deponent must be allowed 14 days after being notified 
by the deposition officer that the transcript or recording is 
available, unless a longer time is agreed to by the parties or 
permitted by the hearing officer, in which:
    (i) To review the transcript or recording; and
    (ii) If there are changes in form or substance, to sign a statement 
listing the changes and the reasons for making them.
    (2) Changes indicated in the deposition officer's certificate. The 
deposition officer must note in the certificate prescribed by paragraph 
(l)(1) of this section whether a review was requested and, if so, must 
attach any changes the deponent makes during the 14-day period.
    (l) Certification and delivery; exhibits; copies of the transcript 
or recording--(1) Certification and delivery. The deposition officer 
must certify in writing that the witness was duly sworn and that the 
deposition accurately records the witness's testimony. The certificate 
must accompany the record of the deposition. Unless the hearing officer 
orders otherwise, the deposition officer must seal the deposition in an 
envelope or package bearing the title of the action and marked 
``Deposition of [witness's name]'' and must promptly send it to the 
attorney or party who arranged for the transcript or recording. The 
attorney or party must store it under conditions that will protect it 
against loss, destruction, tampering, or deterioration.
    (2) Documents and tangible things--(i) Originals and copies. 
Documents and tangible things produced for inspection during a 
deposition must, on a party's request, be marked for identification and 
attached to the deposition. Any party may inspect and copy them. But if 
the person who produced them wants to keep the originals, the person 
may:
    (A) Offer copies to be marked, attached to the deposition, and then 
used as originals--after giving all parties a fair opportunity to 
verify the copies by comparing them with the originals; or
    (B) Give all parties a fair opportunity to inspect and copy the 
originals after they are marked--in which event the originals may be 
used as if attached to the deposition.
    (ii) Order regarding the originals. Any party may move for an order 
that the originals be attached to the deposition pending final 
disposition of the case.
    (3) Copies of the transcript or recording. Unless otherwise 
stipulated or ordered by the hearing officer or Commission, the 
deposition officer must retain the stenographic notes of a deposition 
taken stenographically or a copy of the recording of a deposition taken 
by another method. When paid reasonable charges, the deposition officer 
must furnish a copy of the transcript or recording to any party or the 
deponent, as directed by the party or person paying such charges.
    (m) Presentation of objections or disputes. Any party seeking 
relief with respect to disputes over the conduct of a deposition may 
file a motion with the hearing officer to obtain relief as permitted by 
this part.

0
12. Section 201.234 is amended by revising paragraphs (a) and (c) to 
read as follows:


Sec.  201.234  Depositions upon written questions.

    (a) Availability. Any deposition permitted under Sec.  201.233 may 
be taken and submitted on written questions upon motion of any party, 
for good cause shown, or as stipulated by the parties.
* * * * *
    (c) Additional requirements. The order for deposition, filing of 
the deposition, form of the deposition and use of the deposition in the 
record shall be governed by paragraphs (c) through (l) of Sec.  
201.233, except that no cross-examination shall be made.

0
13. Section 201.235 is amended by revising the section heading and 
paragraphs (a) introductory text, (a)(2), (4), and (5) and adding 
paragraph (b) to read as follows:


Sec.  201.235  Introducing prior sworn statements or declarations.

    (a) At a hearing, any person wishing to introduce a prior, sworn 
deposition taken pursuant to Sec.  201.233 or Sec.  201.234, 
investigative testimony, or other sworn statement or a declaration 
pursuant to 28 U.S.C. 1746, of a witness, not a party, otherwise 
admissible in the proceeding, may make a motion setting forth the 
reasons therefor. If only part of a statement or declaration is offered 
in evidence, the hearing officer may require that all relevant portions 
of the statement or declaration be introduced. If all of a statement or 
declaration is offered in evidence, the hearing officer may require 
that portions not relevant to the proceeding be excluded. A motion to 
introduce a prior sworn statement or declaration may be granted if:
* * * * *
    (2) The witness is out of the United States, unless it appears that 
the absence of the witness was procured by the party offering the prior 
sworn statement or declaration;
* * * * *
    (4) The party offering the prior sworn statement or declaration has 
been unable to procure the attendance of the witness by subpoena; or
    (5) In the discretion of the Commission or the hearing officer, it 
would be desirable, in the interests of justice, to allow the prior 
sworn statement or declaration to be used. In making this 
determination, due regard shall be given to the presumption that 
witnesses will testify orally in an open hearing. If the parties have 
stipulated to accept a prior sworn statement or declaration in lieu of 
live testimony, consideration shall also be given to the convenience of 
the parties in avoiding unnecessary expense.

[[Page 50239]]

    (b) Sworn statement or declaration of party or agent. An adverse 
party may use for any purpose a deposition taken pursuant to Sec.  
201.233 or Sec.  201.234, investigative testimony, or other sworn 
statement or a declaration pursuant to 28 U.S.C. 1746, of a party or 
anyone who, when giving the sworn statement or declaration, was the 
party's officer, director, or managing agent.

0
14. Section 201.250 is revised to read as follows:


Sec.  201.250  Dispositive motions.

    (a) Motion for a ruling on the pleadings. No later than 14 days 
after a respondent's answer has been filed, any party may move for a 
ruling on the pleadings on one or more claims or defenses, asserting 
that, even accepting all of the non-movant's factual allegations as 
true and drawing all reasonable inferences in the non-movant's favor, 
the movant is entitled to a ruling as a matter of law. The hearing 
officer shall promptly grant or deny the motion.
    (b) Motion for summary disposition in 30- and 75-day proceedings. 
In any proceeding under the 30- or 75-day timeframe designated pursuant 
to Sec.  201.360(a)(2), after a respondent's answer has been filed and 
documents have been made available to that respondent for inspection 
and copying pursuant to Sec.  201.230, any party may make a motion for 
summary disposition on one or more claims or defenses, asserting that 
the undisputed pleaded facts, declarations, affidavits, documentary 
evidence or facts officially noted pursuant to Sec.  201.323 show that 
there is no genuine issue with regard to any material fact and that the 
movant is entitled to summary disposition as a matter of law. The 
hearing officer shall promptly grant or deny the motion for summary 
disposition or shall defer decision on the motion. If it appears that a 
party, for good cause shown, cannot present prior to the hearing facts 
essential to justify opposition to the motion, the hearing officer 
shall deny or defer the motion.
    (c) Motion for summary disposition in 120-day proceedings. In any 
proceeding under the 120-day timeframe designated pursuant to Sec.  
201.360(a)(2), after a respondent's answer has been filed and documents 
have been made available to that respondent for inspection and copying 
pursuant to Sec.  201.230, a party may make a motion for summary 
disposition on one or more claims or defenses, asserting that the 
undisputed pleaded facts, declarations, affidavits, deposition 
transcripts, documentary evidence or facts officially noted pursuant to 
Sec.  201.323 show that there is no genuine issue with regard to any 
material fact and that the movant is entitled to summary disposition as 
a matter of law. A motion for summary disposition shall be made only 
with leave of the hearing officer. Leave shall be granted only for good 
cause shown and if consideration of the motion will not delay the 
scheduled start of the hearing. The hearing officer shall promptly 
grant or deny the motion for summary disposition or shall defer 
decision on the motion. If it appears that a party, for good cause 
shown, cannot present prior to the hearing facts essential to justify 
opposition to the motion, the hearing officer shall deny or defer the 
motion.
    (d) Motion for a ruling as a matter of law following completion of 
case in chief. Following the interested division's presentation of its 
case in chief, any party may make a motion, asserting that the movant 
is entitled to a ruling as a matter of law on one or more claims or 
defenses.
    (e) Length limitation for dispositive motions. Dispositive motions, 
together with any supporting memorandum of points and authorities 
(exclusive of any declarations, affidavits, deposition transcripts or 
other attachments), shall not exceed 9,800 words. Requests for leave to 
file motions and accompanying documents in excess of 9,800 words are 
disfavored. A double-spaced motion that does not, together with any 
accompanying memorandum of points and authorities, exceed 35 pages in 
length, inclusive of pleadings incorporated by reference (but excluding 
any declarations, affidavits, deposition transcripts or attachments) in 
the dispositive motion, is presumptively considered to contain no more 
than 9,800 words. Any motion that exceeds this page limit must include 
a certificate by the attorney, or an unrepresented party, stating that 
the brief complies with the word limit set forth in this paragraph and 
stating the number of words in the motion. The person preparing the 
certificate may rely on the word count of a word-processing program to 
prepare the document.
    (f) Opposition and reply length limitations and response time. A 
non-moving party may file an opposition to a dispositive motion and the 
moving party may thereafter file a reply.
    (1) Length limitations. Any opposition must comply with the length 
limitations applicable to the movant's motion as set forth in paragraph 
(e) of this section. Any reply must comply with the length limitations 
set forth in Sec.  201.154(c).
    (2) Response time. (i) For motions under paragraphs (a), (b), and 
(d) of this section, the response times set forth in Sec.  201.154(b) 
apply to any opposition and reply briefs.
    (ii) For motions under paragraph (c) of this section, any 
opposition must be filed within 21 days after service of such a motion, 
and any reply must be filed within seven days after service of any 
opposition.

0
15. Section 201.320 is revised to read as follows:


Sec.  201.320  Evidence: Admissibility.

    (a) Except as otherwise provided in this section, the Commission or 
the hearing officer may receive relevant evidence and shall exclude all 
evidence that is irrelevant, immaterial, unduly repetitious, or 
unreliable.
    (b) Subject to Sec.  201.235, evidence that constitutes hearsay may 
be admitted if it is relevant, material, and bears satisfactory indicia 
of reliability so that its use is fair.

0
16. Section 201.360 is amended by revising the section heading and 
paragraphs (a)(2) and (3), (b) introductory text, and (c) to read as 
follows:


Sec.  201.360  Initial decision of hearing officer and timing of 
hearing.

    (a) * * *
    (2) Time period for filing initial decision and for hearing--(i) 
Initial decision. In the order instituting proceedings, the Commission 
will specify a time period in which the hearing officer's initial 
decision must be filed with the Secretary. In the Commission's 
discretion, after consideration of the nature, complexity, and urgency 
of the subject matter, and with due regard for the public interest and 
the protection of investors, this time period will be either 30, 75, or 
120 days. The time period will run from the occurrence of the following 
events:
    (A) The completion of post-hearing briefing in a proceeding where 
the hearing has been completed; or
    (B) The completion of briefing on a Sec.  201.250 motion in the 
event the hearing officer has determined that no hearing is necessary; 
or
    (C) The determination by the hearing officer that, pursuant to 
Sec.  201.155, a party is deemed to be in default and no hearing is 
necessary.
    (ii) Hearing. Under the 120-day timeline, the hearing officer shall 
issue an order scheduling the hearing to begin approximately four 
months (but no more than ten months) from the date of service of the 
order instituting the proceeding. Under the 75-day timeline, the 
hearing officer shall issue an order scheduling the hearing to begin 
approximately 2-\1/2\ months (but no more than six months) from the 
date of

[[Page 50240]]

service of the order instituting the proceeding. Under the 30-day 
timeline, the hearing officer shall issue an order scheduling the 
hearing to begin approximately one month (but no more than four months) 
from the date of service of the order instituting the proceeding. These 
deadlines confer no substantive rights on respondents. If a stay is 
granted pursuant to Sec.  201.161(c)(2)(i) or Sec.  201.210(c)(3), the 
time period specified in the order instituting proceedings in which the 
hearing officer's initial decision must be filed with the Secretary, as 
well as any other time limits established in orders issued by the 
hearing officer in the proceeding, shall be automatically tolled during 
the period while the stay is in effect.
    (3) Certification of extension; motion for extension. (i) In the 
event that the hearing officer presiding over the proceeding determines 
that it will not be possible to file the initial decision within the 
specified period of time, the hearing officer may certify to the 
Commission in writing the need to extend the initial decision deadline 
by up to 30 days for case management purposes. The certification must 
be issued no later than 30 days prior to the expiration of the time 
specified for the issuance of an initial decision and be served on the 
Commission and all parties in the proceeding. If the Commission has not 
issued an order to the contrary within 14 days after receiving the 
certification, the extension set forth in the hearing officer's 
certification shall take effect.
    (ii) Either in addition to a certification of extension, or instead 
of a certification of extension, the Chief Administrative Law Judge may 
submit a motion to the Commission requesting an extension of the time 
period for filing the initial decision. First, the hearing officer 
presiding over the proceeding must consult with the Chief 
Administrative Law Judge. Following such consultation, the Chief 
Administrative Law Judge may determine, in his or her discretion, to 
submit a motion to the Commission requesting an extension of the time 
period for filing the initial decision. This motion may request an 
extension of any length but must be filed no later than 15 days prior 
to the expiration of the time specified in the certification of 
extension, or if there is no certification of extension, 30 days prior 
to the expiration of the time specified in the order instituting 
proceedings. The motion will be served upon all parties in the 
proceeding, who may file with the Commission statements in support of 
or in opposition to the motion. If the Commission determines that 
additional time is necessary or appropriate in the public interest, the 
Commission shall issue an order extending the time period for filing 
the initial decision.
    (iii) The provisions of this paragraph (a)(3) confer no rights on 
respondents.
    (b) Content. An initial decision shall include findings and 
conclusions, and the reasons or basis therefor, as to all the material 
issues of fact, law or discretion presented on the record and the 
appropriate order, sanction, relief, or denial thereof. The initial 
decision shall also state the time period, not to exceed 21 days after 
service of the decision, except for good cause shown, within which a 
petition for review of the initial decision may be filed. The reasons 
for any extension of time shall be stated in the initial decision. The 
initial decision shall also include a statement that, as provided in 
paragraph (d) of this section:
* * * * *
    (c) Filing, service and publication. The Secretary shall promptly 
serve the initial decision upon the parties and shall promptly publish 
notice of the filing thereof on the SEC Web site. Thereafter, the 
Secretary shall publish the initial decision in the SEC Docket; 
provided, however, that in nonpublic proceedings no notice shall be 
published unless the Commission otherwise directs.
* * * * *

0
17. Section 201.410 is amended by revising paragraph (b), redesignating 
paragraph (c) as paragraph (d), and adding a new paragraph (c) to read 
as follows:


Sec.  201.410  Appeal of initial decisions by hearing officers.

* * * * *
    (b) Procedure. The petition for review of an initial decision shall 
be filed with the Commission within such time after service of the 
initial decision as prescribed by the hearing officer pursuant to Sec.  
201.360(b) unless a party has filed a motion to correct an initial 
decision with the hearing officer. If such correction has been sought, 
a party shall have 21 days from the date of the hearing officer's order 
resolving the motion to correct to file a petition for review. The 
petition shall set forth a statement of the issues presented for review 
under Sec.  201.411(b). In the event a petition for review is filed, 
any other party to the proceeding may file a cross-petition for review 
within the original time allowed for seeking review or within ten days 
from the date that the petition for review was filed, whichever is 
later.
    (c) Length limitation. Except with leave of the Commission, the 
petition for review shall not exceed three pages in length. 
Incorporation of pleadings or filings by reference into the petition is 
not permitted. Motions to file petitions in excess of those limitations 
are disfavored.
* * * * *

0
18. Section 201.411 is amended by:
0
a. In paragraph (c), removing the term ``Sec.  210.410(b)'' and adding 
in its place ``Sec.  201.410(b)''; and
0
b. Revising paragraph (d).
    The revision reads as follows:


Sec.  201.411  Commission consideration of initial decisions by hearing 
officers.

* * * * *
    (d) Limitations on matters reviewed. Review by the Commission of an 
initial decision shall be limited to the issues specified in an opening 
brief that complies with Sec.  201.450(b), or the issues, if any, 
specified in the briefing schedule order issued pursuant to Sec.  
201.450(a). Any exception to an initial decision not supported in an 
opening brief that complies with Sec.  201.450(b) may, at the 
discretion of the Commission, be deemed to have been waived by the 
petitioner. On notice to all parties, however, the Commission may, at 
any time prior to issuance of its decision, raise and determine any 
other matters that it deems material, with opportunity for oral or 
written argument thereon by the parties.
* * * * *

0
19. Section 201.420 is amended by:
0
a. Revising paragraph (a); and
0
b. Adding a sentence to the end of paragraph (c).
    The revision and addition read as follows:


Sec.  201.420  Appeal of determinations by self-regulatory 
organizations.

    (a) Application for review; when available. An application for 
review by the Commission may be filed by any person who is aggrieved by 
a determination of a self-regulatory organization with respect to any:
    (1) Final disciplinary sanction;
    (2) Denial or conditioning of membership or participation;
    (3) Prohibition or limitation in respect to access to services 
offered by that self-regulatory organization or a member thereof; or
    (4) Bar from association as to which a notice is required to be 
filed with the Commission pursuant to Section 19(d)(1) of the Exchange 
Act, 15 U.S.C. 78s(d)(1).
* * * * *
    (c) * * * Any exception to a determination not supported in an

[[Page 50241]]

opening brief that complies with Sec.  201.450(b) may, at the 
discretion of the Commission, be deemed to have been waived by the 
applicant.
* * * * *

0
20. Section 201.440 is amended by revising paragraph (b) to read as 
follows:


Sec.  201.440  Appeal of determinations by the Public Company 
Accounting Oversight Board.

* * * * *
    (b) Procedure. An aggrieved person may file an application for 
review with the Commission pursuant to Sec.  201.151 within 30 days 
after the notice filed by the Board of its determination with the 
Commission pursuant to 17 CFR 240.19d-4 is received by the aggrieved 
person applying for review. The applicant shall serve the application 
on the Board at the same time. The application shall identify the 
determination complained of, set forth in summary form a brief 
statement of alleged errors in the determination and supporting reasons 
therefor, and state an address where the applicant can be served. The 
application should not exceed two pages in length. The notice of 
appearance required by Sec.  201.102(d) shall accompany the 
application. Any exception to a determination not supported in an 
opening brief that complies with Sec.  201.450(b) may, at the 
discretion of the Commission, be deemed to have been waived by the 
applicant.
* * * * *
0
21. Section 201.450 is amended by revising paragraphs (b), (c), and (d) 
to read as follows.


Sec.  201.450  Briefs filed with the Commission.

* * * * *
    (b) Contents of briefs. Briefs shall be confined to the particular 
matters at issue. Each exception to the findings or conclusions being 
reviewed shall be stated succinctly. Exceptions shall be supported by 
citation to the relevant portions of the record, including references 
to the specific pages relied upon, and by concise argument including 
citation of such statutes, decisions and other authorities as may be 
relevant. If the exception relates to the admission or exclusion of 
evidence, the substance of the evidence admitted or excluded shall be 
set forth in the brief, or by citation to the record. Reply briefs 
shall be confined to matters in opposition briefs of other parties; 
except as otherwise determined by the Commission in its discretion, any 
argument raised for the first time in a reply brief shall be deemed to 
have been waived.
    (c) Length limitation. Except with leave of the Commission, opening 
and opposition briefs shall not exceed 14,000 words and reply briefs 
shall not exceed 7,000 words, exclusive of pages containing the table 
of contents, table of authorities, and any addendum that consists 
solely of copies of applicable cases, pertinent legislative provisions 
or rules, and exhibits. Incorporation of pleadings or filings by 
reference into briefs submitted to the Commission is not permitted. 
Motions to file briefs in excess of these limitations are disfavored.
    (d) Certificate of compliance. An opening or opposition brief that 
does not exceed 30 pages in length, exclusive of pages containing the 
table of contents, table of authorities, and any addendum that consists 
solely of copies of applicable cases, pertinent legislative provisions, 
or rules and exhibits, is presumptively considered to contain no more 
than 14,000 words. A reply brief that does not exceed 15 pages in 
length, exclusive of pages containing the table of contents, table of 
authorities, and any addendum that consists solely of copies of 
applicable cases, pertinent legislative provisions, or rules and 
exhibits is presumptively considered to contain no more than 7,000 
words. Any brief that exceeds these page limits must include a 
certificate by the party's representative, or an unrepresented party, 
stating that the brief complies with the requirements set forth in 
paragraph (c) of this section and stating the number of words in the 
brief. The person preparing the certificate may rely on the word count 
of the word-processing system used to prepare the brief.

0
22. Section 201.900 is revised to read as follows:


Sec.  201.900  Informal procedures and supplementary information 
concerning adjudicatory proceedings.

    (a) Guidelines for the timely completion of proceedings. (1) Timely 
resolution of adjudicatory proceedings is one factor in assessing the 
effectiveness of the adjudicatory program in protecting investors, 
promoting public confidence in the securities markets and assuring 
respondents a fair hearing. Establishment of guidelines for the timely 
completion of key phases of contested administrative proceedings 
provides a standard for both the Commission and the public to gauge the 
Commission's adjudicatory program on this criterion. The Commission has 
directed that:
    (i) To the extent possible, a decision by the Commission on review 
of an interlocutory matter should be completed within 45 days of the 
date set for filing the final brief on the matter submitted for review.
    (ii) To the extent possible, a decision by the Commission on a 
motion to stay a decision that has already taken effect or that will 
take effect within five days of the filing of the motion, should be 
issued within five days of the date set for filing of the opposition to 
the motion for a stay. If the decision complained of has not taken 
effect, the Commission's decision should be issued within 45 days of 
the date set for filing of the opposition to the motion for a stay.
    (iii) Ordinarily, a decision by the Commission with respect to an 
appeal from the initial decision of a hearing officer, a review of a 
determination by a self-regulatory organization or the Public Company 
Accounting Oversight Board, or a remand of a prior Commission decision 
by a court of appeals will be issued within eight months from the 
completion of briefing on the petition for review, application for 
review, or remand order. If the Commission determines that the 
complexity of the issues presented in a petition for review, 
application for review, or remand order warrants additional time, the 
decision of the Commission in that matter may be issued within ten 
months of the completion of briefing.
    (iv) If the Commission determines that a decision by the Commission 
cannot be issued within the period specified in paragraph (a)(1)(iii) 
of this section, the Commission may extend that period by orders as it 
deems appropriate in its discretion. The guidelines in this paragraph 
(a) confer no rights or entitlements on parties or other persons.
    (2) The guidelines in this paragraph (a) do not create a 
requirement that each portion of a proceeding or the entire proceeding 
be completed within the periods described. Among other reasons, 
Commission review may require additional time because a matter is 
unusually complex or because the record is exceptionally long. In 
addition, fairness is enhanced if the Commission's deliberative process 
is not constrained by an inflexible schedule. In some proceedings, 
deliberation may be delayed by the need to consider more urgent 
matters, to permit the preparation of dissenting opinions, or for other 
good cause. The guidelines will be used by the Commission as one of 
several criteria in monitoring and evaluating its adjudicatory program. 
The guidelines will be examined periodically, and, if necessary, 
readjusted in light of changes

[[Page 50242]]

in the pending caseload and the available level of staff resources.
    (b) Reports to the Commission on pending cases. The administrative 
law judges, the Secretary and the General Counsel have each been 
delegated authority to issue certain orders or adjudicate certain 
proceedings. See 17 CFR 200.30-1 through 200.30-18. Proceedings are 
also assigned to the General Counsel for the preparation of a proposed 
order or opinion which will then be recommended to the Commission for 
consideration. In order to improve accountability by and to the 
Commission for management of the docket, the Commission has directed 
that confidential status reports with respect to all filed adjudicatory 
proceedings shall be made periodically to the Commission. These reports 
will be made through the Secretary, with a minimum frequency 
established by the Commission. In connection with these periodic 
reports, if a proceeding pending before the Commission has not been 
concluded within 30 days of the guidelines established in paragraph (a) 
of this section, the General Counsel shall specifically apprise the 
Commission of that fact, and shall describe the procedural posture of 
the case, project an estimated date for conclusion of the proceeding, 
and provide such other information as is necessary to enable the 
Commission to make a determination under paragraph (a)(1)(iv) of this 
section or to determine whether additional steps are necessary to reach 
a fair and timely resolution of the matter.
    (c) Publication of information concerning the pending case docket. 
Ongoing disclosure of information about the adjudication program 
caseload increases awareness of the importance of the program, 
facilitates oversight of the program and promotes confidence in the 
efficiency and fairness of the program by investors, securities 
industry participants, self-regulatory organizations and other members 
of the public. The Commission has directed the Secretary to publish in 
the first and seventh months of each fiscal year summary statistical 
information about the status of pending adjudicatory proceedings and 
changes in the Commission's caseload over the prior six months. The 
report will include the number of cases pending before the 
administrative law judges and the Commission at the beginning and end 
of the six-month period. The report will also show increases in the 
caseload arising from new cases being instituted, appealed or remanded 
to the Commission and decreases in the caseload arising from the 
disposition of proceedings by issuance of initial decisions, issuance 
of final decisions issued on appeal of initial decisions, other 
dispositions of appeals of initial decisions, final decisions on review 
of self-regulatory organization determinations, other dispositions on 
review of self-regulatory organization determinations, and decisions 
with respect to stays or interlocutory motions. For each category of 
decision, the report shall also show the median age of the cases at the 
time of the decision, the number of cases decided within the guidelines 
for the timely completion of adjudicatory proceedings, and, with 
respect to appeals from initial decisions, reviews of determinations by 
self-regulatory organizations or the Public Company Accounting 
Oversight Board, and remands of prior Commission decisions, the median 
days from the completion of briefing to the time of the Commission's 
decision.

    By the Commission.

    Dated: July 13, 2016.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-16987 Filed 7-28-16; 8:45 am]
 BILLING CODE 8011-01-P