[This story previously appeared in Securities Regulation Daily.]
By John M. Jascob, J.D.
NASAA has expressed concern that two bills in Congress concerning email privacy could severely hamper the ability of state regulators to prevent securities fraud. In separate letters to leaders of the House and Senate Judiciary Committees, NASAA wrote that provisions of the Email Privacy Act (H.R. 1852) and the Electronic Communications Privacy Act Amendments Act of 2013 (S. 607) could significantly limit the effectiveness of state civil and administrative investigations if state securities regulators are required to obtain search warrants in order to gain access to email communications stored by an Internet service provider (ISP).
Search warrant requirement. NASAA observed that federal law currently authorizes a governmental entity to use an administrative subpoena to obtain the contents of an electronic communication from an ISP, once notice has been provided to the customer. The proposed legislation, however, aims to amend 18 U.S.C. § 2703(b) by prohibiting ISPs from providing a governmental entity with the contents of any communication that is in electronic storage or maintained by the provider without a search warrant.
No independent authority. In NASAA’s view, the bills would effectively foreclose securities regulators from obtaining email or other electronic communications from an ISP in civil or administrative investigations. NASAA observed that state securities regulators typically rely on subpoenas, not warrants, to obtain critical investigative information. Many state regulators do not have independent authority to obtain a search warrant from a court, thus leaving the agencies that lack independent criminal authority with no practical way to obtain the warrants that the bills would require.
SEC concerns. NASAA noted that SEC Chair Mary Jo White has also expressed concerns about the “significant negative impact” that S. 607 would have on the SEC’s enforcement efforts. In a letter last year to the Senate Judiciary Committee, Chair White suggested that Congress might strike a better balance between privacy interests and investor protection by amending the bill to establish a mechanism enabling a federal civil agency to obtain electronic communications from an ISP for use in a civil enforcement investigation upon satisfying a “judicial standard comparable to the one that governs receipt of a criminal warrant.” NASAA wrote that state regulators would also support such an approach, provided that the mechanism is fully accessible to both state and federal civil agencies.