Failure to update the Email Privacy Act would impede the Securities and Exchange Commission’s ability to catch fraud against elderly investors as well as Ponzi schemes, the agency’s director of enforcement told Congress on Tuesday.
In testimony before the House Judiciary Committee, Andrew Ceresney, head of the SEC’s Division of Enforcement, urged lawmakers to update the Email Privacy Act, H.R. 699 — which seeks to modernize portions of the Electronic Communications Privacy Act, passed in 1986 — because the bill prevents the SEC and other civil law enforcement agencies from obtaining electronic information from Internet service providers.
H.R. 699 would require a criminal warrant to seek the content of emails and other electronic communications from Internet service providers. As a civil agency, the SEC does not have the authority to issue a criminal warrant.
Ceresney noted that emails, texts and chat room messages often provide “critical evidence” to the commission when investigating wrongdoing.
“Establishing fraudulent intent is one of the most challenging issues in our investigations, and emails and other electronic messages are often the only direct evidence of that state of mind,” Ceresney said.
When the SEC conducts an investigation, “we generally will seek emails and other electronic communications from the key actors via an administrative subpoena – a statutorily authorized mechanism for gathering documents and other evidence in our investigations.”
Not all of the SEC’s requests for emails are granted, Cerensey noted, and sometimes subpoenaed recipients erase emails, tender only some emails, assert damaged hardware, or refuse to hand them over. In still other instances, he continued, email account holders cannot be subpoenaed because they are beyond the agency’s jurisdiction.