SEC Hit With Lawsuit Over Texting Sweep

What You Need to Know

ASA is suing under FOIA to get the SEC to produce documents related to its off-channel communications sweep.
The trade group has sent three letters under FOIA since March, but hasn’t heard from the agency.
ASA wants to know how the penalties were calculated, and why firms were targeted in the first place.

The American Securities Association is suing the Securities and Exchange Commission for failing to produce documents under the Freedom of Information Act regarding its off-channel communications sweep.

In the September 2021, the SEC began to investigate certain broker-dealers’ retention of “off-channel” communications, such as text messages on personal devices, states the lawsuit, filed Thursday by ASA, a trade group representing regional financial services firms, in the U.S. District Court for the Middle District of Florida.

The agency ”launched a suspicion-less investigation into whether certain broker-dealers were properly retaining business-related text messages sent and received on personal devices as required by the Commission’s rules,” the lawsuit states.

The lawsuit, according to ASA, concerns the “SEC’s unprecedented enforcement activities and the agency’s refusal to disclose its records of these activities” under FOIA.

“The purpose of the Freedom of Information Act is to ensure the public has access to information in the possession of federal agencies so the people can hold their government accountable,” ASA president and CEO Chris Iacovella said Thursday in a statement. “Unfortunately, the SEC has failed to comply with its FOIA obligations, and that is why ASA filed this lawsuit. The American public must have transparency into the SEC’s enforcement process.”

In March, ASA states that it filed three FOIA requests for records concerning the SEC’s “off-channel” communications sweep.

“The SEC, however, has refused to produce any documents in response to these requests,” the group said.

The agency citied an exemption to FOIA for requests that could be expected to interfere with law enforcement proceedings, but “did not explain why the Exemption applied or why it justified a blanket withholding of every responsive document,” according to the lawsuit.

ASA is seeking to force the SEC to turn over the documents and to recoup its attorneys’ fees.