On August 31, 2020, the White House quietly released a memorandum that could significantly change the way civil and administrative enforcement actions proceed. The memorandum can be found here.
The memorandum is directed to Deputy Secretaries of Executive Departments and Agencies. This means it applies to the Securities and Exchange Commission, the Federal Trade Commission, the Federal Reserve, and any other government agency with civil or administrative enforcement authority.
The memorandum directs agencies to provide much greater due process to individuals and companies being investigated. The memorandum specifically provides the following best practices to be followed by the agencies:
- The government bears the burden of proving an alleged violation of the law.
- The subject of enforcement should not bear the burden of proving compliance with the law.
- A cause of action must be based on actual misconduct and not on what should have been done.
- Regulatory ambiguities should be read in favor of subjects of enforcement.
- Agencies should seek approval from an Officer of the United States before entering into a tolling agreement to extend the statute of limitations.
- Investigations should end within a defined time period and/or end with formal declination. This will avoid subjects wondering for years whether there will be a knock on the door.
- Agencies should confirm their civil adjudicatory evidence disclosure practices similar to those described in Brady v. Maryland, 373 U.S. 83, 87 (1963), Giglio v. United States, 405 U.S. 150, 154 (1972), and Kyles v. Whitley, 514 U.S. 419, 432-33 (1995). This means that agencies should turn over exculpatory evidence similar to the procedures laid out in the Justice Manual of the U.S. Department of Justice.
- All rules of evidence and procedure should be public, clear, and effective.
- Penalties should be proportionate and transparent.
- Liability should be imposed only for violations of statutes or duly issued regulations, after notice and an opportunity to respond. The element of surprise should be eliminated.
While the memorandum is tied to the coronavirus and the Trump administration’s attempt to have an economic recovery, the implementation could have lasting effects on the way these agencies operate. Particularly, the memorandum provides for transparency, accountability, and fairness in administrative and civil enforcement proceedings. This is a huge change from the current states of affairs and should provide companies that are in regulated entities a great deal of comfort.