The SEC can force an investment adviser to turn over compliance communications because they aren’t protected work product, a federal judge said June 10.
The U.S. Securities and Exchange Commission accused two former Brite Advisors USA Inc. employees of misrepresenting an investment option’s tax implications. Brite can’t withhold emails to a group of external attorneys because there wasn’t an attorney-client relationship, the U.S. District Court for the Southern District of New York said.
Benjamin Alderson and Bradley Hamilton worked for Brite, then known as deVere USA Inc., when they allegedly misled clients. According to the court, the pair planned to argue “that they relied in good faith on the advice of counsel” Brite hired. But Brite asserted work product and attorney-client privilege and refused to let the two men use the communications and some tax opinion prepared by another firm. The SEC sought to compel Brite to turn over the documents.
Brite hired MarketCounsel LLC, a consulting firm staffed by attorneys, to handle its compliance questions, the opinion said. But their agreement “expressly disclaimed the existence of an attorney-client relationship,” the judge said.
Many attorneys on MarketCounsel’s staff also worked for a related law firm, and Brite had the opportunity to retain the law firm itself for a higher fee, the opinion said. MarketCounsel “made clear that any advice given by” attorneys on its staff, “although informed by their legal training and experience, should not be relied upon as legal advice or viewed as part of an attorney-client relationship,” the judge said.
The only communications covered by attorney-client privilege are two instances where Brite sought legal advice after the SEC began investigating, the opinion said.
Brite also tried to protect tax opinions another law firm prepared for it. But the opinions weren’t work product because they weren’t prepared in anticipation of litigation, the opinion said. And they weren’t protected by attorney-client privilege because Brite voluntarily disclosed them to a third party, the judge said.
MarketCounsel must turn over almost all of the compliance communications to the SEC, and the SEC must turn over the tax opinions to Alderson and Hamilton, the opinion said.
Judge Valerie Caproni wrote the opinion.
Harris, St. Laurent & Chaudhry LLP represented Alderson. Kaplan Landau PLLC represented Hamilton. Carlton Fields P.A. represented Brite.
The case is SEC v. Alderson, 2019 BL 213717, S.D.N.Y., No. 18-cv-04930, 6/10/19.
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