The SEC stated to the USA Court in a response on January 30, 2024.
“For the foregoing reasons, and those in the Commission’s Response to the Order to Show Cause (Dkt. 233), the Commission respectfully submits that sanctions are not warranted and that the Court’s Order to Show Cause (Dkt. 215) should be discharged.”
For the reasons given in the Commission’s Response to the Order to Show Cause, the Commission respectfully submits that the statements identified in the Order to Show Cause do not warrant sanctions under Rule 11 or the Court’s inherent authority. (Dkt. 233 at 8-20.)
While the Commission recognizes that its attorneys should have been more forthcoming with the Court, sanctions are not appropriate or necessary to address those issues. Significantly, the Commission is continuing to take steps to address the issues the Court identified and to identify any other issues that may warrant further consideration.
As indicated in the Commission’s Response, experienced trial attorneys from the Commission’s Denver Regional Office have been assigned to this matter. (Id. at 1; see Dkt. 234-236.) That team is reviewing the allegations and evidence in this matter.
Given this ongoing review, the Commission has determined that the best way to proceed is to dismiss this action without prejudice. Thus, the Commission has authorized the filing of a motion to dismiss this action without prejudice, which will be forthcoming.
If the Court were to determine that some sanction is warranted, it should decline to impose a penalty beyond dismissal without prejudice. Any Rule 11 sanction must be “the least severe sanction adequate to deter future abuses.” Dodd Ins. Servs., Inc. v. Royal Ins. Co. of Am., 935 F.2d 1152, 1159 (10th Cir. 1991); see Fed. R. Civ. P. 11(c)(4) (“A sanction imposed under this rule must be limited to what suffices to deter repetition of the conduct or comparable conduct by others similarly situated.”).
In addition to moving to dismiss this action without prejudice, and as explained in the Commission’s Response to the Order to Show Cause, agency officials have taken and are taking broader corrective action to ensure the concerns raised by the Court do not arise again, including holding mandatory trainings for all Enforcement Division staff involved in investigations and litigation on the importance of candor and the duty to promptly correct any inaccuracies, as well as the unique considerations that apply when seeking emergency relief, particularly on an ex parte basis.
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