Commission deems relevant or material to the inquiry." Id., § 21(b), 15 U.S.C. § 78u(b). In the event of disobedience, the Commission may petition the court to exact compliance. Id., § 21(c), 15 U.S.C. § 78u(c). It is pursuant to that authority that the SEC petitions for judicial enforcement of its subpoena duces tecum.
The standard for determining whether a federal regulatory agency has exceeded the scope of its investigatory powers is clear -- it is sufficient if the inquiry is within the authority of the agency, the demand is not too indefinite and the information sought is reasonably relevant. United States v. Morton Salt Co., 338 U.S. 632, 652, 94 L. Ed. 401, 70 S. Ct. 357 (1950). Here, the SEC has requested information relating to transactions undertaken by Blinder, Robinson during a discrete time period and involving sixteen specific issuers suspected of fraud. The request is limited to documents which must be kept on file pursuant to SEC rule 17a-3, and that request sets out in detail which of those records are to be produced. As the SEC is charged with overseeing the securities industry and preventing fraud in the trading of stocks and bonds, it is well within the scope of its authority to request information necessary to dispel or confirm suspicions of which they have substantive evidence.
By the same token, the information sought is reasonably relevant to the inquiry -- in fact it goes directly to the heart of the issue in question. Because the investigation is broad the subpoena's production effort is broad, yet it is no broader. The Commission has established prima facie evidence of its potential importance in terms of the investigative objectives. That level of justification is sufficient to validate the scope of the request and the Court therefore finds that the information sought is not clearly irrelevant or immaterial.
Finally, there is the crux of Blinder, Robinson's objection -- that the demand for information is indefinite, and therefore vests in the staff member seeking to enforce the subpoena the power to determine the scope of the request, in violation of the Fourth Amendment. A review of the terms of the subpoena shows quite clearly that this objection cannot be sustained. Blinder, Robinson is directed to produce certain information about transactions completed after August 9, 1983 relating to the securities of sixteen companies. The requested information is carefully categorized and the limits of the requested production are clearly delineated; only those documents pertaining to the announced investigation must be surrendered. The fact that the subpoena requests virtually every piece of information in Blinder, Robinson's possession regarding the subject issuers does not change the fact that the request is specific and reasonably related to the inquiry. In fact, since maintenance of the requested records is mandated by the statute which the SEC seeks to enforce, it is quite logical that it would be those documents which would be requested in a proceeding investigating compliance.
Blinder, Robinson's objections to the constitutional and statutory validity of the subpoena must be rejected as meritless, as the request is within the SEC's statutory authority, the information is reasonably definite, and not clearly irrelevant to a properly justified investigation.
Blinder, Robinson's final argument is that even if the documents are properly recoverable under the subpoena as issued, it should not be required to bear the entire expense of production. Rather, it contends that the SEC has a duty to prevent the investigation from unduly burdening Blinder, Robinson and to share in the costs if the investigation cannot be reasonably confined.
There is a continuing general duty to respond to governmental process, and parties will be required to absorb the reasonable costs of so doing. SEC v. Arthur Young & Co., 190 U.S. App. D.C. 37, 584 F.2d 1018, 1033 (D.C. Cir. 1978), cert. denied, 439 U.S. 1071, 59 L. Ed. 2d 37, 99 S. Ct. 841 (1979). Although it is within the discretion of the Court to order the SEC to provide reimbursement for the costs of compliance with its subpoena, such an order will not issue unless "the financial burden of compliance exceeds that which the party ought to reasonably made to shoulder." Id.
Blinder, Robinson submits that compliance with the subpoena required the duplication of microfiche records, the cost of which was in the amount of $ 14,800. It contends that this cost was unreasonable because the information contained on microfiche was largely duplicative of that contained on computer tapes, a copy of which had already been delivered to the SEC staff. In fact, argues Blinder, Robinson, the production of microfiche is necessary at this time only because of the SEC's earlier refusal to accept the most efficient means of producing the records requested.
Consequently, it refuses to produce the copied microfiche records until the SEC provides reimbursement of $ 7,400, or one-half of duplication costs.
In a situation where the SEC had required the reproduction of requested records, these arguments might be sufficient to support an order granting reimbursement of costs. In this instance, however, the Court is not persuaded that there was any need to reproduce the microfiche at all in order to comply with the SEC's demands. Certainly the SEC required nothing more than that the information requested be delivered for its review -- it never specified that a copy, new or pre-existent, was required. Blinder, Robinson does not dispute that at the time of the original request it had within its possession an original and a copy of its microfiche records. See Declaration of John J. Cox at 7. One copy is maintained in the firm's vault for security purposes and the other is maintained for day-to day retrieval and research purposes. That the company chose to make an additional copy for delivery to the SEC rather than surrendering one of the two it already possessed is of no consequence. The simplest method of compliance with the SEC's request would have been to produce one of the existing sets of microfiche.
At the very least, Blinder, Robinson had an affirmative duty to explore that possibility with the SEC prior to acting unilaterally in having the microfiche copied.
The Court finds that it was only due to Blinder, Robinson's preference in submitting a new copy of the microfiche records rather that the copy already available that any expenditure was necessitated. If the costs associated with compliance with the subpoena duces tecum in question are unreasonable, they are unreasonably only because Blinder, Robinson chose to pursue an unreasonable avenue of compliance. Compliance could have been achieved just as satisfactorily without additional cost, and the Court will not hold the SEC liable for expenditures neither requested nor required. Therefore, the SEC is not required to reimburse Blinder, Robinson for any portion of the costs incurred to date for compliance with the subpoena.
For the above reasons, it is hereby this 24th day of November, 1987
ORDERED that the Commission's Application for Order Directing Compliance with the Subpoena Duces Tecum dated May 5, 1987, Returnable May 27, 1987, be and it hereby is granted; and it is further
ORDERED that Blinder, Robinson & Co., Inc., shall comply fully with the subpoena duces tecum issued to it by the Commission and produce documents at the offices of the Commission, 450 Fifth Street, N.W., on or before December 7, 1987.