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Commission Remands To ALJ Due To Enforcement Failure to Comply With Discovery Rule

Byron S. Rainner, Exchange Act Rel. 59040, December 2, 2008


Rainner was convicted of wire fraud and sentenced to 30 months imprisonment, three years supervised probation and ordered to make $2 million of restitution. The ALJ barred Rainner from association with any broker, dealer, or investment adviser. He was released from prison in October 2008. While Rainner was incarcerated the Division of Enforcement made its investigative file "available" for him to review at the Commission's nearest regional office but did not copy the entire file due to the $7,500 cost. It provided him copies of documents it was relying on to establish its case.

Rainner appealed the ALJ's decision citing failure of the Division to comply with Commission Rule 230(f) that requires it to give copies of any document made available for review if the respondent agrees to pay reasonable copying costs. Since Rainner was not given copies of the file to review the Commission remanded to allow Rainner an opportunity to review the investigative file before responding to the Division's summary disposition motion.


The cost of litigating this appeal and a remand is no doubt much greater than the trivial $7,500 cost of initially complying with the Commission's discovery obligations. One must wonder why the Division took this stiff necked position.