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SEC to Review Subpoena Action

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Times Staff Writer

Securities and Exchange Commission Chairman Christopher Cox distanced himself Monday from the decision of SEC enforcement officials to subpoena two journalists and said the agency would review the matter as early as this week.

SEC investigators on Friday backed away from their demand that two business writers employed by Dow Jones & Co. turn over their phone and e-mail records. The subpoena, which had triggered concerns that the agency was trampling on the news media’s 1st Amendment rights, took Cox by surprise.

“Until the appearance of media reports this weekend, neither the chairman of the SEC, the general counsel, the office of public affairs nor any commissioner was apprised of or consulted in connection with a decision to take such an extraordinary step,” Cox said in a statement.

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“The sensitive issues that such a subpoena raises are of sufficient importance that they should, and will, be considered and decided by the commission before this matter proceeds further,” he said. The statement seemed to offer at least a mild rebuke to Linda Chatman Thomsen, director of the enforcement division, who had approved the subpoena.

Thomsen declined Monday to talk about the subpoena or the investigation. In an interview, she maintained that SEC subpoenas were issued only after careful consideration.

“We don’t issue subpoenas willy-nilly,” Thomsen said. “Without regard to any particular investigation, we’re going to do it with great care, based on where the evidence is taking us.”

Herb Greenberg, a San Diego-based columnist for Dow Jones’ MarketWatch website, wrote Friday that he had been subpoenaed by the SEC in connection with an investigation into research firm Gradient Analytics Inc.

Online retailer Overstock.com Inc. of Salt Lake City has accused Gradient and a hedge fund of conspiring to push down its stock price.

Dow Jones Newswires columnist Carol S. Remond was also subpoenaed as part of the probe, but a spokeswoman for Dow Jones said agency officials had backed away from the demand Friday in face of the company’s objections.

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The episode comes at a time when the U.S. government has been more aggressive in demanding materials from journalists and pursuing officials who make unauthorized disclosures to the media. The Justice Department, for example, is trying to find out who leaked information to the New York Times about the president’s program of domestic surveillance.

The SEC has not been in the forefront of demanding reporters’ materials. Agency officials have described the subpoena as very rare and have had trouble coming up with another recent example of a subpoena to journalists.

Cox on Monday faced conflicting pressures in working through the matter.

On the one hand, he sought to quell concerns that the SEC would casually demand reporters’ records for its many investigations -- pointing out that the financial press can play a useful role in keeping the marketplace informed about significant events.

“We have to be particularly considerate of the vital role the media plays in the operation of the capital markets,” Cox said in an interview. “Markets thrive on information, and we don’t want to chill that in any way.”

At the same time, the nation’s chief securities cop did not want to sound critical of SEC investigators.

The agency has faced a backlash from business groups as it has moved to enforce tougher rules for corporations, including the Sarbanes-Oxley law triggered by the Enron Corp. scandal.

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Cox has been trying to calm some of those corporate critics while assuring the public that he remains committed to robust enforcement.

“Investors have every right to expect that there will be an aggressive program of securities law enforcement,” he said. Speaking of the enforcement chief, he added, “My estimate of Linda Thomsen is the same as it has been since the day I met her. She is absolutely outstanding.”

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