SW Legal studies in Business

Securities Regulators Do Not Have General Right of Access to Financial Records
Description Illinois appeals court held that during a routine audit, the state securities regulators did not have the authority to demand that employees of a securities firm provide copies of their personal financial data, including personal checking account records. Unless there is suspicion of fraud, such a demand is a violation of constitutional rights.
Topic Securities Law
Key Words Securities Professionals; Personal Accounts; Subpoenas; Right of Privacy
C A S E   S U M M A R Y
Facts A.G. Edwards, a broker/dealer, and several of its employees were served subpoenas by the Illinois Department of Securities to produce bank records for all accounts in which commission checks were deposited for some brokers who worked for Edwards. Some of the accounts were personal checking accounts of the brokers. Edwards and the employees moved to squash the subpoenas, contending that they were so broad as to invade the brokers' right of privacy. The Department of Securities contended it had a right to these records as part of a routine audit. The district court quashed the subpoenas; the Department appealed.

Affirmed. The state Securities Law is to be liberally construed to help protect the public from fraud in the sale of securities. However, this does not give securities regulators the right to have general access to the personal checking accounts of securities professionals. There was no claim made of suspicion of fraud that might justify the production of such records. As part of a routine audit of a securities firm and its employees, this search and seizure goes too far as it is indefinite in scope, and so violates the constitutional rights of the employees.

Citation A.G. Edwards, Inc. v. Secretary of State, 772 N.E.2d 362 (App. Ct., Ill., 2002)

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