FTC Revises Rules of Practice for Investigations & Attorney Discipline
by Margaret Wright, Esq.
The Federal Trade Commission (FTC) has issued the Final Rule regarding revisions to 16 CFR Parts 2 and 4 of the Rules of Practice governing investigation and attorney discipline procedures. The need for additional clarification of the FTC’s investigatory procedures has resulted from the increasing trend of using compulsory process to obtain information from parties regarding matters under investigation and the need to clarify appropriate standards of discipline resulting from attorney misconduct in FTC investigation proceedings.
Part 2: Rules Governing Investigations
The first section of the Rules of Practice revised by the final rule governs FTC investigations. This section outlines the FTC investigation process from start to finish, beginning with the receipt of a complaint to the final disposition of the review.
Initiation of an Investigation
The process begins with receipt of a complaint and a request for FTC action. The rule explains the methods by which a complaint may be submitted to the FTC and the information required for opening an investigation. The rule clarifies that the person submitting a complaint will not be a party to the investigation or later proceeding and their name will not be made public unless certain circumstances exist. The existence investigation itself may be disclosed to witnesses and other third parties to the extent that additional information or documentation is required to further the investigation.
Compulsory Process and Procedures
Compulsory process use in investigations is extensively outlined in the final rule. The FTC is authorized to issue civil investigative demands where unfair or deceptive acts or practices are alleged; subpoenas for witnesses, documents and information; require preparation of special reports; issue orders requiring access to documents or information systems in order for the FTC is examine; initiate investigational hearings, depositions, testimony; and issue orders requiring parties to allow inspection, copying, testing and sampling of documentary material, including electronic media.
Once compulsory processes have been initiated, the FTC requires a “mandatory pre-petition meet and confer process” which seeks to encourage dialog between parties to aid in providing the correct information requested. The meet and confer is required for parties to discuss compliance with information requests and allow claims of protected status to be raised.
Protected Status and Petitions to Limit or Quash
If a claim of protected status is made, the rule outlines the use of a Privilege Log and identifies the format and information that the Log must include in order for the FTC to appropriately analyze and make the decision whether or not the information requested is privileged information. If the Log does not contain enough information for the FTC to make a decision, the claim may be denied.
Before a petition is filed, the FTC expects that parties will have discussed the privilege claimed to reach an agreement. If agreement cannot be reached and the petition is filed, a signed statement must be including indicating that counsel could not reach agreement with the FTC on the issue.
Petitions to quash or limit will be part of public record, unless a request for confidentially or privilege is approved by the FTC. However, the rule clarifies that any legal and factual responses prepared by FTC staff for purposes of FTC decision making will not be served on the petitioner.
Filing a petition to limit or quash will stay the compliance requirement as to the contested items while the petition is pending.
Noncompliance with Compulsory Process
Where a party does not comply with compulsory process, the rule states that the FTC or the Attorney General may initiate appropriate action. Noncompliance with compulsory process may result in actions for enforcement, forfeiture, civil penalties, or criminal sanctions. The FTC General Counsel is also authorized by the rule to initiate compulsory process enforcement proceedings when deemed the appropriate course of action and may also request civil action.
Rights of Witnesses in Investigations
A witness has a right to inspect a transcript of the proceeding or any documents used. The rule outlines the procedure under which a witness may request changes to the transcript.
During a deposition, counsel may not advise the witness while a question is pending except in matters involving protected status, may only object in a “a non-argumentative and non-suggestive manner” for the hearing record and may not advise the witness not to answer unless the issue involves protected status. Protected status applies to privilege, work product protection, or statutory exemption.
Counsel may request that the witness be able to clarify answers and the rule indicates that these requests will be granted unless good cause is stated and explained on the record to otherwise not allow the request. If counsel fails to comply with these witness requirements the hearing official can report counsel to the FTC for discipline as outlined in the second section of the final rule revisions.
Investigation Disposition
The rule states that once the investigation has concluded, the FTC may initiate further proceedings where corrective action is warranted. Where corrective action is not necessary or warranted, the FTC may close the investigation. The rule clarifies that if parties are not otherwise notified, after 12 months from the last written communication from the FTC, they are no longer under obligation to preserve documents and information for the investigation.
Part 4.1(e): Attorney Discipline
The second portion of the final rule outlines the FTC’s authority for reprimanding, suspending or disbarring attorneys practicing before the FTC. This section authorizes the FTC to initiate disciplinary proceeding where an attorney has engaged in “obstructionist, contemptuous or unprofessional conduct”, most notably engaging in conduct designed to disrupt the discovery process or designed to merely “delay or burden another party”.
The final rule explains that senior attorneys and managing attorneys will be responsible for the conduct of those for whom they have supervisory authority.
If a disciplinary action is brought against an attorney, an order to show cause will be issued, allowing the attorney to dispute the material facts of the claim before imposition of any sanction or disciplinary action.
The rule outlines the hearing procedures in matters of attorney conduct and the procedures by which to implement the sanctions.
Effective and Compliance Date: November 9, 2012
View the rule in its entirety on AllRegs:http://www.allregs.com/ao/main.aspx?did2=02a57c4d99ae4d8d98a0914183e5d0dc
About The Author:
Margaret is Vice President and Senior Counsel of Bankers Advisory, Inc. As Director of Regulatory Compliance Research, she oversees the state rule summaries Bankers Advisory publishes through AllRegs. She serves on the Compliance Committee of the Massachusetts Mortgage Bankers Association. Margaret is a graduate of Stonehill College, received her Juris Doctor at Suffolk Law School and is admitted to the Massachusetts Bar. She can be reached at margaret@bankersadvisory.com
Margaret Wright, JD, is regulatory compliance director with CLA. She is a graduate of Stonehill College and earned her juris doctor at Suffolk University Law School. She is admitted to the Massachusetts Bar.
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