Ripple wins either way: SEC Hinman’s public guidance or personal opinion?

Rick Steves

“Indeed, SEC regulations provide that Director Hinman’s public statements could be relied upon as representing the views of Corp Fin, the division he led.”

The Securities and Exchange Commission has filed a motion for partial reconsideration and clarification of Magistrate Judge Netburn’s DPP Ruling.

The pre-announced motion pertains to Ripple’s motion to compel the SEC to produce documents the plaintiff claims deliberative process privilege.

The judge ordered the agency to hand over a few notes, including a single, clean draft of a June 14, 2018 speech delivered by Bill Hinman.

The Court found that “emails concerning the [S]peech or draft versions are neither predecisional nor deliberative agency documents entitled to protection” under the deliberative process privilege (“DPP”), and ordered the SEC to produce them.

SEC says court did not consider the 67 other emails

The SEC asked the court to reconsider its prior ruling and to find that all such documents are protected by the DPP.

Otherwise, the plaintiff wants the court to clarify whether the order compels production of all speech drafts and related emails on the SEC’s privilege logs, the vast majority of which reflect the views of staff other than Director Hinman on an important policy issue confronting multiple agency divisions and offices, said the letter.

“Reconsideration of this aspect of the Court’s decision is warranted because the Court based its decision on a single document relating to the Speech—one that Defendants chose to highlight for the Court—and did not consider the 67 other emails attaching drafts of the Speech that were before the Court on Defendants’ motion.

“These additional documents—along with other matters available to the Court and described below—demonstrate that the Speech was not “merely peripheral to actual policy formation” and was in fact an “essential link in the SEC’s deliberative process with respect to Ether.”

Now, Hinman 2018 speech was public guidance

The SEC appears to have made yet another turn in regard to William Hinman’s 2018 speech on whether it was his personal opinion or the SEC’s public guidance.

“The Speech itself—and the many drafts and comments by SEC staff across different SEC divisions and offices deliberating the agency’s approach to the regulation of digital assets—show that Director Hinman and other SEC staff used the Speech to provide public guidance as to how Corp Fin would apply the federal securities laws to offers and sales of digital assets including Ether.”

“Indeed, SEC regulations provide that Director Hinman’s public statements could be relied upon as representing the views of Corp Fin, the division he led.”

The SEC then insisted that the speech and other drafts and communications related to it are protected by the DPP under the Court’s own analysis: They reflect the very types of deliberations that SEC staff “need to be able to conduct . . . with the expectation of candor” and are no different than other documents the Court has already held to be protected.

SEC wants the cake and eat it too

The battle for William Hinman’s 2018 speech on Ether and the other 67 related documents is one of the most critical in the SEC v. Ripple lawsuit.

Ripple will certainly use the notes to its benefit and possibly in either scenario: to argue XRP is not a security or to argue the SEC failed to provide fair notice.

In 2021, the SEC chose to define the speech as Hinman’s personal opinion in order not to give ammunition to Ripple’s defense, but the tactic backfired as Judge Sarah Netburn concluded the documents were not protected by deliberative process privilege.

The ruling was very well received by Ripple and XRP Holders, who were accepted as Amicus Curiae in court. Attorney John Deaton confirmed the court order as a win and said the biggest victory wasn’t the speech draft itself but the notes from meetings with third parties not associated with Ripple.

The SEC now is contesting the ruling and wants the documents protected by DPP, arguing the aforementioned speech was public guidance and so, all notes related to it must be protected.

While turning it back into “public guidance” gives Ripple the opportunity to use the speech against the SEC, the public will never know what was in the notes with the third parties. Attorney Jeremy Hogan recently suspected that the SEC could be hiding “something really bad”. 

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