Subpoena Responses for Financial Institutions

• Testify as a witness. When seeking testimony from an entity, like a financial services company, the subpoena may require the company to designate a representative or multiple representatives to testify on the company’s behalf. A witness may testify by either:
• • appearing at a deposition, hearing, trial, or other proceeding; or
  • submitting written testimony, often to authenticate documents being produced in response to the subpoena, such as in a declaration, an affidavit, or in response to a deposition on written questions.
• Produce documents, electronically stored information (ESI), or other tangible items (document subpoena). A subpoena for documents may be directed to a financial services company’s custodian of records and require an affidavit or a declaration from the custodian that authenticates the documents.
• Testify and produce documents and information.
• Permit the inspection of a premises that the person or entity owns or otherwise controls. (For example, Federal Rule of Civil Procedure (FRCP) 45; Financial Industry Regulatory Authority (FINRA) Rules 12512 and 12513.)

• Common scenarios in which financial services companies receive subpoenas and the kinds of information and documents the subpoenas seek.
• The rules that apply to subpoenas that financial services companies often receive.
• The legal and practical concerns regarding the production of information, including the assertion of regulatory privileges and the protection of customers’ personal information.
• The procedural considerations for counsel when they receive subpoenas, including whether the recipients are obligated to respond to them and how to raise objections.

• Disputes in civil courts and arbitration, where the parties seek information about accounts held by or transactions involving their adversaries or relevant third parties.
• Regulatory, criminal, and other investigations, where government agencies and other regulatory bodies seek information regarding the company or its customers, employees, or other stakeholders.

• Commercial litigation and business disputes. Parties in these cases often seek financial records of businesses and individuals to:
• • locate disputed assets;
  • investigate an entity’s or individual’s financial position;
  • determine how certain funds have been used, including to investigate fraudulent transfer, breach of fiduciary duty, or self-dealing claims; and
  • uncover evidence relevant to any number of other issues in the litigation.
• Class actions. Class counsel in a securities class action may subpoena a securities firm for the names and contact information of customers who purchased a particular stock or bond (for a collection of resources on bringing a securities class action, see Commencing a Federal Securities Class Action Toolkit on Practical Law).
• Trusts and estates disputes. Executors, administrators, trustees, and beneficiaries may seek account information regarding, among other things:
• • a decedent’s or trust’s assets;
  • challenged transactions involving a decedent; and
  • alleged wrongdoing or self-dealing by trustees, administrators, and executors. (For more information, see Trusts & Estates Litigation: Overview on Practical Law.)
• Family law matters. Parties in divorce proceedings may seek account information to:
• • identify a spouse’s assets for the division of marital or community property; or
  • investigate efforts to conceal property from the other spouse or the court.
• Guardianship and conservatorship matters. A guardian or conservator may seek information to:
• • identify the assets of a ward or other protected individual; or
  • investigate suspicious transactions involving the ward’s assets before the creation of the guardianship or conservatorship.
• Post-judgment enforcement proceedings. A judgment creditor may subpoena records to identify a judgment debtor’s assets in search of property to levy to enforce a judgment (for more information, see Enforcing Federal Court Judgments: Basic Principles on Practical Law).
• Receiverships. A receiver may seek information regarding the assets subject to the receivership and certain transactions preceding the appointment of the receiver (for more information, see Corporate Receiverships: Overview on Practical Law).
• Bankruptcy proceedings. A bankruptcy trustee or creditor may seek information regarding the assets of the debtor, preferential transfers, or fraudulent transfers (for more information, see Bankruptcy Basics: What Commercial Litigators Need to Know on Practical Law).

• In disputes between customers and their financial advisors:
• • broker-dealers and financial advisors sometimes seek records related to securities accounts held at other firms to corroborate or rebut a customer’s contentions regarding risk tolerance or financial resources; and
  • customers sometimes seek records from individual financial advisors’ previous firms to corroborate allegations against the financial advisors (for example, customers may seek employment records, FINRA registration records, supervisory records, and other business records related to the financial advisors).
• In an industry dispute between a broker-dealer and an associated person, a broker-dealer might seek employment records and registration files from the associated person’s previous firms when defending against defamation claims regarding the broker-dealer’s disclosures in the associated person’s FINRA Form U-5 Uniform Termination Notice for Securities Industry Registration.

• State health and welfare agency investigations. For example, a state agency may seek information regarding the financial assets of a vulnerable adult for purposes of investigating alleged financial exploitation or elder abuse.
• Tax matters. The Internal Revenue Service or a state taxing authority may seek, among other things, customer records or account information to investigate allegations of tax evasion.
• State or federal grand jury subpoenas. Prosecutors may use grand jury subpoenas to seek account or transactional information relevant to the investigation of suspected crimes involving customers, employees, or related entities of financial services companies.
• State or federal financial regulatory investigations. Regulators and governmental entities may subpoena financial services companies as part of their oversight or enforcement responsibilities. These subpoenas may originate from:
• • the Consumer Financial Protection Bureau (CFPB);
  • the Department of Justice (DOJ);
  • the Treasury Department;
  • the Federal Trade Commission;
  • the Securities and Exchange Commission (SEC);
  • the Commodity Futures Trading Commission;
  • FINRA;
  • federal and state law enforcement agencies; or
  • state attorneys general.

• Court.
• Arbitration forum.
• Regulatory agency or government office.

• Be a party to a pending lawsuit or to a lawsuit in which the party is seeking post-judgment discovery. In other words, subpoenas in civil litigation typically are invalid without an underlying case.
• Include any disclosures or other information required under the applicable rules of civil procedure (for example, FRCP 45(a)(1)(A) (requiring, among other things, that subpoenas include a case number, the issuing court, a case caption, and the text of FRCP 45(d) and (e))).
• Ensure that the subpoenas are signed by an appropriate officer of the court. Depending on the jurisdiction and circumstances, that may be the clerk of court, the judge, or an attorney (for example, FRCP 45(a)(3) (permitting attorneys to sign subpoenas)).
• Properly serve the subpoena, as set out in the applicable rules of civil procedure. For example:
• • FRCP 45 requires the issuing party to personally serve subpoenaed parties (FRCP 45(b)(1));
  • some states statutes require the issuing party to open a miscellaneous action or obtain a commission and then serve the subpoena according to that state’s rules; and
  • some state rules permit service of subpoenas by less formal means, such as by certified mail or by email or social media if other methods of service are unsuccessful (for example, Ohio R. Civ. P. 45(B) (permitting certified mail service)).
• Comply with any additional forum-specific rules that apply, such as:
• • rules governing service of subpoenas on other parties to the lawsuit (for example, FRCP 5(a)(1)(C) (requiring service of discovery papers, such as subpoenas, on all parties to the lawsuit); NY CPLR 3120(3) (requiring service of copies of the subpoena on all parties when serving the subpoenaed party)); and
  • procedures for obtaining customer records from financial services companies (for example, Tex. Fin. Code Ann. § 59.006 (requiring, among other things, at least 24 days to respond after service, payment of the financial services company’s reasonable costs of compliance or posting of a bond for that amount, and notice to any nonparty customer of the records request, and prohibiting a financial services company from producing records until the issuing party complies with the statute)).

• In FINRA arbitrations, FINRA’s codes of arbitration procedure permit arbitrators to:
• • issue subpoenas for documents and testimony to nonparties who are not FINRA members or associated persons; and
  • order nonparty FINRA member firms and associated persons, such as financial advisors, to produce documents and information, with or without a subpoena. (For example, FINRA Rules 12512 and 12513 (customer disputes); FINRA Rules 13512 and 13513 (industry disputes).)
• In arbitrations before the American Arbitration Association (AAA), applicable AAA rules may permit arbitrators to issue subpoenas to nonparties (for example, AAA Commercial Arbitration Rules, Rule 34).

• The form and format of the subpoena (for example, Fed. R. Crim. P. 17(a)).
• Who may issue a subpoena and how they may issue it (for example, Fed. R. Crim. P. 17(a), (f)).
• What information, documents, and testimony may be demanded in a subpoena (for example, Fed. R. Crim. P. 17(c), (h)).
• Service methods and procedures (for example, Fed. R. Crim. P. 17(d), (e) (requiring personal service of subpoenas in criminal cases and permitting service on US parties anywhere in the US)).

• Contempt of court for failing to obey a subpoena in a criminal proceeding (Fed. R. Crim. P. 17(g)).
• Sanctions from the agency that issued the requests (for example, FINRA Rule 8310).

• Comply with applicable privacy laws and regulations.
• Preserve applicable regulatory privileges, such as the bank examiner privilege, and comply with the non-disclosure requirements of anti-money laundering laws and regulations, such as the Bank Secrecy Act.

• The Gramm-Leach-Bliley Act (GLBA), as implemented by the CFPB’s Regulation P, restricts the disclosure of nonpublic personal information (15 U.S.C. § 6809(4)). The GLBA:
• • prohibits a financial services company from disclosing nonpublic personal information to a nonaffiliated third party unless the company has given the consumer notice and provided an opportunity to opt out; and
  • provides exceptions for properly authorized civil, criminal, and regulatory investigations, and for subpoenas or summonses from federal, state, or local authorities, including law enforcement agencies and self-regulatory organizations, such as FINRA. (For example, 15 U.S.C. § 6802(a), (b), (e)(5), and (e)(8); for more on the GLBA, see GLBA: The Financial Privacy and Safeguards Rules and Financial Privacy Rules Compliance Checklist on Practical Law.)
• The SEC’s Privacy of Consumer Financial Information rule (Regulation S-P) (17 C.F.R. pt. 248) requires financial services companies to provide customers with a notice of their privacy policies and practices. The regulation also prohibits disclosure of nonpublic personal information about a consumer to nonaffiliated third parties unless the financial services company provides certain information to the consumer and the consumer has not opted out of the disclosure. The SEC promulgated this rule under Section 504 of the GLBA. Similar to Regulation P, it provides exceptions for properly authorized civil, criminal, and regulatory investigations.
• The Right to Financial Privacy Act (RFPA) may impose requirements in connection with a government subpoena or request for information. Before responding to a request for information from a federal agency, a financial services company should obtain a written certification from the agency stating that it has complied with the RFPA in connection with that request (12 U.S.C. § 3403(b)). The RFPA:
• • generally prohibits federal departments and agencies from obtaining customer information from “financial institutions,” which include banks, credit unions, card issuers, industrial loan companies, trust companies, and consumer finance institutions, unless certain conditions are met (12 U.S.C. § 3401(1));
  • contains various exceptions for valid administrative subpoenas and summonses, search warrants, judicial subpoenas, and certain other requests (12 U.S.C. § 3402);
  • generally requires the department or agency to serve a copy of any subpoena, summons, or request on the affected customer, disclose specific information to the customer, and provide the customer an opportunity to challenge the subpoena or summons, though this requirement may be modified by a court (12 U.S.C. §§ 3405 and 3407-09); and
  • does not apply in certain contexts, such as supervisory or regulatory examinations, proceedings in which a government authority and customer are parties, and grand jury proceedings (12 U.S.C. §§ 3413-14).

• Identifying who will handle the subpoena response.
• Preserving relevant documents and information.
• Determining the applicable deadlines.
• Asserting objections and producing documents responsive to the subpoena.

• Delivering the subpoena to an in-house subpoena team, which may handle the entire response in appropriate cases. This team often includes paralegals or other non-attorney professionals who report to in-house counsel.
• Hiring outside counsel to handle the response. A company typically should hire outside counsel if it does not have an in-house subpoena team.

• Asserting objections. For example, the financial services company may assert that the subpoena:
• • imposes an undue burden; or
  • seeks sensitive information without providing sufficient opportunity to protect that information from unnecessary disclosure.
• Motion practice, such as a motion:
• • to quash the subpoena (for sample motion papers, with explanatory notes and drafting tips, see Motion to Quash or Modify a Subpoena (Federal): Motion or Notice of Motion, Motion to Quash or Modify a Subpoena (Federal): Memorandum of Law, and Motion to Quash or Modify a Subpoena (Federal): Proposed Order on Practical Law); or
  • for a protective order (for information on protective orders, see Protective Orders: Overview (Federal) on Practical Law; for sample motion papers, with explanatory notes and drafting tips, see Motion for a Protective Order (Federal): Motion or Notice of Motion, Motion for a Protective Order (Federal): Memorandum of Law, Motion for a Protective Order (Federal): Supporting Declaration, and Motion for a Protective Order (Federal): Proposed Order on Practical Law).
• Negotiation of limitations on the documents and information demanded.
• The production itself, including its scope, means, timing, and format.

• Identify the departments or lines of business that are the subject of the subpoena as soon as possible.
• Give notice to all personnel who are likely to have responsive information (for a model legal hold notice, with explanatory notes and drafting tips, see Litigation Hold Notice on Practical Law).
• Take steps to collect or otherwise preserve potentially responsive information, including:
• • asking relevant personnel to search for and collect any items in their possession; and
  • determining what record systems and files, including ESI, should be searched.

• When and how the issuing party served the subpoena, bearing in mind that subpoena respondents may need to object to the subpoena within a certain time after service to avoid waiver (for example, FRCP 45(d)(2)(B) (requiring objections to be raised within the earlier of the date set in the subpoena or 14 days after service)).
• Who the issuing party is and whether they are represented by counsel.
• The deadline, if any, for producing responsive materials.
• The date scheduled for any witness testimony, such as at a deposition, hearing, or trial.
• Whether the production of documents relieves the financial services company of the obligation to produce a witness (for example, FRCP 45(d)(2)(A); Mo. Sup. Ct. R. 57.09 and 58.02). Often, counsel may avoid preparing a witness for live testimony by producing an affidavit or a declaration from a records custodian to authenticate the documents produced.

• Carefully evaluate and assert appropriate objections to the subpoena.
• Negotiate with the issuing party to limit the burden of the subpoena.
• Where permitted by law, consider communicating with any affected customers.
• Produce the appropriate documents.
• Prepare witnesses to testify.

• The issuing party’s failure to follow applicable procedures. For example:
• • the subpoena may be facially invalid because, among other reasons, it lacks the necessary signatures, such as the signature of the clerk of court, the judge, or an attorney;
  • the issuing party may not have served the subpoena in the manner required by the applicable jurisdiction’s rules of civil procedure; or
  • the subpoena or the issuing party may not satisfy other jurisdiction-specific requirements, such as those in state statutes protecting customer data held by financial services companies.
• The subpoena is substantively objectionable because, for example, it:
• • demands a response within an unreasonably short time frame or at an unreasonable location;
  • is overbroad in scope in that it seeks categories of documents and information that are disproportional to the needs of the case; or
  • fails to adequately protect the financial services company’s data or customer data as may be required under state or federal law.

• Assert objections in writing, typically in a letter, to issuing counsel.
• File a motion for a protective order or motion to quash the subpoena to protect the interests of the financial services company or, in appropriate cases, its customers.

• Work closely with the department or line of business that is the subject of the subpoena to identify where potentially responsive materials reside, which typically includes identifying document custodians and relevant record repositories.
• Ensure that the subpoena recipient’s partners in the business have conducted a reasonably diligent search for responsive materials and collected the records.
• Conduct a document review to ensure that the documents collected, including any ESI:
• • are responsive to the subpoena’s requests;
  • are not protected from disclosure by any applicable privileges, such as the attorney-client privilege or regulatory privileges (see Regulatory Obligations and Privileges above); and
  • do not contain any confidential business or customer information or that such information is marked for redaction.
• In appropriate cases, ensure that a confidentiality or protective order is in place to protect any confidential information that falls within the scope of the subpoena’s requests and retain a copy of that order for their records. If no order is in place, counsel should request that one be entered.

• All privileged documents are withheld or privileged content is redacted.
• A privilege log accompanies the production, if required by applicable law.
• Any confidential business or customer information is redacted or produced in compliance with any confidentiality or protective order in place.
• The production is stamped with an appropriate confidentiality designation under the applicable protective order, such as the words “CONFIDENTIAL” or “ATTORNEYS’ EYES ONLY.”
• The production complies with all applicable regulations regarding sharing customer information or other confidential financial information (see Privacy, Confidentiality, and Privilege Issues above).

• Work with their business partners to identify the person or persons best suited to testify for the company, typically individuals who have some substantive knowledge on the relevant topic or topics.
• Research the topics for examination identified in the subpoena.
• Prepare the designated witness to testify on the company’s behalf, including educating the witness on certain topics, if necessary, using documents or other company information.

Republished with permission. This article, "Subpoena Responses for Financial Institutions," was published in Practice Law The Journal, March 2023 Issue.