United States: SDNY Judge Finds Attorney-Client Privilege Waived Based On Response To Regulatory Inquiry

In a recent decision, Judge Laura Taylor Swain of the U.S. District Court for the Southern District of New York held that J.P. Morgan Chase & Co.'s (JPMorgan) disclosure of information to FINRA in response to a routine chronology/name recognition inquiry constituted a waiver of privilege in a subsequent criminal insider trading case.[1] Although the privileged status of such communications has rarely been challenged, this decision opens the door for the government and private plaintiffs to pursue waiver arguments in future cases. As such, the ruling could have implications for counsel responding to regulatory inquiries who seek to avoid triggering a waiver of the privileges ordinarily attaching to the communications upon which such response is based. 


JPMorgan's healthcare investment banking group was engaged to advise clinical research organization Kendle International, Inc. (Kendle) in its acquisition by INC Research, LLC, which was announced in May 2011. Shortly after the announcement of the acquisition, FINRA initiated an inquiry into pre-announcement trading in Kendle and sent JPMorgan a routine request asking for, among other things, a chronology of the events which preceded the announcement and a list of persons who were knowledgeable about the acquisition before it became public. JPMorgan's response identified Sean Stewart, a JPMorgan investment banker, as an individual with potential knowledge of the deal. FINRA sent a follow-up request to JPMorgan, which attached a list of individuals and asked whether any of the individuals whom JPMorgan identified recognized any persons on that list. FINRA's list included the name of Stewart's father, among others, which JPMorgan forwarded to all relevant employees. 

Ryan Hickey, a JPMorgan in-house attorney, initially submitted a letter response stating that none of the employees reported recognizing the names on FINRA's list. A FINRA investigator noted the similarities in the names and addresses for Stewart and his father and independently confirmed that they were related. FINRA followed up with Hickey, who confirmed that JPMorgan's letter included a response from Stewart but decided to investigate the matter further. After meeting with Stewart, Hickey supplemented JPMorgan's response by phone and by letter, informing FINRA that Stewart had "overlooked his father's name when he first reviewed the enclosure." Hickey's letter further stated that Stewart "reported that he did not discuss the transaction at issue with his father, and does not know of any circumstances under which any knowledge of the company's business activities would have been gained by his father."[2] Each of JPMorgan's letters sent in response to the name recognition inquiry included explicit language stating that it did not intend to waive any applicable privileges or other rights, including the attorney-client privilege and work-product doctrine.

In 2015, the DOJ charged Stewart and his father with insider trading in Kendle and four other companies that Stewart allegedly gained nonpublic information about during his employment at JPMorgan and subsequently at Perella Weinberg Partners L.P. A close acquaintance of Stewart's father, Richard Cunniffe, was also charged as a co-conspirator; Cunniffe pled guilty and cooperated with the government. Stewart's father also pled guilty and was sentenced in May 2016 to four years of probation with one year of home confinement. The trial against Stewart is currently ongoing.[3]

The Government's Motion to Compel

In advance of trial, the government filed a motion to compel Hickey's testimony and for JPMorgan to produce documents concerning communications that Stewart had made to Hickey in connection with the Kendle FINRA inquiry. JPMorgan conceded that the factual information relayed to FINRA was not privileged and agreed to make Hickey (who had since left JPMorgan) available as a witness. JPMorgan indicated, however, that Hickey would testify only that Stewart's statements to her were "consistent" with her written and telephonic correspondence with FINRA. JPMorgan asserted that the underlying communications, including the interview and internal emails regarding the FINRA inquiries, were protected by its attorney-client privilege and the work-product doctrine.

Judge Swain disagreed with the bank, finding that JPMorgan waived attorney-client privilege to the extent that it "disclosed the contents of privileged communications" rather than non-privileged facts. In so finding, Judge Swain rejected JPMorgan's argument that privilege was not waived because its disclosure was mandatory under FINRA Rule 8210, and that it faced sanctions if it failed to comply with the rule.[4] Judge Swain reasoned that JPMorgan could have asserted its privilege and refused to disclose the communications, and that its disclosures were voluntary because FINRA "is a self-regulatory organization and J.P. Morgan's disclosures were not compelled by a court or other government order, nor was the information seized." Judge Swain did not address JPMorgan's arguments that a finding in favor of the government could have a chilling effect on the level and quality of cooperation with regulators, and that it had preserved the right to assert its privileges in the relevant correspondences with FINRA.

Judge Swain did find that the waiver was limited, however, in that it did not apply to the entire scope of JPMorgan's communications with Stewart regarding the Kendle deal or the FINRA inquiries. Specifically, the following communications were deemed waived: (1) Stewart's initial statement that he did not recognize any names on FINRA's list; (2) Stewart's subsequent explanation that he had overlooked his father's name when he first reviewed the list; and (3) Stewart's representation that he "did not discuss the transaction at issue with his father, and does not know of any circumstances under which knowledge of the company's business activities would have been gained by his father." Judge Swain directed Hickey to testify as to communications that were "quoted, described, or summarized" in her correspondence with FINRA, and for JPMorgan to produce documents that "embody, contain, or otherwise document" these communications.

Key Takeaways

This case is another example of how responses to routine regulatory inquiries, like chronology and name recognition requests, can play a prominent role in subsequent enforcement actions. Although Judge Swain's ruling may be limited to the specific statements at issue, it underscores that the disclosure to regulators of the contents of otherwise privileged communications with employees may constitute a privilege waiver in a future criminal trial or other proceeding. While the notion that attorney-client privilege is waived as to a statement made, or relayed, to a regulator is hardly new, the potential to trigger a broader privilege waiver is cause for concern. As noted above, JPMorgan was required to produce documents that "embody, contain or otherwise document" the communications at issue. Moreover, "cabining" Hickey's live testimony at trial may prove difficult, particularly where a criminal defendant's right to cross-examine the government's witnesses is implicated.

Perhaps more startling is the zeal with which the government pursued this waiver argument—even in the face of strong public policy against it. In light of this, those communicating with regulators should consider taking the following precautions to minimize the possibility of a finding of privilege waiver:

  • Provide only factual findings to regulators. Avoid relaying the contents of actual communications with employees and the use of direct quotations or paraphrasing. To the extent possible, if a number of interviews are conducted, make the response applicable across the board to all interviewees.
  • Keep emails and other written communications regarding internal investigations—especially communications with or about individual interviewees—at a high level and to a minimum. Expressly indicate that such communications are protected by attorney-client privilege and/or work-product doctrine.
  • Consider using outside counsel to communicate findings to regulators, where appropriate. Although theoretically this should not impact the privilege analysis from a legal standpoint, it may improve the optics and remove the relevant employee an extra step from the ultimate communication to the regulator.
  • Ensure that all communications with regulators that could arguably be deemed a privilege waiver are well-documented.
  • While unrelated to the privilege waiver issue, attorneys should consider whether and how to deliver Upjohn warnings in connection with these routine inquiries.
  • Non-FINRA regulated entities whose cooperation is requested on a voluntary basis should consider this ruling when deciding whether, and to what extent, such cooperation is warranted.

In line with the above recommendations, FINRA-regulated entities should revisit their standard responses to routine inquiries and consider whether any revisions are appropriate. More importantly, FINRA-regulated entities should at least be prepared that a waiver argument may arise in a subsequent action and keep this possibility in mind when communicating with both employees and regulators.

[1] United States v. Stewart, No. 15-CR-287-LTS (S.D.N.Y. July 22, 2016) (order granting in part and denying in part the government's motion to compel).

[2] This response partially tracked the language in FINRA's request, which asked for "[a] statement as to the circumstances under which any knowledge of the company's business activities may have been gained by the individual."

[3] Interestingly, Stewart moved to compel his father's testimony at trial, but his father invoked his Fifth Amendment privilege against self-incrimination. After conducting an in camera hearing, the court denied Stewart's motion. United States v. Stewart, No. 15-CR-287-LTS, (S.D.N.Y. entered July 28, 2016) (minute entry for status conference held on July 27, 2016).

[4] FINRA Rule 8210 requires members "to provide information orally, in writing, or electronically . . . with respect to any matter involved in the investigation, complaint, examination, or proceeding," and further states that "no member . . . shall fail to provide information or testimony . . . pursuant to this Rule." FINRA Proc. R. 8210.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions