Exhibit 296

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					Securities and Exchange Commission
      Division     of Enforcement




                 ~E-X~~
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                                    T,

      5j                             pt
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           Enforcement    Manual




                               Office     of Chief   Counsel


                                     October    6, 2008




                                                          MADOFF   EXHIBITS-04492
                                                         Enforcement        Manual
                                                           Table    of Contents




i.   Introduction


     I. I. Puroose-         and


     1.2.    Origin


     1.7.    Public       Disclosure


     1.4. Fundamental                Considerations

            1.4.1.        Mission          Statement


            1.4.2. Updatinglnlernal                     Systems

            1.4.3.        Consultation


            1.4.4.        Ethics


                                                   of
2. A Guide to Matters Under Inquiry, and the Sta_E~es Informal and Formal
     Investigations


     2. I. General          Policies         and   Procedures


            2. L.1. Ranking Investigations and Allocating Resources
            2.1.2.        Six-Month            ReviewofInv                  ions and Status   U


     2.2. Complaints, Tips, and Referrals
            2.2. i.       Comolaints           and TiDs From        the Public


            2.2.2.        Other     Referrals


                     2.2.2. I.         Referrals from FinCEN or Referrals Involving Bank Secrecy Act
                                Material


                     2.2.2.2.          Referrals fi-omthe Public Company Accounting Oversight Board

                     2.2.2.3.          Referrals       from State      Securities    R


                     2.2.2.4.          Referrals       from C




                                                                                                  MADOFF   EXHIBITS-04493
                                    from           Organizations
                   2.2.2.5. Referrals SelfRegulatory
      2.3. Matters Under Inquiry ("MU[s") and InvestiRations

          2.3.1.       OpeningaMUI

                       an            ConvertingMUI,or Closing MUI
          2.3.2. Opening Investigation,       a             a
          2.3.3.       Formal Orders ofInvestigation

          2.3.4.      Formal Order Action Merno Process

                  2.3.4. i.   Supplementin~        a Formal Order

               2.3.4.2.       Requests for a CoDv of the Formal Order

      2.4. The Wells Process

      2_5. Enforcement        Recommendations

          2.5.1.      The Action Memo Process

         2.5.2.       Commission       Authorization

                   1.
              2.5.2.          ClosedMeetings
              2.5.2.2.        Seriatim Consideration

              2.5.2.3.        Duty Officer Consideration


                         ofCommission
         2.5.3. Delegations        Authority
               an
     2.6.Closing Investigation
         2.6,1,      Policies and Procedures                                                             B

         2,6,2.      Termination Notices

3,   A Guide to Investigative          Practices

     3.1, Special     Considerations

         3,1.1, External Communications Between Senior Enforcement Officials and
                  Persons Outside the SEC Who Are Involved in Investigations

                     of          and     Agreements
        3.1~2.Statutes limitations Tolling
                           During
        3.1.3. Investigations         SEC
                                Ongoing Litigation




                                                                               MADOFF   EXHIBITS-04494
                               and
   3.L.4. ParallelInvestigations the StateActorDoctrine
3.2. Documents           and Other        Materials

   3.2.1.        Privileges      and Privacy          Acts

   3.2.2.        Bluesheets


   3.2.3.        Voluntary       document         requests

            3.2.3.1.          Forms      1661 and       1662

   3.2.4.        Document         Requests        to ReRulated Entities

   3.2.5.        Document         Recluests to the News Media

   3.2.6. Subpoenas for Documents
            3.2.6. 1.         Service     of Su

            3.2.6.2.          Form      of Production


                        1.
                 3.2.6.2.                                  of
                                         AcceptingProduction Copies
                 ?.2.6.2.2.              Bates Stamping

                 3.2.6.2.3.              Format for Electronic Production of Documents to the
                               SEC


                 3.2.6.2.4.              Privilege Logs

                 3.2.6.2.5.               Business      Record Certifrcations

                 3.2.6.2.6.              ConF~rmin~ Completeness             olProduction

            3.2.6.3.          Forthwith      Subt~oenas in Investigations

            3.2.6.4.          Maintainin~         Investigative      Files

                  3 2 6 4 1               Document        Control                 ---~



                        3.2.6.4.1.1.                  Document       Imaging in Investigations-

                        3.2.6.4.1.2.                  Electronic     Files


                        3.2.6.4.1.3 Complyingwith FederalRuleof Civil Procedure26(a)
                        Reauiremenb and Preserving Evidence in Anticipation~f~f~,~g~_



                                                               111




                                                                                                  MADOFF   EXHIBITS-04495
                   3.2.6.1.1.4          Iron Mountain


              3.2.6.4.2.            Preserving      Intemet Evidence

              3.2.6.4.3.            Preserving     Physical     Evidence

                   3.2.6.4.3.1.                Preserving     Audi


                   3.2.6.4.3.2.                Preservin~     Electronic    Media

3.3. Witness Interviews           and Testimon

   3.3.1.    Privile~es and Privacy Acts

   3.3.2.    No"Taraets"          ofInvestig-ations

   3.3.3.    VoluntaryTeleDhone               Interviews

        3.3.3.1.          Privacy Act Warnings            and Forms 1661 and 1662

       3.3.3.2.


   3.3.4.    Voluntary        On-the-Record       Testimon

                  Under
   3.3.5. Testimony   Subpoen_a
       3.3.5.1.          Au


       3.3..2.           Basic Procedures        for Testimony          Under S

            2.3.5.2. 1.            Using a Background Questionnaire

            3.3.5.2.2.             Witness Right to Counsel

            3.3.5.2.3.             Going: Off the Record

            3.3.5.2.4.            Transcriot     Availabili

       3.3.5.3.          Soecialcases


            3.3.5.3. i.            Witness Assurance          Letters

            3.3.5.3.2.            Immunity       Orders


            3.3.5.3.3.            Contacting      Emt~lovees of Issuers

            3.3.5.3.4.            Communications            with EmDlovees ofBroker-Dealers




                                                                                              MADOFF   EXHIBITS-04496
                           3.3.5.3.5.                Contacting Witness Residing Overseas
                     3.3.5.4.          Proffer       Agreements


4.   Privileges           and     Protections


     4. i. Assertion             of Privileges

            4. 1.1.·       Attomev-Client             Privi


                     4. 1.1.1.         MultiDle        reDresentatlons


            4.1.2.        Attorney          Work      Product        Doctrine


            4.1.3. The Fifth Amendment Privilege Against Self-incrimination

     4.2. Inadvertent Production of Privileged or Non-Responsive Documents
            4.2.1.         PuroosefUl           Production          With     No Privile~e    Review

     4.3.    Waiver         of Privileg-e


            4.3.1.        Confidentiality             Agreements


     4.4.    Com~liance              with    the    Privacy         Act


     4.5. Compliance with the Right to Financial Privacy Act ("RFPA")

     4.6. ComDliance                 with the Electronic                  Communications         Privacy   Act ("ECPA'


     4.7. Handling Materials from FinCEN or Other Sources Involving Bank Secrecy Act
             Material


5.   CooDeration                with Other         Agencies         and Organizations

     5.1.    Disclosure            of Information             and    Access      R


     5.2. Coo~eration                with Criminal             authorities


            5.2.1.         Parallel Investigations

            5.2.2.         Grand      Jury      Matter

     5.3. CooDeration                with       the I;ood and Drug              Administration       ("FDA


     5.4. Cooperation with the Public Company Accounting Oversight Board
                        AOB




                                                                                                                         MADOFF   EXHIBITS-04497
5.5. Informal Referrals from Enforcement

   5.5.L. Informal Referrals to Criminal Authorities

                                            Organizations
   5.5.2. InformalReferralsto Self-Regulatory           ("SROs

                Referrals thePubiic
   5.5.3. Informal     to               Accounting
                                  Company              Board
                                                Oversight
            ("PCAOB

   5.5.4.    Informal Referrals to State Agencies

                                        LicensingBoards
  5.5.5.-InformalReferralsto Professional




                                                                 MADOFF   EXHIBITS-04498
I.   Introduction


          1.1            Purpose      and Scope

                        Manual("Manual")is an electronic
          The Enforcement                              documentdesignedto be a
reference for the staff in the U.S. Securities and Exchange Commission's ("SEC")
       of         ("Division" "Enforcement")theinvestigation potential
Division Enforcement        or            in               of
violations of the federal securities laws. It contains various general policies and
        and          to      guidance tothestaff theDivision. is not
procedures is intended provide     only        of           It
intendedto, does not, and maynot be reliedupon to createany rights,substantiveor
         enforceable lawbyanypartyin anymatter or criminal.
procedural,       at                         civil
          1.2            Origin

                   was      under general
          The Manual prepared   the               of          of
                                        supervision theDivision
            OfficeofChiefCounsel("OCC")in consultation
Enforcement's                                        with the Securitiesand
Exchange           Office theGeneral
        Commission's     of              ("OGC"),
                                   Counsel            of
                                                Office the Inspector
      ("OIG") Office theChaim~an. coordinates
General      and     of           OCC         periodic       of
                                                      revision the
               the      is     to              decisions
Manual.Although Manual intended be comprehensive,      aboutspecific
              cases,and chargesare madeaccordingto the specificfactsand
investigations,
circumstances            at hand.


          1.3            Public     Disclosure


       The Manualis UnitedStatesGovernment     property. It is to be used in conjunction
                                 containedin the Manualare subjectto the provisionsof
with officialduties. All materials
             Section
Title5, U.S.C.             with          of             excluded
                   552(a)(2), theexception thosematerials      under17
                                this
C.F.R.Section200.80. Accordingly, Manualis availablefor publicinspectionon
line at www.sec.~ov.

           1.4           Fu ndam      eotal      Considerations


                         1.4.1      Mission       Statement


          The Division'smissionis to protectinvestorsand the marketsby investigating
        violations the federal
potential        of                   laws           the
                             securities and litigating SEC'senforcement
actions. Values integral to that mission are:

                      acting
           · Integrity:             forthrightly, impartially everyaspectof our
                            honestly,          and          in
                 work.


                                                                     treatment,
           · Fairness: assuringthateveryonereceivesequaland respectfUl
                       regard wealth,
                 without     to          standing,
                                    so~ial                politics, personal
                                                 publicity,       or
                 characteristics.




                                                                                      MADOFF   EXHIBITS-04499
                               the         of
          · Passion: recognizing importance and caring deeply about our mission of
              protecting investors and markets.

                                    and
          · Teamwork: supporting collaborating with colleagues andother Dlvlslons
            and Offices at the SEC and fellowlaw enforcement
                                                           professionals.
             1.4.2        UpdatingInternalSystems
          The Division uses several     internalsystems,includingthe Hub,CATS,and
  Phoenix, to help manage case information track boththe collectionand distribution
                                         and
  ofdisgorgementand penalties. The reliability usefUlness of each of the Division's
                                            and
  internal        is            upon and          entry
          systemsdependent timely accurate oEinformation staff.
  Therefore, it is considered
                                                                    bythe
                             "missioncritical" all information
  systems updated in real time.
                                         to keep                    by
                                                             required these
                                                           are      to
                           Staffat all levelsof the Division required adhereto
                        of
  thedataentryrequirements eachsystem.
             1.4.3       Consultation


                this   is       to            for
         Although Manual intended bea reference thestaffintheDivision
 who are responsiblefor investigations, set of procedures policiescan replacethe
                                      no                or
 need for active and ongoing consultation colleagues, other Divisions and Offices at
                                      with
    SEC, internalexperts.
 the and                      often    careful and
                    Investigationsrequire legal technical
        ofcomplicated
 analysis                 culminating difficultjudgment
                    issues,         in                calls that mayaffect
      participants,
 marker                  and        Therefore, tilr~e issue
                individuals, issuer-s.      any an             for
                                                          arises
 which colleagues or other Divisions
                                     or Oft?cesmay hold particularexpertise,the staff
 should consider consultation. In addition, should keep other Divisions and Offices
                                          staff
 informed regarding issues of interest that arise during investigations, and consult with
         Divisions Offices
 rnterested     and           making
                         before                 foraction the
                                    recommendations     to
            at         of
 Commissiontheconclusionan Investigation.
            1.4.4 -     Ethics

                   and       oFa
        Maintaining fostering culture of integrity and professionalism is the
       highest    The     ofGovemment ("OGE")
Division's priority. Office       Ethics'         of
                                           "Standards
                            of
EthicalConductfor Employees the ExecutiveBranch" lays out the basic obligation of
publicservice: "Each employeehas a responsibility to the United States Government and
  citizens loyalty Constitution, ethical
its     toplace tothe      lawsand           above
                                      principles private
gain. To ensure that everycitizencan havecomplete        in            of-the
                                                confidence the integrity
     Govemmenf employee respect adhere the
Federal    each      shall   and              ofethical
                                    to principles
conduct... ." See 5 C.F.R. Part 2635 101 The SEC has a number of resources from
    any all     staff obtain
which and Divisio~l can          on       regarding
                           guidancequestions     ethical
       Prominent
conduct.          die
              among resources
                           available theSEC
                                  are           officials.
                                           ethics        Staff
should not hesitate to consult   with Division
                                    the                 the     EthicsLiaison
                                             ChiefCounsel, Deputy
Officerorthe attorneystaff in the SEC EthicsOffice on any question ofethics. Also
available to staff are the written Ethics bulletins reference of applicable statutes
                                                 and                                                          ii
available from the SEC Ethics Office.




                                                                                    MADOFF   EXHIBITS-04500
Considerations:


     ·                              in
          Shouldstaff find themselves doubtoveran ethicalissue,staff shouldseek
          guidanceon the issuefroman SECethicsofficialbeforeacting.
     ·    Staff should remain alert to new rules and updates posted by the Ethics Office.

     ·    Staff should be aware of ethical issues that may arise, including policies on:

                              and            of         Information
              o Confidentiality the Protection Non-public
                       Responsibility theOGEStandards Ethical
              o Attorney             (under               of        Conductfor
                         of
                Employees theExecutive          the
                                         Branch, Rulesof Professional
                            of                 the     is        to
                Responsibility thestatein which attorney licensed practicelaw,
                      and the Rules of Professional Responsibility of the state in which the
                              is       on     of             before tribunal
                      attorney appearing behalf the Commission    a        or
                      otherwiseengagingin suchotherbehavioras may be consideredthe
                             of                            and          rules.)
                      practice lawunderthatstatebar'sethical disciplinary
              o       Securities     Transactions       by Employees
                       of       (includin~
              o Conflict Interest                and
                                         Financial PersonalInterests)
              o Recusals         the
                        iincluding oneyearrecusal      for
                                                 ~olicy Division staff)
                  o   Referral ofProfessionaI Misconduct
                  o   Publication       Guidelines
                  o   Giftsandlnvitations
                  o   Outside Emplovmentand Activities
                  o   Requirements undertheHatchAct
                  o MisuseofPublicOffice forPrivateGain
                  o   Pro BonoActivlty
                                           Employment Outside the SEC
                  o Seeking and NeRotiatin_lT


Further    Information.


     ·                         of                          of
          See also OGE Standards EthicalConductfor Employees the Executive
          Branch       5 CFR      Part 2635    ef al.
     ·    OGE Compilation of Federal Ethics Laws available at
                                  reas rec~ep             ethics
          hlrpr//www.usoae.pov/pa~!esll~M's slalF/com~ilation laos.hmll
     ·    CriminalConflictof InterestStatutesincluding18U.S.CSections203,205,207,208,
          209 and Other Related Statutes available                at
                  usoR~.~av/pa~es/lausfedrep
          htrp~wluw.              reps                ethicsguidance.hhn[
                                            slats/other




                                                                                         MADOFF   EXHIBITS-04501
                    Under
 2, A Guideto Matters   Inquiry       andthe
                               (~LRII~T~s") S                                     and
                                                                          oCInformal
 Formal Investigations

              2.1         General Policies and Procedures

                                                   and        Resources
                         2.1.1 RankingInvestigations Allocating
 Introduction.



               of        handles     of          which in
      TheDivisionEnforcement a number investigations vary
    size,        and        importance.
their complexity, programmatic            appropriate
                                    Devoting               to
                                                    resources
          which more       will ensure quality
investigations are significant help high              and
                                            investigations
maximize desired program outcomes. In quarterly reports to the Director, Home Office
       Directors Regional
Associate     and             list                      and their
                       Directors theirtopteninvestigations rank                                                s
  three        The
                 top investigations whichorshe
top investigations. three     areones he     considers                                                         jj
              important, thetoptenareconsidered
to becritically      while                             To
                                             significant. achieve
           in
consistencythisarea,I-iome
                         Oftice
                              Associate
                                      Directors Regional
                                             and                should
                                                        Directors
take into account certain
                                            whenranking topthreeinvestigations listing
                                     criteria         their                 and
    top            sothat may        make       regarding
their teninvestigations they effectively decisions
resourceallocationamongall competinginvestigations.
            When
Considerations        an
                RankinF! Investi~-ation:
                 their                              Home
      To determine topthreeandtopten investigations, OfficeAssociate
        and
Directors Regional         should
                   Directors            at                for
                                 evaluate leastthreefactors each
investigationundertheir responsibility:

                     importance enforcement considering:
          theprogrammatic    ofan       action,
          ·             the     matteris an SECpriority
                  whether subject
          ·             the     matteris a Division
                  whether subject                 priority
          ·      whether an action would fulfill a programmatic goal of the SEC or the
                 Division

                 an     would
         · whether action         a          industry
                            address problematic     practice
         · whether conduct
           markets
                   the         the
                        underminesfairnessliquidity U.S.
                                        or      ofthe securities                                               ,%
         ·             an                 an          for
                 whether actionwouldprovide opportunity theSECto address
                        conduct
                 violative          to        population
                             targeted a specific              that
                                                      orcommunity might                                        11
                           be        with    or           afforded the
                 nototherwise familiar theSEC theprotections     by
                 securities   laws

                 an     would
         · whether action         a
                            present good         to           other
                                        opportunitycoordinatewith
                 civil and criminal agencies




                                                                                     MADOFF   EXHIBITS-04502
    ·   whether the conduct can be addressed by any other state or federal regulators
    ·   whether an action would alert the investing public of a new type of securities
        fraud

·               of
    the magnitude the potentialviolationsinvolvedin the investigation,
    considering:

        o       the egregiousness of the conduct

                                                or
        o the lengthof tiinethe conductcontinued, whetherit is ongoing
        o       the numberofviolations


        o       whether recidivists      were involved

        o       whetherviolations        were repeated

        o       the amount of harm or potential harm to victims

        o       the amount ofill-gotten gains to the violators

        o whethervictimswere specificallytargetedbasedon personalor affinity
                group characteristics

        o for issuersor regulatedentities,whetherthe conductinvolvedofficers,
                directors, or senior management

                           (suchas accountants attorneys) securities
        o whethergatekeepers                 or         or
                industry professionals are involved

·               requiredto investigate potentialviolations,
    the resources                    the                  considering:

         o the complexity of the potential violations

                       staff          over      ofthe investigation
         o theapproximate hoursrequired thecourse
         o      the number ofstaffassigned

         o      theamountoftravel          required

         o      thedurationofthe         relevantconduct


         o      the number of potential,violators

         o      the number and location of potential witnesses




                                                                               MADOFF    EXHIBITS-04503
                    number location
                O the   and              documenD;reviewed
                                 ofrelevant    tobe
            Although          the
                    determining overallsignificance theinvestigation
   factors   into
         above consideration,                     of               shouldtakethe
                                          of             isajudgmenl bemade
   by the Home Office Associate theranking an investigation        to
   circumstances known to date.
                                       and       Directors, onallfacts
                                Directors Regional        based       and
  might                           example,
                          investigation a potentially rankedthe fraud
        includecomplex For into aninvestigationaccounting that
                a                                   egregious
                                                              in top  tl~ree
            high
  hasa very resource               land
                         requirement thelongest   amountoftirne     to
                                                               needed complete
  the investigation).         an
                     However, investigation             maKet
                                           intoa potential               that
                                                               manipulation
  may resultin a tradingsuspension    also
                                 might rankinthetopthree,         the
                                                            despite lower
  amount of resources needed,
                                    shorter neededcompleteinvestigation,
                                  the    time    to    the          and
          of investorsthe
           harmed       conduct and
  ~~a~ibnn~mber because is        requires
                            cgreRious
  Considerati         Wh
                                             N11     !arlons:
                                     ------.UY~ :LIIVT
                   resources
          Allocating       among              requires Associate Assistant
                                  investigations     that      and
  Directors'exercise
                            nexibilitY    Associate Assistant
                             andcreativity.
  normallyassignstaff to morethanone
                                                  and              will
                                                           Directors
                                          investigationspecifying        of
 competing investigations so thatstaffmembers ata time,work. thepriorities
                                            mayplantheir
                   among
          Priorities
             For    investigations rapidly
 investigation. example,    may             onthe of
                               change depending stage the
                    two        investigationscompete resources,
                       significant
 but staff maybe assigned                    may        for
                         and
                  toreview analyze
 waiting for documents                      in
                                   evidenceoneinvestigation  while
                tobe       inanother
                    produced
 allocating resources                           Therefore,
                                    investigation.         when
              among        investigations,
                   competing                     and
                                         Associate Assistant Directors
      take account only significance
 should into     not the                              but        of
                                     of theInvestigation, thephase
   investigatipn~ among things:
 the        consideriug, other
            thereis an urgent
    · whether               needto filean Enforcement action, such as an
                into
                   ongoingor
         :on~l~is~~~l fraud    that
                                 poses ofimminent
                           conduct athreat   harm
    ·   the volumeof evidencethat the
        records,                     must
                       documents,staff
               corporate                        and      such
                                          collect review, as trading
                                and e-mailcorrespondence
            of       required complex andevidence, asauditor
   · thelevel analysis       for        data    such
               bluesheets, financial
     workpapers,        or         data

       nuniber
             location and scheduling
   · the and ofwitnessesthe     the
                               of testimony
        travel requirements


                ---------

ITheterm   "Assistant
                   Directors"
Assistant Regional
                              Assistant
                        includes            in       Office
                                     Directors theHome    arld
                       Directorsthe Regional Offices.
                              in




                                                                           MADOFF   EXHIBITS-04504
    c       timelines for writing internal memos, evaluation of the case by pertinent SEC
                  and       and            of        by
            Offices Divisions, consideration thematter theCommission
                      with       considerations
            coordination andtiming                 state      authorities
                                             ofother andfederal
            For investigations   rankedin the top three,Associateand AssistantDirectors
     consider
should             a      of          staff      to     that
           assigningminimum twopermanent attorneys ensure
    is       on              inthe   of      or              In
there continuitytheinvestigation event absencesstafftransitions.
addition, the assignment of at least two attorneys may contribute to a collaborative
approach that improves tl~e          of                 and
                            quality theinvestigationpromotes           accountability.
        attorneys beassigned
Additional      may                on       of
                           depending thephase theinvestigation.
                2.1.2 Sig-MonthReviewof Iovestigatiousand Status Updates

Introduction:


            Each investigation,                           shouldbe reviewedby the
                                  whetherformalor informal,
      staff(Assistant level below) each
assigned          Director and   at          mark the
                                      six-month after
         isopened.    tothe s         entry         into
investigation Inaddition staff continuing ofinformationthe
Hub ~including,for example, adding the names of new staff assigned to the investigation
                                                     the       of
and removing the names of staff no longer assigned), status the information      should
be checked and anarrative update should  be entered into the Hub at the six-month mark.
Although each investigation is unique and does not conform to a particular time frame,
the six-month reviews and updates will allow senior management (Associate Director
                                                           and
level and higher) to assess the progress of an investigation evaluatewhetherthe
           continues be an appropriate
investigation      to                        of
                                    allocation resources.
Basics:


         assigned should
     · The     staff        the         and     the    Of
                       review investigationupdate status an
                                                         of
            ongoinginvestigation eachsix-monthanniversary the openingdate of the
                               on
             investigation.

        ·   The narrative update on the Hub systemshouldbe includedin the "Current
            Summary" narrative box under the "Nature/Substance of Case" tab for their
                        In       the          submit textoftheupdate a
            investigation.addition, staffshould    the             to
             Deputy Director by e-mail.

                     in
        · Thenarrative theHub     explain change theoriginal
                             should     any    in         analysis
                                                             whether investigation an
             contained in the case opening narrative regarding     the           is
                                                        the      staff    keep
             appropriate use of resources. Inparticular, assigned should inmind
             whetherthe conductis still withinthe statuteof limitationsperiod.

                     should thestageof theinvestigation anymajoreventsor
        · Thenarrative     note                       and
                     that occurred theprior months. example, staff
             milestones have     in       six     For     the




                                                                                      MADOFF   EXHIBITS-04505
                 mightnote that they are
                                      testimony, they conducting
                                 taking       that are:       settlemerlt
                          orthat       defendant been
                negotiations, a potential     has indicted.
                The six-monthreviewshouldinclude
                                              a review of information entered into the
                Hub              the
                     concerning investigation. inaccurateor out-of-dateinformation
                                            Any
                should be corrected.

         Exception:

                An updateis not requiredif an investigation
         action,                                    is open,but          because civil
                           proceeding,othereventis in progress is inactive
               administrative       or                       andthecollectionof
                                                                               a
         information under the
                      ofa investigation
                                  or theceased.
        despite filing civilaction has
              the                                ifan        isongoing
                                             Rowever,investigation
        example,ifthe investigation               of            proceeding
                                         institutionanadministrative    (for
                                         as         not    in action), the
                                  isongoingtopersons namedthe
        staffmust continueto update                                  then
                                               of         portiorl theinvestigation.
                                       thestatus theongoing     of
               2.2               Tips,and Referrals
                       Complaints,
                                     and
                       2.2.1 Complaints TipsFromthePublic
                  complaints tips primarily
             Public      and are         received through the Division's e-mail
             (enfor
        address            ~~ theSEC's      web
                                      online form
            I~www.sec.FTov/comlaint.sh
                                                contact staffat anyof theSEC's
                                       or through
        offices.Thevastmajorityofcomplaints           with
    electronic form and the Division
                                                       by          are
                                        andtipsreceived thel)ivision in
    electronic media.                            the     to        with
                                         encourages public communicate it through
                         Every iscarefully byDivision for
    reliability, detail and complaint  reviewed    staff apparent
    complaintor tip generallyis processed ofthe to the guidelinesbelow. review,
                        potential violations federal           laws.
                                                     securities After        the
                                         according
            for       ofPublic
    GuidelinesProcessing            and
                             Complaints Ti
    ·              that
          Complaints appearto be serious substantial usually
          fhe home office or the       and        are             to
                                                           forwarded staffin
                               appropriate office more
          resultin the openingofa MUI, regional for        review, may
                                                     detailed and
·         Complaints that relate to
                 assigned theexisting
          thestaff      to
                                      anexisting investigationgenerally
                                    matter.
                                            MUI or         are              to
                                                                     forwarded

           that      the
· Corriplaints involve specific
                              expertiseof anotherDivisionor Officewithinthe
            typically to that Division far
         ~nEa~ya~      slaffin        Office
                 forwarded particularor    further
·                 that
         Complaints fall within
         forwarded to the SEC          thejurisdictionfederal state are
                                                ofanother  or agerlcy
                                 contact at that agency.




                                                                                MADOFF   EXHIBITS-04506
   Complaints totheprivate theOfficeof Investor oradiscrete
           relate
        that                    affairs
                         financials ofaninvestor
                          to
                  forwarded                           and
                                              Education
   investor group are usually
                                      about  practicethefederal
   Advocacy("OlEA"). Commentsorquestions agency    or
   securitieslawsare also forwardedto OIEA.

                  2.2.2    Other   Referrals

                                 Referrals FinCEN Referrals
                           2.2.2.1      frorn   or              Bank
                                                         rnvolving
                                   Secrecy Act Material

The Bank Secrecy Act ("BSA"):
          The BSA is a tool ttlat the U.S.     gov,mment fightmoney
                                                     usesto                and
                                                                  laundering
                        in    and    by
drug trafficking. Enacted 1970 amended the USA      Act,
                                              PATRTOT It a
                           institutions,
designed to prevent financial               broker-dealers,being as
                                     including           from used
vehicles through which         hide        of        obtained The
                       criminals thetransfer illegally      funds.
recordkeeping and reporting                   BSA      a    trail
                                          o~the create paper forfederal,
                                   requlrements                           state
and local law enforcement to investigate          of     in
                                         themovement fUnds money           and
                                                                  laundering
                                 at
           schemes. RSAis codified 3 1 U.S·C-5311,et seq. The regulations
otherillegal      The
implementing the BSA are located at 31 C.F.R. Part 103.
                                                        compliance brokers
          For the SEC, the primary mechanism forenforcing        by      and
dealers with the requirements               is     17(a)          Exchange
                                    oftheBSA Section oftheSecurities    Act
of 1934         Act")andRule17a-8.UnderRule 17a-8,everyregisteredbrokeror
       ("Exchange
dealer must comply           the      recordkeeping retention
                          with reporting,        record
                                               and               of
                                                          provisions
                  Intheinvestment
31 C.F.R. Part 103.                    context, registered
                                 company     the              must
                                                        "funds"
comply with Rule 38a-1              Company of 1940
                       oftheInvestment    Act                 COmpa"Y
                                                    C'lnvesm7ent
 Act").      38a-1 that must and        ~itten    and
          Rule stales funds adopt implement policies
                                          of
                                  violation the"Federal         Laws."
                                                       Securities
          reasonably
 procedures               to
                   designed prevent "FederaaSecurities
                                                     Laws"includethe BSA.
 As defined in the Investment Company Act,
                                         and       to
                               confidential, subject thestrict
           BSA information is highly                                   set
                                                              limitations out
                                 Network
 by the FinancialCrimesEnforcement      ("FinCEN"),         in
                                                    a bureau theDepartment
 ofthe Treasury. Enforcementstaffhas access
                                                    to and reviewscertainelectronicreports
 filed under the BSA.

   Basics Handlin~peferrals BSA
 The   of             Containing Material:
      FinCEN has determined         thatBSA       are        documents that,
                                           materials non-public     and
      absent    certain             these       are        documents.
                          circumstances, materials privileged     Absent
      certain   circumstances,     is      by from         SSA      in
                              staff reshictedlaw disseminatingmaterial
      litigation or to the public.       staff use         contained
                                   However, may theinformation inthe
                                               documents in            .
      BSA material as a lead to possibldnd~rlying orvalueaninvestigation-
      Ah hardcopy BSA material         be        and under and or
                                   should segregatedkept lock key ifin
      electronicform,in a secureelectronicfile.




                                                                                    MADOFF   EXHIBITS-04507
                may
      BSAmaterial include,
              Currency
      ("SARs"),              other      Suspicious
                         among documents,             Reports
                                                Activity
      Reports Casinos
           by
                     Transaction("C?`Rs") C'urrency
                   ("CTRCs")
                            Reports
                         (i~e~~
                                       and       Transaction
                                   reports
                                         on         in     of$10,000);
      Reportsof ForeignBankand FInancial transactions excess
                                                     ("FBARs");
                                              Interests          of
                                                            Reports International
               ofCurrency
     Transportation    orMonetary Instruments         and     of
                                             ("CMIRs"); Reports
                Over
     CashPayments $10,000Receivedin Tradeor Business.
  Considerations:

              keep   the
         Please inmind following
  fi-om FinCEN or                         when       information
                              considerations receiving
                        sources may
                    other                BSA
                              that contain material:
                          contain material?
            Doesthereferral     BSA
                                                        take
                                          Ifso,staffshould appropriate
                to       and       secure material.
            Steps segregate properly    the
                is          toshare information inBSA with
           Staffpermitted the
           other SECstaff if relevantto an
                                           contained material                                           :j
                                             inquiryor investigation.Staffshouldnot
           inake copiesor forward
           SARs, which are           electronic ofBSA
                                           copies            particularly
                                                    informatioll,
           disclose BSA
                             highly documents. generally not
                                 sensitive      Staff      should
                                  orits
                          information
           a matter, such as
                                             topersons may assistillg
                                       existence who be             in
                             anIndependent     Person, Receiver
                                       Compliance     or      because
                           are
           BSAmaterials non-publIcdocuments. cannot shownto
                                              BSAmaterials   be
           witnesses  or
                             as       in
                        marked exhibits testimony.
           BSAmaterialsmay be embedded
          staffshould add the                      a       production.
                                              within document       Therefore,
                               fellOwing to its letterrequests documents
          regulated entities and
                                     language                for       to
                                               to
                                   its subpoenas financialinstitutions:
                                   production tainsBankSecrecy materials,
                    "If the document        con               Act
                 please segregate and label thosematerials the production."
                                                     within
Further Information:

      should
· Staff         the     ofChiefCounselfurther information about how to
           contact Office           for
        BSA
  handle materials      from     or
                  received FinCEN othersources:                                                     ;f
                4.7
· Seealso Section of theManual.

                      2.2.2.2 Referrals from
                                                     Company
                                             thePublic     Accounting
                            : OversightBoard

             from
The~s~S~g~TiD the_PC~OB:                                                                            ;%
                 staffoftheP~blic
     Theenforcement
                          toCompany Division
                                  Accounting
("PCAOB") forward itreceives staffofthe Oversight
      may      tips         the                    Board
                                             ofEnforcement.
              done    the
Thisis normally through Enforcement          office,whichmakes
                               ChiefAccountant's




                                                                              MADOFF   EXHIBITS-04508
an initial assessment regarding whether fUtureinvestigation is warranted. If the staff
receives a referral through the office of the Chief Accountant of Enforcement:

     ·                             shouldnotify the officeof the Chief Accountant
          Staffand their supervisors                                            of
          Enforcement about obtaining documents and information regarding the tip.

     ·                  staff shouldthen get approvalto open a MUIon the matter(see
          If appropriate,
          Section 2.3.1 of the Manual regarding Opening a MUI).

Considerations:


                 callingthe enforcement
          Consider                    staffofthe PCAOBto discussthe tip with them.

Further   [nformationl


          Pleaserefer any questionsaboutreceivinga tip fromthe PCAOBto the Chief
Accountant        of the Enforcement   Division


                             2.2.2.3 Referrals    from State Securities   Regulators

The Basics of Receiving Referrals from State Securities Re~ulators:

                                  enforcestate-widesecuritieslaws knownas "bluesky
          Statesecuritiesregulators
laws." The Division of Enforcement receives information and referrals from state
         regulators.
securities          Mostof the statesecuritiesregulators  have relationshipswith the
SECregional  officewhichcoversthe territoryin whichthey are locatedand the state
regulatorsdirecttheir referralsto that office.Pursuantto Rule2 of the SEC's Rules
                          the
Relatingto Investigations, staffcan share nonpublicinformation,     includingwhether
the staff has or will commence an investigation, with state regulatory agencies. 17 C.F.R.
Section   203.2.


Considerations:


     ·    Staff should discuss the information received fi~omstate securities regulators
          promptly with their supervisors.

     ·                              withthe statesecuritiesregulator,as appropriate.
          Considerongoingcoordination

Further   Information:


                                               see
          If the openingof a MUI is appropriate, Section2.3.1 of the Manual.




                                                                                       MADOFF   EXHIBITS-04509
                               2.2.2.4 Referrals from Congress
     The Bas
               Ics o fR ecelvinRa Referral fi-omConRress:
                                                     ess



              The SEC ~equently receives complaints and other information fi-ommembers of
     Congress on behalf o f the          whomthey represent. Mostof these lettersare
                              constituents
                                       Affairsor the Chairman'sOfficeand then assigned
     directedto the Officeof Legislative
     to the appropriate SEC division or regional office. The Chairman's Office tracks the
     responses to congressional letters and has issued guidelinesto followconcerning style
                                                                                      the
  and format ofcongressional response letters. As with complaints and other information
  received
                      sources, complaint tipreceived theDivision
               ~omother     each      and          by          from
       and          constituents
 Congress congressional               reviewed staff.
                             isi~arefully   by
 Considerations:

        Staffshouldnot share nonpublicinformation,
                                               including whether the staff has or will
              an            with            or      of
        commence Investigation, thecomplainantsmembers Congress.
           provide responses
 · StaflFshould timely              letters~, the
                         tocongressional meeting deadlines
              by          of
       required the Office legislative      or            Office.
                                      Affairs theChairman's
 ·     Ifstaffbelieves the information obtained ~om the congressional letter warrants the
       opening ofa MUI, staff should follow the instructions for opening a MUI in Section
       2.3.1 ofthe   Manual.

 Further Information:

                 should
             Staff         the        from       of         Rffairs the
                      consult guidelines theOffice legislative    and
          Office
 Chairman's    whendrafting
                          responses to congressional correspondence.

                           2.2.2.5ReferralsfromSelfRegulatoryOrganizations
        of        Referrals SROs
TheBasics Rece_ivinn      fi-om

               Division's ofMarket
             The      Office             ("OMS") primary of
                                Surveillance isthe    point                                                   rS:
      for
contact trading·related by
Eachequityand option
                     referrals    Self       Organizations
                             domestic Regulatbry     ("SROs").                                                1.3
                                      is          for        its        and
                               exchange responsible monitoiing ownmarkets
       exchange andregulations thefederal
enforcing    rules          and                laws.
                                       securities IftheSRO                                                    if
discovers violative conduct and believes it hasjurisdiction,it willconductits own
                                      that                                                                    ii
investigation.if the SRO determinesthat it doesnothavejurisdiction theparties
                                                                 over
involvedin the matter,it will refer the potential        to
                                                violations theSECviatheSRO
              Referral  ("SMSR").
MarketSurveillance System                         OMS reviews SRO
                                                              all                andin
consultation with senior staff in Enforcement opens MUIs and distributesreferralsto the
                                                                         the cases
                                                                                                              ,16
          staff in the regionaland homeoffices.
appropriate




                                                                                 MADOFF      EXHIBITS-04510
Considerations:


              staff
     · Assigned should      information
                      discuss                from withOMS.
                                      received SROs
     ·    ConsiderongoingconsultationwithSROs,as appropriate.

Further    Information:


                         SRO       with       investigation,
           If thereferring continues a parallel           pleasereferto the
                              in
policyon parallelinvestigations Section3.1.4of the Manual.
          2.3 Matters Under Inquiry ("lMCns")and Investigations

                   2.3.1   Opening a R·IU][
Introduction


                   of             and      for         and     of
          Thepurpose the procedures policies the review approval new
MUIs is to help ensure efficient allocation of resources.

                 a    requires thestaffassigned a R/i~n theAssistant
           Opening MLn.      that             to      (at          Director
                                     analysesto determine:1)whetherthe facts
leveland below)firstconductpreliminary
         the                          to      conduct violates
underlying MUIshowthatthereis potential address     that     the
                                                 ofa
federalsecuritieslaws;and 2) whetherthe assignment MUIto a particularofficewill
be the best use of resources for the Division as a whole. If the preliminary analyses
       that         be     then                     with
indicate a MUIshould opened, thestaff,afterconsulting the assigned
                                             shouldfollowthe procedures
AssociateDirectoror RegionalHeadof Enforcement,
     for    a                    system seeking finalapproval
below opening MUIwithintheinternal     and    the           of
                                        Headof Enforcement a Deputy-
boththe assignedAssociateDirector/Regional               and
       of           Priorto anyothercotlsiderations, staffShould
Director theDivision.                            the                 NRSI
                                                               consult
                                                             is
and the Hub for relatedinvestigations.Ifa relatedinvestigation found,the staff
assigned to that investigation should be consulted.

                         a    the      staff(Assistant
           Priorto opening MUT, assigned                   and    should
                                                    Director below)
determine whether the known facts show that an Enforcement investigation wouldhave
           to      conduct violates federalsecurities The Division
thepotential address     that     the              laws.
                  from a varietyof sourcesthat may warrantthe openingof a new
receivesinformation
   including
MCn,               articles,
           newspaper                ~om        whistlt=blowers,
                           complaints thepublic,           and
       from   agencies self-regulatory
referrals other      or                       ~SRO'').Assigned
                                   organizations             staff
             to                and          in       the
areencouraged usetheirdiscretion judgment making preliminary
            of       it           to              The
determination whether is appropriate opena MUL. considerations   described
      are          only         not           the
below suggestions andshould discourage opening ~v~n:     ofa    basedon
      information.
partial          MUlsarepreliminary         and
                                    in·nature typically       incomplete
                                                        involve
                                      for
information.The thresholddetermination openinga new MUIis low becausethe
       ofa      is
purpose MU1 togatheradditional to help evaluatewhetheran investigation
                                    facts
would be an appropriate use of resources.




                                                                                  MADOFF   EXHIBITS-04511
          To determinewhetherto open a MUI,the staflFattomey, conjunctionwith the
                                                            in
  Branch Chief and Assistant Director, should consider whether a sufficiently credible
                                                                    action that would
  sourceor set of factssuggeststhat a MUIcould lead to an enforcement
       a        of        securities Basic
  addressviolationthefederal      laws.             used making
                                         considerations when
  this determination may include, but are not limited to:

          · The statutesor rulespotentiallyviolated;

                            of
          · The egregiousness the potentialviolation;

                                of
         · The potentialmagnitude the violation;

                     losses    or    to         or
         · Thepotential involved harm an investor investors;
                the         harmed
         · Whether potentially       is          vulnerable at risk;
                                 group particularly      or
         · Whethertheconductisongoing;

                 the     can             efficiently within statuteof
         · Whether conduct be investigated         and     the
            limitations period; and

         · Whetherother authorities, including     or            or
                                             federal stateagencies regulators,
                                             the
            mightbe bettersuitedto investigate conduct.

                       that                 to      conduct violates
       Afterdetermining a MUIhasthe potential address      that      the
       securities
 federal                       staff
                laws,theassigned shouldevaluatewhether~oma resources
          it          for office handle investigation.
 standpoinfis reasonable their   to   the           Basic
             used
 considerations when        this       may      but            to:
                     making determination include, arenotlimited
        · The locationof the wrongfulconduct;

                    of           wrongdoers;
        · Thelocation thepotential

                    of           entity's,or
        · Thelocation theissuer's,             headquarter;
                                           SRO's
        · The locationof mostwitnessesor victims;and

                    and        of
        · Theresources expertise theoffice.                                                               ;i
               believes compelling tohandle orinvestigation
      Ifanoffice     ithas     reasons   a MUI         for                                                :i-
    another mayhave substantial itshould
which     office  a          nexus,         with      office
                                       consult theother                                                   -f
         which should
todetennine office       the or           Exceptions
                    purs~e MUI investigation.     tothe
general guidance   include:


                 fo                       Ifa     is
         Relatrbn aprevious irrvestigalion: E~ZUI closely related to a previous
                      a             shouldbe made whetherthe officethat handled
         Investigation, determination




                                                                                MADOFF   EXHIBITS-04512
                                                                            of
                the previous investigation shouldhandlethe new MU[,regardless whether
                that office has a nexus to the new ~IUE.

                InsufJicienlresources Coinvestigace: The home office may open a h~i~nwhen a
                                                       office
                regionalofficehas a nexusif that regional determines that it cannot
                     sufficient
                devote                pursuing h~Ln iftheregional has
                             resourcesto     the  or           office
                otherconcernsthat preventit frompursuingthe matter.
                                                            is         in
                         clearthattheMUIor investigationcentered a specifte
           If it later becomes
region,consideration  shouldbe givento            the              to
                                        referring investigation thatregional      office,
depending available in theregional
           on           staff               officeand the stageof the investigation.In
                                                       or       an        has
some situations, such as where witnesses are dispersed where office special
       itmay sense staff more one to together
expertise, make for from than officework   ona
matter.



         for     a
Procedures ODeninn M~I
               Ifthe        analyses suggest potential
                    preliminary above     the              conduct
                                                   toadtiress that
violates the federal securities laws:
      I) The assigned           staffshouid
                                        with
                                consult theassigned           Director/Regional
                                                      hssociate
         Head of Enforcement concerning the analyses.
       The        should out electronic form inthe
     .L) staffattomey fill the      MUI located Division's
               internal systems.
           form be      electronically asslgrted
      3) The will submitted       tothe       Associate
                             Head            for
               Director/Regional of Enforcement approval.
                                                       shouldreviewthe form
                                      Headof Enforcement
      4) The AssociateDirector/Regional
               promptly           t~io
                         (within business     days),and,if he or she is Satisfiedthat the NIC~Ihas
               the potential to address         conduct, or shemayapprove ~c~fl
                                        violative      he                        the       through
               the electronic    form.

                 Associate
          5) Ifthe                   ofEnforcement the
                                                     MUI
                       DirectorlRegionalHean approves form,
               the      staff  draft send   message Deputy
                  assigned should and ane-mail   toa    Director
               with a briefexp!anation              the   potential address
                                            regarding MU['s      to       violative
                                                         one             to handle the
                      and     why
               conduct, explain thisgroupis theappropriate
                           fi~om resourcesstandpoint.
               investigation   a
               Deputy
          6) The         should tt~e promptly two
                   Director review e-mail (wilhin business
               days) to determine              based                     theopening the
                                         whether, onthestaffsrepres~ntations,     oEthe
               MUI is an appropriate use of resources.
          7) IftheDeputy          agrees the is              use
                          Director ihat MUI anappropriateofresources,    the
               DeputyDirectormay approvethe       of     by     to
                                            opening theMUZ e-mail theAssociate
                             Head           and       staff.
               Director/Regional ofEnfi~rcementassigned
          8)     assigned should
               The     staff        acopy corresponden~
                              maintain ofthe          approval
                                                    and
                     the
                fi-om DeputyDirectorin the MUTfiles.




                                                                                         MADOFF      EXHIBITS-04513
                   requires
        9) if theMUI      expedited
                                  approval, and the assigned Associate
                Director/R-egional
                MUI form, then
                                        of        isnot     toapprove clec~-onic
                                     Head Enforcement available    the
            available              staff use MUI to  approval any
                                 the may the formrequest ~om
                        Associate          Head
                                              ofEnforcement.
                               Director/Regional
            staff may use the M~I form                            the
                                                        Alternatively,
                                                   approval
                                           torequest            fiom     Director.
                                                         directly a Deputy
        10)The DeputyDirectorwill
                           YII'ClOr receivep;~ru~k~e"Eiiduring
                                    receive
                                 will         report    opened the
                                         aweekly ofallMUls:
   Considerations:


            The internalsystemwill converta MUT an investigation the MUIhas
   beenopenforsixtydays. A                    to               when
   generated and sent by e-mail to the
                                      reminderOftheconversion
                                             upcoming      isautomatically
                                  primary member ontheMUI ten
           toconversionand five days prior staff
   days prior                                            listed           form
                                           to conversjon. Uponreceiving the first
  reminder,and prior to the sixtiethday
                                    oftheMUT, staff
                                                  the should
  conversionto an investigation appropriate. should
                                                                 determine whether                    :i
                               is            Staff
  proceduresfor closinga MCII, converting MUI[ Section
                                                                the
                                                          follow policies  and
                               or          a       in        2.3.2of thisManual.
  Further -Reference:

           For more information
                            onfilling ~vfl~l please
                                    out    forms,        for
  the internaltrackingsystems contact CaseManagementcheck instructions
                            or      a             Specialist.
                                                                    on

                     2.3.2 qpeningan~ning
                                                  Convertiog orClosing
                                       anInvestigation, aMUL,       a
 Introduction


                     areopened two
          Investigations     in ways:1)theinvestigationopened a
                                                      is    when
 h/lUTis converted to an
                           (which automaticallydays the
              or~ investigation occurs
 MUIis opened), 2) an                      sixty aAer
 sixtieth day automatic                   isopened      either to
                                 investigation independently,prior the
                      conversion
In bothcases,theopening an pfaEVII_TI
                          of                    any          ofa
                                       orwithout history h/ll_TI case.  inthe
Assistant         level
         Director andbelow)              requires the
                              i?vestigation that assigned the      staff(at
                                 conduct evaluation of the facts to determine the
investigation'spotential               an
                       toaddress
analysisfor whethertoconvert a        that        the
                                 conduct violates federal                laws.
                                                             securities The
       ~om              for
differs theanalysis whether        to
                               MUI aninvestigation,oropenan    investigation,
     of limited
basis very
                                  toopena MUE.       a       danbe opened
                               aninvestigation While MUT opened on the
                    information,
        staff
assigned hasdonesomeadditional              generallyshould  be          afterthe
be appropriate thi, timeto revisit information-gathtring
              at                               the
                                                                       It
                                                        andanalysis.mayalso
                                                                to
                                         whether officehasa nexus theMUI.
       sis: Willthe
          Violative
Addre ---------~'~L Cond         7        the     toSubstantively
                                       Have Potential        andEffectively
        The assignedstaff,inconsultation the    Associate
                                     with assigned            should
                                                       Director,
evaluate the infdnnation
                                  to       whetherisanappropriate of
                            gathereddetermine   it            use
        to
'esources openan investigation
                             (either conversion MUIorindependent
                                  through    ofthe




                                                                            MADOFF   EXHIBITS-04514
        While threshold
ofa MUI).   the            for      of  is        low,
                     analysis opening MUI relatively
determining whether the MUI should be converted to an investigation or whether to open
an investigation typicallya moredetailed
               is                        evaluation that is based on additional
information.

                 for     to      a                      (or
     Theevaluation whether convert MUIto an investigation openan
         turns
             on     and    extenf investigation potential
investigation) whether,towhat the            the
                                           has       to
address violative conduct.                                               the
                                 Thresholdissuesto considerwhenevaluating facts
include:


          the suggest
      I) Do facts       violation federal
                  apossible ofthe            laws
                                      securities involving
            ~aud or other serious conduct?
             is         ofresourcesthestaff
     2) Ifyes, aninvestment      by             by:
                                          merited
                              or     of
                a) themagnitude nature theviolation,
                 b) the size of the victim group,
                           of        or      losses investors,
                 c) theamount potential actual    to
                      potential trading, amountprofitslosses
                 d) for     insider the      of     or          or
                                                          avoided,
                             financial
                 e) forpotential           violations,
                                    reporting      materiality?
      3) Ifyes, is the conduct:
                 a) ongoing,or
                          the    of          period?
                 b) within statute limitations
         to          issues orle to       whether conduct
Inadditiotlthethreshold above, way dctermitle  the     is
 serious is to consider the following supplemental factors:
                                    actionto protectinvestors?
       · Is therea need for immediate
           the    undermine fairness LiquiditytheU.S.
      · Does conduct     the       or      of       securities
            markets?     -

       · Does the case involvea recidivist?
                            designated subject
       · HastheSECor Division        the          to
                                             matter be a priority?
            the         a          goal         and
       · Does casefulfill programmatic of theSEC theDivision?
               the involvepossibly
            Does case   a               industry that    be
                                widespread practice should
            addressed?

            the   give SEC        tobe      in       that
       · Does matter die anopportunity visibleacommunity
                                                             afforded the
            might otherwise familiar the SECor the protections
                not       be       with                             by
            securities   laws?

                the present ogportunity
           · Does case   a good             with civil
                                   tocoordinate other and
            criminaiagencles?




                                                                                  MADOFF   EXHIBITS-04515
 Considerations

      Assigned staffis encouraged revisitwhether office hasa sufficient
                                to             the     still
nexus under the new facts learned
                              duringperiodof theMUI.if the factshave
changed,assignedstaffshould         the
                                          whether isappropriatecontact
                                    consider    it           to            office
                                                                     another
   may     suited   the
that bebetter tohandle investigation.
       for
         Converting
Proc_edures    aMUltoag~g~g~
   Sixty days after a MUI is
                      opened, MUI beconverted investigation
unless MUlisclosedpriorto the the
     the                          will    toan
                                     day The listed the
staffori the MUI formwill rec~ive Sixty maric person as primary
                                an
conversion:ofthe MUI, and will                 e-mail
                                        automatic         ten        to
                                                    reminder daysprior the
                                           a     e-mail  five prior
                                     receivesecond reminder days tothe
       ofthe Upon      the
conversion MLII. receiving     reminder
                          ten-day e-mail:
                staff,in consultati0n
   1) Theassigned
                                    with        Associate
      evaluatethe factsgatheredduring theassigned             should
                                                       Director,
      determinewhether,and to            using       listed
                                   theMUT, thefactors above,   to
                                    extent, investigationhave potential
      address violative conduct. what    the          will the       to
  2) If theassigned staff in consultation
                                                      Associate
                                        withtheassigned       Director,
               that                ~o
     determine it is appropriate proceedwith the investigation, the
                                                               then
      conversion       to an
              Branch
      attorney,         or
                               investigarion without action thestaff
                   Chief, Assistant
                                          occur
                                       will
                                  Director.
                                                  further by
  3) Atthe timeofthe
                                         the       staff  draft    an
                                conversion, assigned should andsubmit
     OpeningNarrativeFormto theirCaseMa"agement        includingbrief
                                               Specialist       a
             regarding inves`tigation's to address violative conduct.
     statement        the            potential
     The information
     available    to
                                     in        will     in      file
                               includedthisform beincludedtheCATS and
                       theDcputy forreview a weekly
                             Director    on       basis.
 4) IEtheassignedstaff,
     determine that                         with assigned
                                 inconsultationthe           Director,
                                                       Associate
                  theinvestigation thepotentialaddress
     co"duq or thereis another
                                     not
                                 does have
                                   that
                             reason the
                                             to     violative
              US"
    inappropriate          then investigationbe
                 ofresources, assigned inwouldanwith the
                              the       staff, consultation                                          -9
                                                                                                     -i
           Associate
    assigned      Director,    close            it
                         should, theMUIbefore converts an   to
              To close Mtrt, assigned should contact their Case
    investi~ation. the the           staff                                                           -I~
    Management          request      the
               SI~Ocialisf toclose MUI,andprovide explanation
                                                        an          for                              2B
          the
    closing ~MU~.  Pleaserefertotheintemal
    MUTcodes. Ifthe MUI·is                     instructions theclosing
                                         systetn         for
                                      closed itslconversion
                                    not    before      toaninvestigation,
            closin~ must (seeSection
               procedures
                       be           orthe
   E~~al~:)~"vestigation followed 2.6                                                            l.;I




                                                                       MADOFF       EXHIBITS-04516
         for                                ofa
Procedures Openingan Invest~ation,Independent MUI
     In certain              it          to                   without
               circumstances,is appropriate openan investigation      having
      a                   in
opened MUI(forexample, a caseinwhich    emergency                  or
                                                 actionis necessary),
      a                       prior             of
convert ~i~I to an investigation to theoccurrence theautomatic conversionon
                                                 underthesecircumstances:
the sixtiethday of the MUT.To openan investigation

          1) The assignedstaff shouldconsultwith the assignedAssociateDirector
             concerning the analyses described above.

                           should outthe investigation
         2) Thestaffattorney     fill                     form
                                                    opening in the
                   system
            internal           and        it,
                         (CATS) forward alongwiththeOpening   Narrative
             Form, td their Associate Director for approval;

                       Director
         3) TheAssociate           review forms
                              should     the         (within
                                              promptly     two
             businessdays),an4 if the AssociateDirectoris satisfiedthat it is
                      to      the       Director approve opening
             appropriateproceed, Associate    may      the     of
             the investigation.

                           should
         4) Thestaffattorney           the      form
                                 forward approved to theirCase
             Management Specialist for processing.

          5) The assignedstaff shoulddraftand sendan e-mailmessageto a Deputy
             Directorwitha brief explanation                           potentialto
                                            regardingthe investigation's
             address   violative   conduct   and the office   nexus.


                        Director
          6) If theDeputy           that            isan        use
                               agrees theinvestigation appropriate of
                      the
             resources, DeputyDirectormay approvethe openingof the
                         by     to           Director assigned
             investigation e-mail theAssociate      and      staff.
                       staff
          7) Theassigned should       a                       with
                               maintain copyof thecorrespondence the
             Deputy Director in the investigation files.

                               requires
          8) If the investigation             approval to ongoing
                                      expedited      due              or
                                                                conduct
             imminent investor harm, and the assigned Associate Director is not
                     to       the          opening
             available approve investigation         then
                                                 form, thestaffmay
                   approval anyavailable
             request       fi-om                 Director.
                                         Associate                   the
                                                         Alternatively,
                                                  a
             staff mayrequestapprovaldirectlyfi;om DeputyDirector.

                     Director receive weekly
          9) TheDeputy      will    a           of
                                           report all investigations
             opened during the prior week

             2.3.3     Pormai Orders,-of Investigation

                                                             the
       UnderRule 5(a)of the SEC's Informaland OtherProcedures, Commission
                     makesuchformal
"may,in itsdiscretion,                        and        the
                                  investigations authorize useof process




                                                                                MADOFF   EXHIBITS-04517
 as it deemsnecessaryto determine    any    has      is         or
                               whether person violated, violating, is
     to      any       of         securities ortherules a self-
 about violate provision thefederal        laws       of
         organization theperson a member participant."C.F.R.
 'egulatory       ofwhich     is      or           17
 Section 202.5 (a). Once Commission a Formal
                       the               issues             of
                                                      Order Investigation
 ("Formal Order'?, members of the staff designatedthe Formal Order to act as officers
                                                by
                                    the
 of the Commissionfor the purposesoEthe investigation
                                                    -mayadministeroaths and compel
 testimonyand the productionofevidence,among other things. Investigations are non-
 publicunlessotherwiseorderedby the Commission.Id.

                   2.3.4 FormalOrderAction           MemoProcess
 Introduction:


          The staffcannotissue investigativesubpoenas testimony or the
                                                to compel
 investigation. documentsCommission
              of Commission the
 production unlessissuea formalorderfom~al private
                The         may
                                    ao~investigation,
                                issues orderin its
                                                of                                                                 ;B
        ifit   that      ofthe   securities may occurred
discretion,deems aviolation federal      laws have    or
  be       and     investigation
may occuning a formal                  and         The
                             isappropriate necessary. formal
    serves important
order    two              First,        describes nature the
                  functions. it generally      the     of
investigation that the Commission
members      as officers for the
                                                      and     it         specific
                                         hasauthorized, second, designates      staff
                                   purposes of the investigation and empowers them to
administeroathsand affirmations,
                               subpoenawitnesses,compeltheir attendance,take
       and      the       ofdocumentsand materials.
evidence, require production          other      Formal
         proceedings
investigative    are       unless    ordered
                    non-public otherwise bytheCommission.
     of        that
                  the      Issue     Order:
Basics Recommendin~ Commission a Formal
                               that
         The staff may recommend the Commissionissue a formal order by presenting
an action memorandum to the Commission:

· The        should
      memo describe facts
  the persons and entities
                                             the
                             known surrounding          violation,
                                                potential        identify
                           involved, thepotential
                                 describe                discussthestageof
                                                violations,
   the investigation and the need fora formal                 any
                                            order,and highlight specialissues.or
   exigent circumstances.

· Beforesendinga formalorder actionmemoto the Commission for consideration, the
      should
  staff           the
           circulate memo other
                        to            Divisions Offices their
                              interested     and     for
        erring side                 ~hisreview help
  review, onthe bfover-inclllsiveness. may toidentify                                                             ..4
            issues  stage            that      the
  potential atanearly oftheinvestigation canmake investigation
  more effective.


· The         typically formal matters Closed
     Commission considers order     during Meetings
     Section ofthe
  (see                  Urgent  may         bythe
          2:5.2.1 Manual)l matters beconsidered Duty                                                              i
       in                 at a    Meeting Section
 Officer lieuofconsideration Closed     (see           of
                                                2.5.2.3. the
  Manual).




                                                20




                                                                                        MADOFF   EXHIBITS-04518
·       A MUI must be converted to an investigation before submitting the action
        memorandum       to the Commission.

Considerations:


                   keep        considerations when
              Please thefollowing          inmind        whether seeka
                                                  deciding    to
formal        order:


·       Is the formalorderactionmemorandum            to              in
                                          beingprovid~d the Commission a
             manner? memorandum allow Commissionopportunity
        timely     The       should the       an         to
              the          for         and     concerns a relatively
        review investigation bothpolicy resource      at           early
        stage.

·                                                             moreefficiently? Tn
        Wouldthe formalorderallowthe staff to obtaininformation
               to         obtaining
        addition efficiently                isa       needed obtain or
                                  information, subpoena    to     bank
                records? there
        telephone       Are            who          to     under orto
                                persons willnotagree testify   oath
                       unlesssubpoenaed?
        providedocuments
·       Haveotherinterested        and                   to
                           Divisions Officesbeenconsulted identifyissuesthat may
                         violations thatmayrelate theinvestigation?
        arisefrompotential        or             to
·                         are         and
        Suchactionmemoranda privileged non-public.Staffshoulduse internal
                   templates,
        standardized              to                          of
                           modified suitthefactsandcircumstances the
        investigation.

                       23.4.1 Supplementing a Formal Order

                                              has                          the
              Oncea formalorderof investigation beenissuedby the Commission,
           has        delegated it fromtheCommission, namestaffmembers
    Division authority,       to                   to                as
       empoweredissue
officers      to           and        oaths, other   17
                    subpoenas administer among things~
         Section
    C.F.R.                 and(4). During course formal
               200.30-4(a)(1)           the    ofa                the
                                                      investigation,
           may    that               Commission a supplemental to
    Division request theSecretary.ofthe      issue         order
                                                                                 order.
    add or removestaff membersliom tl;e list of officersnamedin the originalFormal
              at          Director orabove authorize Division's
    A supervisortheAssistant     level   may       the       request
       a         order.     staff      office contact Ofllce
    fore supplemental Assigned inthehome should    the     of
              di;ectly reriuestsupplementalorder,assigned intheregional
    iheSecretary     to      a               and        staff
                           administrative
    officesshouldcontactthe~            assistantsin the Officeof Chief Counsel.

                       2.3.4.2 Requests for a Copy of the Formal Order

    Basics:      .


                                               to            provides a person
                 Rule7(a)oftheSEC'sRules~elating Investigations     that
                                                evidenceor testimonyat a formal
    who is compelled requested furnishdocumentary
                    or        to
                                       request, shown Commission's order
    investigative proceeding shall, upon     be     the        formal of
                However,copy theformal shall befurnished thatperson
    investigation.    a    of        order not         to




                                                                                   MADOFF   EXHIBITS-04519
for their retention
Assistant Director ot
                        without approval Division atthelevel an
                              express
                            the       ofa      official   of
                                   Adminish-atqr~ 17
                              District                   Section
                                           orhigher. C.F.R    203.7(a).
      for
        Responding- forCoovthe Order:
Procedures             a
              toaRequest of Formal
          When a member of the
                                      staffreceives fora copy theformal staff
                                               a request    of        order,
   ~e~t~d~nd procedures
           following when whether
~oouufdd the                     the
                       determining request
       · The requestmust
                                 by          or      for        who
                          bemade a person counsel a person hasbeen
         asked to fUrnishdocuments or testimony theformal
                                               in                    for
                                                         investigation which
                    is        a copy        order.
            theperson requesting of theformal
      ·     Therequestfor
                 order
                                 a copy theformal
            formal maynotbeprovided thebasis an oralrequest.Therefore,
                                  on
                                      of       ordermust inwriting. copy the
                                                      be         A     of
                                           of                                                               if
               should to person their inwriting Assistant
                     advise
                         the tosubmit
            staff assigned theinvestigation. request tothe
            Director
                                                                                                                I
      · The written request for the formal              representationsshow
                                         ordermustinclude            to
                       of         is
            thatapproval therequest "consistent with protectionprivacy
                                            both the         of      of
           persons involved inthe         investigation the unimpededconductof the
                                                   and with
           investigation." 17 C.F.R~
           Sample representations to              203.7(a). may
                                            Section                  the
                                                         Staff furnish following
                                                      in         request:
                                            be included thewritten
                      lind~rsignedrepresenrs
                    The                                                      above
                                                                         in~he
                caprionedmalfer.          Pursuant ~o
                                   c(ient[s~
                                                                      hereby    on
                                                        17CF.RJT203~CZ/wel Irquesr
                behalj~of[my/our] to befumishedwitha copyofrhe
                Commission's Formal Order
                warrant that the Formal
                                                       in~he   Inc~rer.
                                           Oflnvesrigollon above     [~/F4~e/
                                                                 contained
                                               O'derandinformation       thereinwill
                remain conlihenrial
                                                not          ~oany    orFnrly
                                          andwill bedisseminared person
                encepr[my/our]client[sjfor use in connection with (my/our]
                representation                   in
                              of[him/her/ir/rhem] this matter
          Only an AssistantDirectoror higher level Division official
                                                                     may approve a
          written request for a COPY formal
          warrant    denial
                                   ofa        order.Theremaybe-circumstances       that                     i
          intendsto use the formalorder fo' purposes isevidencethe in the
                         ofthe        such
                               request, aswhen     there       that requester
                                                         the
                                                   outside representation
                or             to
          matter, doesnotintend keepthe formal
                                             order              confidential,                               i

         in   that a
      Keep mind even request a copy theformal isdenied,
                           for    of        order     a
      requestirig       person   who is
      i
                              compelled or requested to furnishdocumentary
                          Yat a formalinvestigative.
                                                   proceeding stillentitled
                                                               is         to
                                                                                                           .I
      'eview the formal order without'etaining 17 C.F.R.Section203.7.
                                             a copy.




                                                                                 MADOFF   EXHIBITS-04520
     2.4       The    Wells   Process


The Wells Notice:
                                           and
           Rule5(c)of theSEC'sRules Informal Other Procedures states that the
                                  on
                              in        orformal
staff may advisepersonsinvolved preliminary             "ofthe
                                              investigations general
                                                   violations theypertain them,and
nature of the investigation, including the indicated        as          to
                            available preparing submitting
                          b.e
the amount of time that may        for       and                  prior
                                                         a statement
                                                     forthe
                                       totheCommission commencement
                       staffr,ommendation
to the presentation··o~a
ofanadministrative            praceedirig."
                    orinjunction         17     Section
                                           C.F.R.     202.5(c).
                                                        made by
      This "Wells notice" evolved fromrecommendations an advisory
                                               to    back theintent theoriginal
committee chaired by John Wells. It is advisable refer    to         of
"Weell Release," in making determinations         Wells         See
                                          regarding notices. Securities Act
                         Release 5310
of 1933 C'Securities Act")       No.                   Relatingto
                                            'SProcedures         the
Commencement of Enforcement                       and         of    Investigations-"
                                         proceedings TerminationStaff
                                                 Commission,
As the Commission stated in the Weils Release,'LThe              is
                                                          however, also
conscious of its responsibility to           the    interest.cannot itself a
                                        protect public    It     place in
                           of establistunent procedural
position where, asa result the            offormal                 it
                                                          requirements,
                               to      activitiesa timely
would lose its ability torespondviolative      in       fashion."
          a
 Providinc~ Wells Notice:

       Theobjective the Wells
                       of          noticeis,as the commissionstatedin the Wells
 Release,".· - not onlyto be informed the findings
                                     of              madeby its staffbutalso,where
 practicable appropriate, have
             and              to           it          of     under
                                     before theposition persons investigation
 at the time it is askedto considerenforcementaction."

            The Wells notice should tell a person                                 that
                                                        involvedin an investigation 1)the
 Division               recommending torecommend ~Commission
               isconsidering   orintends        the
                                             that     file
 an actionor proceedingagainstthem;2)the       violations heart
                                        potential      atthe afthe
                                           arguments evidence theDivision
 recommendation; and 3) the person may submit     or        to
 and the Commission regarding the             and       The             to
                                  recommendationevidence. staffisrequired
                                 before aWells ordetermining
 obtain a Deputy Director's approval issuing notice      to
        an          action   issuingWells
 recommend enforcement without     a    notice.
                     whether when provideWells consider.
            Todetermine   pr    to      a    notice
         the         issubstantiallycomplete
     Whetherinvestigation                   recipient Wells
                                      astothe     ofthe
     notice.


     Whether         immediate   enforcement   action            for           of         If
                                                        isnecessary theprotection investors.
                                     toprotect
                      actionis necessary
      promptenforcement                            providing notice
                                            investors,    aWells
                                    t;ot practical example,
      and waiting for a submissionmay be       (for               nto
                                                        a recommendatio
      file an emergency                a        restraining andasset
                       actionrequesting temporary        order          to
                                                                   freeze
                                              a Wells may potential
                                       providing notice alert
      stop an ongoing~aud). In addition,




                                                                                       MADOFF   EXHIBITS-04521
               to
       defendants thepossible
        'ecommendation    is            ~e"e put the funds die
                                     "Sset and atrisk investorthat
                               l"tended to protect.
       Contentof the
    The-- ---------L~ce:

             notice bein
       AWells should writing
    O~ally, be      followed possible. notice
              promptly by when IraWells isgiven
       itshould
                                    confirmation. intends
         awritten notice, staffwritten
    provide    Wells the                        staff to
                                            Ifthe
                                      Asingive
                                       may advance ofthe      tothe
                      counsel telephone. a Wells notice intention
   recipient or his
                           by
           follow
   should the         guidance but sbftalso referto specificevidence call
   'egarding the facts and
                           below,the          the           ofa
                                         notice, substance Wells
                                         may
                ClrcUmstances the for staffs
   recommendations.        form basis the
                        which
                written notice
                             written
          The Wells or confurnation.p notice.should:
                                       an oralWells
      identifj·
                th,Idl~ss~Pecific recommending
                           the considering t,the
                             staff
                      char~es is
          therecipientofthe
     accord              Wells
                            the  t, provide
     Statement, oron noticeopportunity avoluntary
           inwriting videotape,
           against or         why Commission bring
                          arguingthe
     anaction them bringing                nut
                                      should
                                    ofthis tothe
                                     any matter;       attention
                          consideration f~dcts Commission'B in
     connection,ith its

                  limitations
   - set reasonable         on
                     tile of submissionthe
                        length
    (typically, submissionsbeany
           written     should        by
                                  made recipient
    andvideo        should
           submissions                               to40 not including
                                                 limited pages,    exhibits,
        for recipientsexceed
                   "Of voluntary well the period
                       a minutes), as
                               asin
    ~f~cW~P to,ubmit12 statement time
          the                                                'esponse to th, Wells

       that submissionbe
 ~ advise any          addr~ssed
                  should
                                                          appropriate Director;
                                                      tothe      Assistant
        therecipienttharanyWells
   inform
      action
   any or                        be
                   that submission by Commission
            proceedingbrings may used the
                      it                    in
                            may discoverable parties
   accordancewith law; and he
             applicable and             bythird in
     acopy release, Act
         the           Release
                             5310:
· at~achof Wells Securities Na:
        acopyofthe
· attach to          Form
                 SEC'S
  I~equested                     1~62 ~i DirectedInformatidn
                SUppljrInformat`ion C'Supplemental f,,Persons
                                 Voluntarily
  Pursuant to                                              Information
                                                   to SUpply
                           Subpoena").
          ~e~S~Ssion:
     discussedaWells
    As    above, n~ice
   a      submission
makevoluntary             arecipientthey entitled
                     informs
                 tothe           that are      to
                         regarding
                 Commissiondie          p,p,,ed
                                 Division's




                                                                                MADOFF   EXHIBITS-04522
                                          in whichthe staff may rejecta Wells
              However,
recommendation.      thereare circumstances
submission:

      Wells   exceedslimitations specified Wells
· ifthe submission the      onlength inthe notice,
       the staff may rejectthe submission.

· Thestaffmay                determinenotto       a        request an     oftime.
                                              grantrecipient's for extension
                             should in      clearly the for
                        oftime bemade writing, state basis
       Requests forexlellsions
      requesl bedirected appropriate Director.
    the    and        tothe      Assistant
· Thestaffmay rejectasubmission iftheperson         the           limits
                                              making submission its
  admissibility under Federal Rule o         408
                                     EEviden~e or otherwiselimitsthe
                ability             pursuantForm
       Commission's tousethesubmission    to    1662.
             Wells submissions will be.provided to the Commission along with any
         from staff an
            the           action the       ofthe -
 recommendation for unsettled againstrecipient Wells
 notice.


 The Post-Notice Wells Process:

                           o~en    to     portionsthe
 · Recipients ofWells notices requestreview             investigative
                                                of staffs
        file. On a case-by-casebasis,                  the s           to    the      of
                                              itiswithin staff discretionallow recipient
                                                           file,
                                           oftheinvestigative including
        the notice to review non-pnvilegedportions
        documents that the recipientlikely                  during
                                                 wouldreceive             if
                                                                  discovery theCommission
        were to file a recommended actioner                Inconsidering
                                                   proceeding.               for
                                                                      a request access
        to the staffs                   file,           keep
                             investigative thestaffshould inmind:
              · whetheraccesswouldbe a productiveway for both the staff and the recipient
                of the Wellsnoticeto gaugethe strengthof the evidence that forms the basis
                   for the staffs recommendations;

               ·   whetherthe prospective             or         invoked Fifth
                                               defendant respondent    Iris Amendment
                                                            the          and
                   rightsor otherwiserefusedto testifyduring investigation;

                   stage investigation toother
               ~ the ofthe           regard persons
                                  with           orwitnesses,
                          whether witnesses yet provide
                   including certain    have to      testimony;
                      ofWells may
           Recipients notices request            with staff
                                           meetings the todiscuss
                                                 totheCommission
                                                                 the
                                                                     staff
                                                              Assigned
           substance ofthe staffs proposedrecommendation
                consult supervisors a request made.
           should    with        if such    is
   ·       The staffmay        engage             set~lement with the     oEthe
                                          inappropriate discussions recihient
           Wells   notice.              staff choose       the    that staffwill
                                      the r~ay toinform recipientthe
                               However,
           not engage                         discussions would timely
                                      seltlelnent
                             in prolonged             which delay
                       of
           consideration the matterby the Commission.




                                                                                    MADOFF   EXHIBITS-04523
        Commissiu" Ils Kelease:
      The      ,W
            O"~S,,II, Release

                RELATING COMh~NCEMEn~OFENFORCE
         PROCEDURES   TOTHE
                      AND
             PROCEEL)R\IGS
                         TERMINATIONINVESTIGATIONS
                              OFSTAFF
                           ACT OF
                  SECURITIES
                  OF Release9796; 5310;
                        1933,
                            No. No: SECURITIES _
           EXCHANGE 1931, ReleaseINVESTMENT
                ACT                     COMP~U~y
               OF Release 7390;
             ACT 1940, No. INVESTMENT    ACT
                                   ADVISORS OF
                                                 ·336
                                 i 940, ReleaseNo~

                                  September2711972

              ,,, orlhe Committ~.. std
                       ndvisoiy
          ,,tothe persons onJune1972,Enforccmesf
     submittedCommission1~
     designedafford
           to          under
                                             Paclicer,
                                         Policir~
           their     to
     present positions the
                                       several
                                co"tainedrecommendations
                                            by
                                Investigation theCommission    i
             These CommiSsion
                        measures,tothe
     proceeding.' procedural prior authorizationa~:f~l5~:~~~e~mt~,~t
                                           would     require a
              defendant respondent ifadopted, ingeneral that
     prospective     or         be
                                   notice staffs and
              'ecommendation given ofthe chargesproposed
     enforcement        andbe
                             accorded opportunity
     statement Commission would an
            tothe       which                       a
                                              tosubmitwritten
                                          t~e
 objective recommen~ed accompany staffrecommendation.
           ofthe         procedures                          The
                 ofan
  authorization enforcement        to before Commission the
                                 iS place the                to
                                                         prior
         party                    the
                      the Proceeding
 adverse concerning facts                     ofboth    and
                                     contentions itsstaff the
 'ecommendation.           and          which the for staff
                              circumstancesform basis the
                     has    these
          TheCommission given
                                        carefUl
        that objective it 'ecommendations consideration.
 itagrees the      issound,                             While
 interestadopt rules thathas
       to    formal for               it
                                   that      not in public
                             concluded would be the
                               Rather;
                          purpose. itbelieves        and
                                             itnecessaryproper
 2                      ---
       Reportthe
     See           Committee
           of Advisoty  dn
 1972,page3letseq.                              Policiesfractices, I,
                                         Enfarcernent and      lune
3Itshouldbe that
         noted
investigation theObtaining statement~om under
                        ofa           aperson
        isexpressly by written theSecurities
                         Section of
                 authorized 20~a)               and
                                         Actof1933
    21(a)the    Exchange Section2l(a) Exchange -
Section of Securities Act f934.
provides as f~ollows:
                       of         ofthe     Act                                           -i
         Commission   may,
       deems~The initsdiscretion,makesuch i"vestigations as it
          "ecessary to
                                                                                          --r6
       about violate determinewheeherhasviolatedIs
           to     anyprovision anyperson      or
                               ~fthis
                                    title          or
                 and requirepermit oranyrule regulation
       thereunder,may         O'      anypersonto filewithit a
               in       under
       Statement writing,
                            Oatb           ~ the
       determine,toallthefacts orotherwise Commission
                as            and                             shall
                        .
       to be ~nvestigated.. .               concerning matter
                                  circumstances     the

                                    26




                                                                      MADOFF   EXHIBITS-04524
               be        where
thattheobjective attained,             on          informal in
                             practicable, a strictly      basis
accordance with procedures which are now generally in effect.

       The Commission                                of
                        desiresnot onlyto be informed the findingsmadeby its staff
                          and             to
but also, wherepracticable appropriate, havebeforeit the positionof persons
                     the
under investigation-at timeit is askedto considerenforcement action.
                       however,is alsoconscious its responsibility protectthe
         The Commission,                      of                 to
                       placeitselfin a position
publicinterest.It cannot                           as
                                              where, a resultof theestablishment
of formalprocedural             it       lose       to         to
                    requirements,would itsability respond violative
activities    in a timely fashion,

                      believesthat the adoptionof formalrequirementscould
         The Commission
senously   the                 of          action inappropriately
        Limit scopeandtimeliness itspossible    and            inject
                                      to                             with respe~tto
into actionsit brings issues,·irrelevant the meritsof suchproceedings,
         or                or        had          an         to
whether notthedefendant respondent beenafforded opportunity be heard
                      of         against andthenature extent such
priorto the institution proceedings    him          and    of
opportunity.

                          is                                       whichrequire
             The Commission oftencalleduponto act undercircumstances
immediate action if the interests of investors or the public interest are to be protected.
          in        case      the        ofa          firm,
Forexample, onerecent involving insolvency broker-dealer the
         was                     a
Commission successfulin obtaining temporary         decreewithin4 hours
                                           injunctive
after the staff had learned of the violativeactivities. In cases such as that referred to,
where prompt                 for           of        the           of
            actionis necessary theprotection investors, establishment
                after
fixedtimeperiods, a caseis otherwise     to
                                    ready be brought,withinwhichproposed
                       couldpresenttheirpositionswouldresult in delaycontraryto
defendantsor respondents
the public interest.

      .The Commission, however,wishesto give publicnoticeofa practice,whichit has
heretoforefollowedon request,of permitting                                 to
                                          personsinvolvedin an investigation
      a         to
present statement it setting                  and       But
                            forththeirinterests position. theCommission
                                                         the
cannotdelaytakingactionwhichit believesis requiredpending receiptof sucha
         and,·        it               -if          is               that
submission, accordingly,willbe necessary, thematerial to be considered,
it be timelysubmitted.In determining    whatcourseof actionto pursue,interestedpersons
                   tojdiscussthe matterwiththe staffmembers
may find it hel;pfi~l                                         conductingthe
                                          mayadviseprospective
investigation.The staff, in its discretion,                    defendantsor
         of-the
respondents                of               including indicated
              generaltlature itsinvestigation,      the                as
                                                              violations
they pertainto them,andthe amountof timethat may be availablefor preparinga
                                                 in
submission.The staffmust,however,havediscretion this regardin order to protectthe
     interest toavoid only
public     and               but     untoward
                    not delay, possible              which
                                           consequences
would obstruct or delay necessary enforcement aCtion.

               adisagreement the andprospective or
             Where          ~tweensta~f a
                        exists            respondent
defendantas to factualmatters,it is likelythat this can be resolvedin an orderlymanner
          litigation.
onlythrough                the         is             to,
                    Moreover, Commissionnotina position in effect,




                                                                                      MADOFF   EXHIBITS-04525
         issues before proceedingbeen
  adjudicate offact the                 and
                                          the
                              has commenc~d evidence
   placedin the record. in addition,where proposed
                                         a                   proceeding
                                                 administrative       is
   involved, the Commission wishes
                                             the      danger apparent
                                       toavoid possible    of      prejudgment
          in          conflicting
   involved considering                    especiallyas to factualmatters,before
                                contentions,
  the case comes to the Commission
  prospective     defendants
                                                   Consequently,
                                        fordecision.                  by
                                                             submissions
                               orrespondents normallyprovemostusefUlin connection
                                         will
  withquestions  ofpolicy,andon occasion,            of
                                            questions law,bearing    uponthequestion  of
           a
  whether proceeding           be
                         should initiated, together with considerations relevant to a
  particular prospective defendant or
                                      respondent             not
                                                whichmight otherwise broughtbe
  clearly to the Commission's attention.

                        by
              Submissions interestedpersonsshould
  Division                                          befonvarded
                                                           totheappropriate                                     I;
            Director orRegional         with to staff
                                            a             conducting
                                Administratorcopy the members
  the investigation and should be
                            clearly
  relates. In the event that a
                                            to
                                   referenced thespecific            to
                                                         investigatidn whichit
                                        for
                        recommendation enforcement                     to
                                                     actionispresented the
            by
 Commission the staft; anysubmissions int~-ested
                                      by                will
                                                 persons be forwarded the to
 Commission in
                     conjunction with the Sti~Bmemorandum.

         It is hoped that this release will be usefUlin encouraging   interested persons to
 make their views known to the Commission and
 that objective can best be achieved.
                                                     in settingforth the proceduresby which

             The Advisory Committee
                                                   that          should in
                                      alsorecommended theCommission adopt
 the usualcase the practiceofnoti~ing whoisthesubject aninvestigation,
                                  a person          of
 and against whom no fUrtheraction is contemplated, that the staff has concluded its
                of
 investigation the mattersreferredto in the investigative order and has determined that
 it will not recommend commencement
                      the                ofan  enforcement   proceedingagainsthim.4
                     this           practice are taking steps to implement it in
             Webelieve is a desirable      and
certain respects.
                          we             that  adopt or        under
                     However, donotbelieve wecan a rule procedure
                     in
whichthe Commission each instancewill inform
been concluded.This is true becauseit is often difficult to determine whether an has
                                                            when
                                                    parties itsinvestigation                                        i
                                                                                                               _t
investigation has been concluded
                                 or merely            and           an
                                          suspended, because investigation
believed to have been concluded may be reactivated as a result of unforeseen
developments. Under such circumstances,  advicethatan investigation beenhas                                    I_i
            bemisleadinginterested
concluded:could       to         persons.

          Commissionits thatcases such appears
        The
          it
               mshucting in whereaction
              is      staff  undermqullythat its formalinvestigation been
appropriate, mayadvisea person
                                                                                                               1-1
                                                                   has
terminated. Such action on the
                                      of                   discretionary itspartfor
                                   part thestaffwillbepurely          on                                       '3
the     mentioned EvenifSuch isgiven, itmust no
   reasons     above.     advice  ~owever, in way
           as
be cons~truedindicating theparty been
                      that      has          or           may
                                     exooer~ed thatnoaction
ultimately result ~-omthe staffs investigation that particularmatter. All thafsuch a
                                             of
      means stat~has its
          isthat
communication the        investigation Ulat
                  completed        that
                                 and at time                                                                   :11
       page
4 Report, 20.




                                                                                  MADOFF      EXHIBITS-04526
    no enforcement action has been recommended to the Commission. The attempted use of
    such a communication as a purported defense in any action that might subsequently be
    brought against the party, either civilly or criminally, would be dearly inappropriate and
    improper since such a communication, at the most, can mean that, as of its date, the staff
    of the Commission does not regard enforcement action as called for based upon whatever
    information it then has. Moreover, this conclusion may be based upon various reasons,
    some ofwhich, such as workload considerations, are clearly irrelevant to the merits of
    any subsequent       action.

i             By the Commission.

    Further   information.


              Please consult with the Office of Chief Counsel concerning any questions relating
    to the Wells process.

                        2.5   Enforcement          Recommendations


                                   2.5.1    .The   Action   Memo     Process


           The filing or institution of any enforcement action must be authorized by the
    Commission. Lnaddition, while the Commission has delegated certain authority to the
    Division Director or the Secretary, most settlements of previously authorized
    enforcement actions, as well as certain other-aspectsof civil litigation, distribution of Fair
    Funds, and collection ofdebts, among other things, require Commission authorization.
    Because obtaining needed authorization before acting iscritical, please consult with
    senior managers, the Division's Office of Chief Counsel, and, if appropriate, the Office
    of the GeneralCounsel, before taking action to ensure that you seek the required
    authorization for all aspects of your matter.

           Commission authorization is sought by submitting an action memorandum to the
    Commission that sets forth a Division recommendation and provides a comprehensive
    explanation of the recommendation's factual and legal foundation. All action
    memoranda submitted to the Commission must be authorized by theDirector or a Deputy
    Director, with a few exceptions. Formal order action memoranda, memoranda seeking
                to
    authorization seekaspecific penaltyin previously                    and
                                                    filedcivillitigation, memoranda
    seeking the termination ordischarge of debts may be submitted to the Commission upon
    ttie authorization ·of an P~sociate Director or Regional Head of Enforcement, provided
    that they do not present significant issues that merit higher-level authorization. Staff
    should consult with senior managers to ensure that appropriate authorization within the
    Divisionis obtainedbeforesubmittingany recommendation.

           Prior to submitting an action memorandum to the Commission, staff should solicit
    review and comment ~-omthe Divisio~'s Office of Chief Counsel, the SEC's Office of
    the General Counsel, and other interested Divisions or Offices.




                                                                                        MADOFF       EXHIBITS-04527
                             2.5.2     Commission    Authorization


         After the Division presents a recommendation to the Commission, the
 Commission will consider the recommendation and vote on whether to approve or reject
 it. The Commission's consideration of the recommendation takes place in a closed
 Commission meeting, by seriatim consideration, or by Duty Officer consideration. -

         A quorum of three or more Commissioners may approve a recommendation with
 a majority vote. If fewer than three Commissioners are currently appointed to the
 Commission, a quorum will consist of the number of Commissioners actually in office.
 If any Commissioners are recused fi~omparticipating las opposed to being unavailable to
 participate), two Commissioners may constitute a quorum If only one Commissioner is
 not recused ~om participating, the matter must be deferred unless there are exigent
circumstances, in which case the matter may be considered by the Duty Officer. 17
C.F.R.   Section   200.41.


         Before any recommendation is considered by the Commission, the staff must
 identifl the counsel representing the subjects of the proposed enforcement action, so that
the Commissioners may determine whether they may need to recuse themselves from
considering the matter.

                             2.5.2.1    Closed Meetings

         The Commission         considers    and votes   on some     of the Division's   recommendations
in "closed meetings," which are meetings that the Commission, pursuant to exemptions in
the Government in the Sunshine Act ("Sunshine Act"), has voted to close to the public.
For each matter which will be considered in a closed meeting, the staff prepares a
Sunshine Act certification, to be signed by theCieneral Counsel of the Commission,
certifying that the matter falls within one of the exemptions provided by Title 5, Section
552 of the United States Code and Title 17, Section 200.402(a) of the Code of Federal
           Generally,
Regulations.                        are        to           at
                    recommendationsthat eligible beconsidered a closed
meeting include recommendations to open a formal investigation; to institute, modify, or
settle an enforcement action; to consider an offer of settlement; or to terminate a debt
owedby an individual.
         At a closed meeting, Division staff orally presents a recommendation to the
         and     its       before Commission on the
Commission answers questions     the       votes
                                            the           receivea copy of
recommendation.Exceptin unusualcircumstances, Commissioners
 the Division?s recotnmendation prior to the closed meeting. Staff should be prepared to
 answer the`questions that are likely to be asked·by the Commissioners and should contact
·the Commissioners' offices priorto the meeting to learn of any particular concerns or                                      ~1
questions about the recommendation.

                                                                                                                            ;.j




                                                                                                  MADOFF   EXHIBITS-04528
                                2.5.2.2    Seriatim   Consideration

                If the Chairmanor the DutyOfficer(see Section2.5.2.3.of the Manual),
      determines                     ofa                at               is
                  thatconsideration recommendatona closedmeeting "unnecessary        in
      Lightof the nature of the matter,             or        to              of
                                        impracticable, contrary the requirements agency
              but                  should         ofa     by
      business," thattherecommendation bethesubject vote theentire
                the            may
      Commission, recommendation acted    separately each
                                       upon       by               in
                                                         Commissioner
                         by
      turn- in otherwords, seriatim             17            200.42.
                                   consideration. C.F.EtSection
                       consideration used
                Seriatim                      the    ofa    meeting filled
                                  is-often when agenda closed     is
      or thedateo~aclosed      is
                         meeting toodistantto meetthetiming    ofapartii~ular
                                                           needs
                   Inaddition,recommendation becirculated
      recommendation.       a            may                   when
                                                        seriatim it is
            or   not     under        Act               ata
      routine does qualiCL theSunshine forconsideration closed  meeting.
      Matters that urgently require action before the next available Commission meeting, but
      raiseissues         to      consideration theentireCommission, withthe
                 sufficient warrant           by                    may,
              of             or
      consent theChairman DutyOfficer,           on           basis
                                         circulate an expedited forrapid
      seriatim consideration.     Staff should consult the Division's Office of Chief Counsel and
              of           for         procedures
      theOffice theSecretary thespecific              for       seriatim
                                               required submitting
      items.


                                 Commissioner reporthisor hervoteonthe
                 Eachparticipating         will
                   to                              usinga seriatimcoversheet
      recommendation the Secretaryof the Commission,
             by       and      by           Even          of
      prepared thestaff approved theSecretary. ifa majority the
               has                                        the
      Commission voted in favorof a seriatimrecommendation, matteris not
               until           has             a                thatheor she
      authorized eachCommissioner eitherrecorded voteor indicated
      is not participating.          of            may                 from
                              Anymember theCommission pulla recommendation
      seriatimcirculationand insteadplaceit on a closedmeetingagendafor further
      consideration.


                                2.5.2.3 DutyOfficer Consideration

                              delegates of itsmembers thantheChairman)the
                   TheCommission     one           (other           as
                                               the
       DutyOfficeron a rotatingbasis,empowering Duty Officer to act, in his or her
                on           entire     when          is
       discretion, behalfofthe Commission urgentactionrequired      a
                                                               before
                     can            at  meeting byseriatini. C.F.R.
       recommendationbeconsidereda closed     or           17     Section
                         of             subsequently
       200.43.Alldecisions theDutyOfficer                 among other
                                                  circulate   the
: ·    Commissioners     for affirmation.

                            requests DutyOfficer
                   Generally,      for                     should
                                               consideration               an
                                                                 resultfi~om
       unavoidable and pressing external need.          Typically, Officerconsideration sought
                                                               Duty                   is
         the              become of imminent
      when staffhasrecently    aware             harm          and
                                          potential to investors,
       the Division either requires               formalorderauthorityto obtainneededrecordsor
                                          immediate
             to       an        enforcement such animmediate
       intends recommend emergency       action, as       tradin~
              ora action a       restrainirig Duty
       suspensioncivil for temporary                 considel-ation
                                         order. Officer
       should,as a generalmatter,not be soughtwhere an enforcement recommendation
             close issues   jurisdiction
       presents legal regarding                Additionally,
                                     orliability.      I)utyO~f~ccr




                                                                                          MADOFF    EXHIBITS-04529
                 is
   consideration generallynotan appropriate   meansto obtain           ofa
                                                             approval proposed
   settlement. Staff shouldconsultwith the Officeof Chief Counsel and the Office of the
        todetermine Officer
  Secretary      ifl)uty          might
                         consideration beappropriate.
                                of         Authority
                  2.5.3Delegations Commission
          The Commissionhas delegatedcertain limitedaspectsof its authorityto the
        Divisions Offices,
  various       and      including
                                 delegations to the Director of the Division of
  Enforcement   to file
                                 enforcement andtotheSecretary the
                          subpoena        actions           of
           to                     or
  Commission issueordersinstituting settlingcertainadministrative
                                                                proceedings.17
  C.F.R Section200.30ef seq.
         E_nforcementActions:
  Subpoena                                                                                                    j
         Ifa personor entityrefUses complywith a subpoenaissuedby the staff
                                  to
        toaformal ofinvestigation,
  pursuant     order          the      may a
                                 Commissionfile subpoena
            actionin federal
  enforcement                     court,seeking ordercompelling
                           district           an              compliance(see
        21(c)of theExchange
  Section                    Act)~ Commission delegated authority file
                                  The           has       the        to
    an     to Directorthe
 such action the              17    Section
                    of Division.C.F.R.   200.30-4~10).
       If, after a reasonableand good faith attempt to resolve disagreements with defense
 counsel,a civil action is necessaryand appropriate to enforce compliance with a
 subpoena, the staff must obtain the approval of the assigned Associate Director or
 RegionalHeadof Enforcement
                          before seeking the Director's authorization to file a
       enforcement [fthe
 subpoena                    agrees subpoena
               action, Director that              is
                                          enforcement
 appropriate and necessary, the assigned staff should prepare a memorandum to the
 Director, laying out the basis fortherecommended           and        his
                                                     action, seeking or her
 signatureauthorizingthe action.

         Admm_nistrative
 Follow-on          Proceedin~s:
        The Secretaryhasdelegatedauthority to issue certain orders in administrative
proceedings. 17 C.F.R.Section200.30-7. Mostsignificantly, Secretarymay issue
                                                             the
orders institutingpreviouslyauthorized("follow-oti")administrative  proceedings to
      whether aperson:6om
determine barring              with           orinvestment
                       association a broker-dealer                                                           ,s
adviser is appropriate based theentry civil
                           on                    or      conviction
                                    oFa injunction criminal
      that    The      may
against person. Secretary also,pursuantto delegatedauthority,enteran                                          i
    imposing
order              bar
          a permanent insuch
                           cases, therespondent
                                if          consents. C.F.R.
                                                   17                                                        a
Section200-30.7(12).

                  terms,this meansthat it is
       In-practical
memorandum        that                   to prepare action
                            notrte~cessary
        recommending theCommission                an
                                         an
                                 institute orderto imposefollow-on
administrative relief under Section 15Cb) the Exchange or Section
                                       of            Act             of
                                                                203(1) the
        Advisers of 1'940
Investment     Act      ("Adirisersif: 1)theCommission
                                Act'?                  previously
authorized a 'cfollow-on~~
                            proceeding partofa prior
                 administrative       as           recommei~dalion,
and 2) the injunctionor criminalconvictionhasbeenentered.Further, Secretary
                                                                the       has




                                                                                  MADOFF    EXHIBITS-04530
        authority institutesettled iftheperson
delegated       to        a      order             to
                                             consents thefull
            relief      by            (a       bar).-   it
administrative authorized theCommission permanent Because is
        importantdetermine theconditions have met that
critically     to       that          at~ove been and the
    to       falls   within Secretary's
order beissued clearly    tile               authority, should
                                     delegated       staff
      with         of           and          of
consult the Office ChiefCounsel theOffice theSecretarybefore
         an               pursuant delegated
submitting orderforissuance      to        authority.
                  2.6 Closing an Investigation

                         2.6.1 Policies and Procedures

Basics:


                closing        isan       part       investigations
          Properly aninvestigation important ofmanaging
and makingthe best use of our resources.Closinginvestigations where there has been
         action       easy;           makes thatithasfollowed
enforcement isrelatively thestaffsimply   sure
     onevery authorizedtheCommission. investigations no
through    step      by           Closing        where
         actionwillbe recommended be a -harder
enforcement                    can                 call. Thestaffis
                                            judgment
encouraged to close an investigation-assoon as it becomes apparent that no enforcement
      will           This                         step
action be recommended. maymeanthateveryinvestigative hasnotbeen
       when        decisionmade. isencouraged this
completed theclosing      is  Staff        tomake decision,
      so             can           to            that
however, thatresources be redirected investigations willbe more
productive.

                  factors should considereddeciding
          Generally,    that   be        in            to     an
                                                  whether close
investigation include:

              The seriousness of the potential violations;
          ·   The staff resources available to pursue the investigation;
          ·   The sufficiency of the evidence; and
                                underlying potential
              Theageof theconduct        the       violations.
Considerations:

                      has          to                  there
       Oncea decision beenm~de closean investigation, areseveral  steps
                                      the      record ensure documents
 thatthestaffmusttake. Thesestepscreate official     and     that
                               are
 obtainedduringthe investigation handledproperly:
                                of          Act                   that
              CheckwiththeFreedom Information ~FOIA")Office;Recoids
              are subject to a request        a
                                         fi·om memberof the publicunderFOIAcannotbe
                      If
              destroyed~noFOIA     exist,   may     thefiles
                              issues thestaff prepare      for
              disposition. IfaFOIA issue exists, the FOIA office will advise the staff on
                      disposition ease
              theproper                      example, staff beasked
                               ofdre files.For     the may        to
                    records
              include           to                  in
                          subject apendingFOIArequest the filesgoingto storage
                       the     would
              eventhough records           not        after
                                   otherwise beretained thecaseis
              closed.




                                                                                  MADOFF    EXHIBITS-04531
               ·         Prepare a closing recommendation. The closing recommendation is a short
                        memorandum and serves as the basic                                 whatthe
                                                                 historicalrecordsummarizing
                        staff did in the investigation and action.

               ·        Preparethe files for disposition.
                                                        Remember that electronic records obtained or
                               during          will require disposition.
                        generated theinvestigation also  proper
               ·        Prepareand send appropriateterminationnotices.
                                  that
              Closinginvestigations have resultedin an enforcenient
                                                                  action havespecial
   issues.
                               cannot     until        actions     are
                   Aninvestigation beclosed allenforcement inthecase
          This           (1)     orCommission and that
  complete. requires a finaljudgment
  Orderedmonetary relief is
                                         order (2) all
                                        accounted for, meaning:

                                   and              have paid
                    · Alldisgorgernent civilpenalties been infullorthe
                                    has
                           Commission
                           amounts;
                                               staff
                                             the         collection unpaid
                                      authorized toterminate qfany

                                collected either distributed
                    · Allfunds and have been
                      the Treasury;
                                                                 orpaid
                                                         toinvestors into

                    ·      All money has beenproperlyrecorded.

                           an            cannot    if       ofa
                   · Further, investigation beclosed anydebts
                                         arethesubject collection bythe
                          defendant~'respondent     of         activity
                                 oron Commission's
                          Commission the              bythe       of
                                              behalf(e.g., Department
                          the Treasury's Financial             Serviceor the Department
                                                      Management                      of
                                 or          are   held    final
                          Justice), ifanyfunds being pending distribution.
 Further Information:

        should the
                 Office
                      Chief with   about a
case.Staff contact of Counselquestionsclosing
                                  2.6.2 Termination    Notices

Basics:

                        policy tonotify
             TheDivision's   is                and       at
                                      individuals entities theearliest                                                  r
        when staff determined recommend
opportunity the has         to
                          not                    action
                                       anenforcement                                                                    I
     them Commission. notification the ofaterminationletler.
against tothe        This       ta~es form
                                   ~to
The staffmay send terminationletters individuals entities
                                               or            the           is
                                                        before investigation                                            i
closed and before a determination
respondent.        Termination
                                             hasbeen   as
                                                    made toevery      defendant
                                                               potential     or                                         i
was pursuant
                                          should sent
                                    letters
                        to a formal order.
                                                          of     the
                                               be regardlesswhether investigation




                                                                                          MADOFF       EXHIBITS-04532
      A terminationlettermustbe sent to anyonewho:

      ·     Is identifiedin the captionof the formalorder;

                or           to     a     submission;
      · Submitted wassolicited submit Wells
      ·     Asks for such a notice (assuming the staff has decided that no enforcement
                         will                 that   or       or
                                        against person entity);
            recommendation be recommended

               believes the was       recommending
      · Reasonably that staff considering     an
            enforcement action against them.

                                                        letter     or       that
       If the staff decides against sending a termination to persons entities
fall intoany of the abovecategories, Associate
                                   an         Directoror RegionalHeadof
                                                       The         lettershould
Enforcement must be notified and approve of thedecision. termination
                                        and                    Wells
be signedby an AssistantDirectoror above a copyof theCommission's
Release(SecuritiesAct ReleaseNo.5310), which        termination should
                                            authorized      notices,
                                                               Wells
be attached to each termination ietter. As notedintheCommission's         the
                                                                   Release,
                   notice actionmayultimately as indicating
                              ,n                          that
provision terminationthat"rnust nowaybeconstrued fromthestaffs the
        ofa        or no                    result
partyhas beenexonerated                                       means
                                    Allthatsucha communication is thatthe
investigation of that particular matter.
                                                                actionhasbeen
                                  andthatat thattimeno enforcement
staffhas completedits investigation
recommended to the Commission."

Considerations:

          Staff should also consider sending termination lettersto companies  who provided
                                         with                insider trading investigations·
          concerning securities connection
information        their      in




                                                                                    MADOFF     EXHIBITS-04533
      Termination
 Sample         Letter:




                                        CDate3
      RE: I~ the Matter of

Dear                                                                                              ~1
     This investigation has been
"Otice], against   we           to asto      ofrelated receiving
                            compiete~Cname party
               whom do notintend
                                  recommend enforcement
                                           any
Commission. areproviding information theguidelines actionby the
              We         this          under         in the fmal
paragraph
        of Securities Act Release No.
                                        5310(ropyaWchodl                                          :B
                                                 Very truly yours,




                                                 Assistant   Director




                                                                        MADOFF   EXHIBITS-04534
3. A Guide to Investigative Practices

    3.1 Special Considerations

                Communications
    3.1.1External                 Senior
                            Between             Officials
                                       Enforcement      and
Persons Outside the SEC Who Are-involvedin Investigations

introduction


       The purpose of these best -practicesis to ensure that external communications
between senior enforcement officials (at the Associate Director level and above) and
persons         the           with           care,       and
          outside SECarehandled theappropriate sensitivity .
transparency. These best practices concern only external communications that are: .
        2)relate    active        and
                                    3)     between
1)material; toongoing, investigations; occur    senior
         officials persons
enforcement     and            the               with
                         outside SECwhoareinvolved investigations
    Lan     atagencies
(other persons               withwhich SEC
                   ororganizations the cooperates).
                          of          of           play        role
         Staffat all levels theDivision Enforcement an essential inseeking
and   receiving the           required discharge investigative decision
                    information      to        their        and
                                          that     persons
making responsibilities, and it is important outside            in
                                                         involved investigations
   that may    the in            without
feel they contact staff theDivision            including
                                      hesitation,     senior
        In            official obtain
officials. facfa senior      may              valuable
                                    particularly             through
                                                    information
       external.comrnunications.
material                             one        Dlvlslon
                            To present consistent             to
                                                       position
     involved
persons                 and
                          continue
           ininvestigations,           the       impartiality
                                tomaintainDivision's
and history of handling investigations with integrity,seniorofficialsshouldtake into
           the           described
consideration bestp~-acrices                   these          is
                                 below.Underlying bestpractices the
                                                 team's responsibility gather
recognition of the importance of the investigative                   to
evidence, raise questions, and manage               with outsidepersonsduringan
                                        relationships
           Thebest     reflect practical ofthe
investigation. practices the                          required
                                      realities teamwork
         involved investigation staff
byallstaff     inan                        tothe senior
                            (fi-om attorney most official),
 while taking into account the             necessary engage communications
                                 flexibility       to      in           in
                                that                  variables.
 situationsand undercircumstances may presentunforeseen

 Best Practices


          These best practices should be applied allsituations in which Seniorofficials
                                               to
      in      communicationspersons
 engage material        with           the relating ongoing,
                                 outside SEC      to
 active investigations:

                 Senior     are        toinclude staff
           Generally, officials encouraged              onthe
                                              other members
           investigative team when engaging lit material external communications, and
           should try to avoid initiating corhmunicationswithout the la~owledge or
           participation at leastone of the other staffmembers. However, "participation"
                       of
                      eitherhaving
           couldinclude                  Staff  present
                                  an;;ther member     duringthe
                         orhaving staffmember
           communications,      a                   in        the
                                            involved preparing senior
                  for                For
           official thecommunications. example,                team
                                               iftheinvestigative believes




                                                                                  MADOFF   EXHIBITS-04535
                 could    productive a one-on-one
 thata communication bemore       as           communication
       the            and               members theteamcould
 between seniorofficial theoutsideperson,     of
 participate by discussing the case with the seniorofficialpriorto the meeting,or
 assisting in preparing talking points for the seniorofficialto use during the
 communication.


 Although                          to      otherstaffmembers the
         senioroacials areencouraged include               on
             team             in              there
 investigative whenengaging a communication, arecircumstances    in
     none             are       to          when
 which ofthestaffmembers available participate anoutside
                                                          the
 personInitiatesa communication.Underthosecircumstances, seniorofficial
 may need to balanceseveralfactorsto determinewhetherto entertainthe
         without           ofother       including.
communication theparticipation staffmembers,
               the
    o Whi~ther seniorofticial is familiarwith the contextand factsthat are
      the subjectofthe communication;

                                team is awarethat the outsideperson planned to
         Whetherthe investigative
                a            with        offtcial;
         initiate communication the senior
    o Whetherthe outsidepersonhad previouslydiscussedthe matterwith
              on              tealn
         others theinvestigative landhowtheteamresponded);
    o    Whether the senior official was   briefed investigative regarding
                                                 bythe         team
         the communication; and

           the          involvesmatter urgency,routine
    o Whether communication    a     of      a       issue
                       situat~on whichtheoutside
        or a morecomplex       in                    is     an
                                               person seeking
                                 regardinga materialaspectof the
        agreementor representation
        investigation.


         official
Ifa senior             a communication theparticipation
               entertains         without           or
        of    staff     then
presence other members, thesknior  official
                                          should      to
                                               indicate the                                            i:
      person thesenior
outside    ttlat            will         other      of
                     official beinforming members the
           team fact the
                of      of communication,any
investigativethe andconsideration, shouldconsider:
       for
details, theirinformation       and
                                    along pertinent
                                        with                                                         i.i;
               to        personthatthe factthattheseniorofficialis
   o Indicating theoutside
     entertaining communication notimply
                 the
        agreement;   and
                               does           acquiescenceor                                         [I
         to oullidepnsoo of~cialin position
          me
  ~ ~ndicating            renior isnata
                   ,,, tile                                                                          :1
              an       or    a             without    the
        toreach agreement make representation reviewing
        circumstances with other investigative membersOowever,the senior
                                                team
        officialneed not avoidieachingan agreementor
                                                          making           if
                                                                representations
        any of the staff preparedthe senior officialfor the communication
                                                                        in                           _i
                  that       or            might
        anticipation agreementsrepresentations bediscussed).




                                                                        MADOFF      EXHIBITS-04536
           a        amount time, senior
   · Within reasonable   of    the            should
                                       official    document ma~e~
            communications to theinvestigation
     external          related                      but         to,
                                            involving, notlimited
         potential settlements,          of            and      decisions,
                                  strength the evidence, charging       -The
         official may take contemporaneous    notes of the communication, send an email to
         any of the assigned staff, prepare a           the
                                              memo to~ file, or orally report details to any
         of the assigned staff (who may then take notes oc preparea memoto the file).

              official
    · Thesenior           at                                     the
                     should all timeskeepin mi~dthkneedto preserve
                                                                  and
         impartiality ofthe Division in conductingits fact-finding information-
                functipns.
         gathering            fairness, objectivity
                       Propriety, and                       are
                                                              of
                                                ininvestigations
                 importance, theinvestigative cannot outits
         theutmost       and               team    carry
                             unless
                                  these        are      maintained.
         responsibilitiesappropriately principles strictly      The
              official
         senior           be          sensitive anexternal
                     should particularly      that      communication
         may appear to be                    to            to        the
                            or hasthepotential be an attempt supersede
                     team'sjudgmentand experience.
         investigative

Considerations:

             may           inwhich    official anoutside find
         There becircumstances a senior     and        person
                   to       the            ofassigned orallegations
         it necessary discuss professionalism       staff
         regarding            conduct        staff. if
                     questionable bytheassigned Even thecommunication
              be
         could considered        communication theinvestigation the
                         a material        about             itself,
              official choose to infonn oftheassigned about
         senior      may     not      any           staff     the
                           The
         communication. senior              however,
                                    official,            be       to
                                                   should sensitive the
         possibility               about
                     thatallegations questionable        may              to
                                                  conduct serveas a pretext
                                                 duringthe investigative
         complain about minoi events or annoyances                     process,to
         gam an advantage                    or           the
                          intheinvestigation to undermine progress theof
                    DependingMe
         investigation.             motivation communication,
                           on apparent      ofthe       the
                      should
         seniorofficial            whether inform staffof thecommunication,
                            consider     to      the
          following, the best practices above.

           of            team     learn a      outside SEC
    · Ifany theinvestigative members that person     the
          might contact a senior official, the staff membershouldalertthe seniorofficialas
            as      and     all       details    the
         soon possible provide pertinent concerninganticipated
          subject matter ofthe communication.

     ·                                                          considerations apply
          In addition to the best practices above and the typical           that
             an employee
          when SEC            with      outside    involved
                      communicates someone theagency
                         investigatio~senior
          in an enforcement                       and               team
                                          officials otherinvestigative .
                                                 and      inherent balancing
          members should recognize ·the discretion judgment      in        all
                          ofa                    with outside persons, including:
          the circumstances potentialcommunication

              time, and    the
                             communication;
          · the place,context~bf


                                                 39




                                                                                   MADOFF      EXHIBITS-04537
                             and          of                staff         in
              · theavaila~ility accessibilityanyoftheassigned to participate
                    the communication;

                              or          subject
                  · theexpected anticipated                            ;
                                                matterof thecommunication
                               phase sensitivity the investigation,
                  · thepriority,    and        of                        the
                                                                 including statusof
                                                           discussions;
                    the Wellsprocessor any pendingSettlement

                              and          of
              · the complexity circumstances the suspectedsecuritieslaw violationsat
                    issue;


                                the         interests theinvestigation in the
              · theneedto fUrther Commission's      in               and
                    protection of investors;

                       of         of       and counsel;
              · thelevel cooperationwitnesses their  and
              ·    the existence   of criminal interest.

    Further   Information:


                         concerning applicability thesebestpractices,
              Forquestions        the           of                  pleasecontact
    the Office ofChiefCounsel.


                             3.1.2 Statutes of Limitationsand TollingAgreements
Basics:


        2462'ofTitle oftheUnited
· Section         28           States    states "[e]xcept otherwise
                                      Code    that     as
         by              an      suit          for-the        of
  provided ActofCongress, action, or proceeding- enforcementany
                                        pecuniaryor otherwise,shall not be entertained
        civil fine,penalty;or forfeiture,
             commenced five
        unless                 hom         the    first  if,
                    within years thedatewhen claim accrued
              the        the      or          is
        within sameperiod, offender theproperty found      the
                                                     within UnitedStates
                                             thereon." The statuteof limitationsis an
        in order that properservicemay be-made
                defense iswaived it isnotraised timely
       affirmative    that     if             in            See    v.
                                                     fashion. Canadv                                            :t;
         230 362, @.C. 2000>.
       SEC, F.3d 363 Cir.
·                                       potentialviolationsof the federalsecuritieslaws
       If the assignedstaff investigating
              that           conduct beoutside five-year
       believes anyofthesuspect   may        the      limitations
       period      the                              anenforcement
             before SECwouldbeableto fileor institute          actior,the
       staff may ask the potential defendant or respondentto sign a "tolling-
                                                                            agreement."
                  are       in        of         negotiations allowtime
       Suchrequests oRenmade- thecourse settlement          to                                                   d
                of         in          of       a         By       a
       forsharing informationfiuthe'rancereachingsettlement. signing
             agreement, potential
       tolling       the                 respondent
                                deS~ndant-or     agreesnotto asserta statute
       of iirnitations defense
                                                  action          time
                                    intheenforcement fora specified period.A tolling                             j
       agreement must be signed by staff at the Assistant Director -level or above.




                                                                                      MADOFF   EXHIBITS-04538
Sample Lan~ua~e:

         The following is an example ofa tolling agreement:

                                      TOLLMG AGREEMENT

               the     of        ("Division")theUnited
     WHEREAS, Division Enforcement         of        States
        and
Securities Exchange        ("Commission")notified
                   Commission         has
             through
                   [his/her/its] that      is        an
IpespondentlDeTendantntl,counsel, theDivisionconducting
                       Matter
investigationentitledInthe oPI                                             to
                                                         l(the"investigation")
                                           of                of
determine whether there have beenviolations certainprovisions the federal
securities        laws;

                     ITISHEREBY
             ACCORDINGLY,          by between parties
                              AGREEDand    the      that:
             i.                      any     of         applicable anyaction
                          therunningof statute limitations      to         or
proceeding  against                  authorized, instituted, or brought by or on
                  CRespondent/Defendant]
                                 the           is
                      or to which Commission a partyarising of the
behalf of the Commission                                           out
                                         any      or      that be
investigation("any proceeding"), including sanctions relief may imposed
                                       beginning [D~TB]
therein,is tolledand suspended theperiod
                              for              on           LDATE]
                                                      through
(the "tolling period");

             2.                         and of[hislherlits] orattorneys
                                          any
                          [Respondent/Defendant]      agents        shall
                                              of the
not include the tolling period in the calculation runningof any statuteof limitations
or for any                         defense
                   othertime-related              to              including
                                         applicable any,proceeding,       any
 sanctions or relief that may be imposed          in        or
                                           therein, asserting relyinguponanysuch
 time-related         defense;

             3.                 in agreement affect applicable oflimitations
                          nothing this   shall any          statute
       or       time-related
 defense anyother               that          to
                          defense maybeavailable
                                      of                or
 CRespondent/defendant] the commencementthetollingperiod be construed
                    before
       any       that be     by applicable oflimilations
 torevive proceedingmay barred any     statute       or
                     defensebefoiethe commencement of the tolling period;
 any othertime-related
             4.             runningany
                          the            of         applicable proceeding
                                 of statute limitations    toany      shalt
      again the of tolling unless isan
 commence after end the                     ofthe
                        period, there extension
       period   inwritingand behalf the
 tolling executed      by on                hereto;
                                 of parties and
               in agreement beconstrued admission
       5. nothingthis      shall        asan        bythe
 Commission or Division relating to the appllicability s~atute limitafions any
                                                  of any     of          to
  proceeding,                             that be
              includingany sanctions relief may imposed
                                   or                             or
                                                           therein, tothelength
                   periodthat mayapply,
  of any limitations                                    of
                                       ortotheapplicabilityanyothertime-rela;ted
  defense.

                 instrument theentire
              This      contains           ofthe    and not
                                    agreement parties may be
        orally, only anagreementwriting.
  changed     but by          in




                                                                            MADOFF      EXHIBITS-04539
 SECURITIES AND EXCHANGE                       COMMISSION
 DIVISION OF ENFORCEMENT



 By:                                                      Date:
           CName]
           Assistant    Director



 IINDIVIDUAL RESPONDENT/DEFENDANT]


                                         Date:


                                                                                                             I
ICORPORATE             RES PONDENT/D          EFENDANT

By:                                          Date:

Approved      as to Form:




         ,Esq.
ILaw Firm Namel

     to
CounselIRespondennDcfendant]
Date;




Considerations:                                                                                         iY

            the    of         issue in
    · Considerstatute limitations early theinvestigation.                                               '1
      ·   Take intoaccountthe amountof time neededfor third parties to completeWells
                      for                                to
          submissions, staff to preparerecommendations the Commission,      for
          interestedDivisionsand OBces at the SEC to reviewrecommendations, for
          the Commissidn       to consider    the recommendation.
                                                                              and                       1)
    ·     Try to avoidmultiplerequestsfor tollingagreementsby askingfor a suitable
              of keeping ulat isultimately efficicntt
          pwiod time, inmind it        more       toovcrcstimate                                        _.i


                                                     42




                                                                              MADOFF   EXHIBITS-04540
                                 the                                   and
          ratherthan underestimate time needto completethe investigation
          recommendation      to the Commission.

     · Section2462ofTitie280fthe United     Codesetsfortha fiveyearstatute
                                       States                             of
                 but
       limitations, certain      or           may
                           conduct circumstances havetolledthestatute,
          depending on                            in                       in
                           the commonlaw developed a particularjurisdiction- such
                   please   a     of            trial            of
          situations, contact member theDivision's unitortheOffice
          Chief Counsel for further information.

          in   that    claims notsubject thefi\Ie-year of
     · Keep mind certain    are        to           statute
                                              claimsfor injunctive
          limitationsunderSection24~2,including                  reliefand
          disgorgement

                     3.1.3 InvestigationsDuring QngoingSEC Litigation

Basics:


                    may      to         and                subpoenas
          TheDivision continue investigate issueinvestigative
      toa·formal ofinvestigation simultaneously arelated
pursuant      order         while          litigating civil
      if                    good-faith forthecontinued
action thereis an independent,       basis                       An
                                                     investigation.
         food-faith mayinclude possible
independent,      basis      the              of        persons
                                     involvementadditional
          in             alleged theclomplaint, additional
or entities the violations      in          or                   violations
                                                         potential        by
one or more of the defendants       in the litigation.

Considerations:

                                            powers,Divisionstaff shouldexercise
          Whilethe SEChas broad investigative
       urhen
judgment    deciding     to       investigating litigating
                   whether continue          while                      a related case.
The staff should review and consider the following:

                   whether issuesubpoenas, staffshould
      · in assessing     to             the                  all
                                                      consider relevant
                            including degrae factual legaloverlap,
        factsandcircumstances,      the     of       and            the
              course theLitigation investigation, Likely
          prior    of           and           the            of
                                                      response defense
                 and                           judgeassigned thecase.
          counsel, thelikelyviewsof theparticular          to
                         testimony documents the investigation are properly
      · If thestaffobtains        or       in                that
                     in            the
        discoverable the litigation, SECmustproduce                    in
                                                   themin the litigation
          accordance with the Fede~ralRules of Civil Procedure.

                 there                    the       staff   not
      · - Although is somecaselawto support practice, should use
                    subpoenas toconduct
           mvestigative    solely           with    to      alleged
                                     discovery respect claims
                      complaint. court
           inthepending       A          conclude theuseofinvestigative
                                     might      that
                                                                         powers
           subpoenasto conductdiscove~ is a misuseof the SEC's investigative and
                    the               and        on        in         Rules
           circumvents court'sauthority the limits discovery theFederal
           ofCivil   Procedure.




                                                                              MADOFF      EXHIBITS-04541
                                                   and
          In addition,thereare specialconsiderations restrictions on continuing an
           following
  investigation the        ofan         proceeding
                   institution administrative ("AP'3:
                 ~P     continuing
             Inthe context,              aresubject 230(g) the
                               investigations toRule    of
             SEC's Rules of Practice, which       tl;e     to      the
                                           requires Division inform hearingofficer
                     party       ifthe issues new
            andeach promptly staff
            formal order.
                                                        under
                                            any subpoenas thesame
                             rule directs hearing "toorder steps [are]
                          The also     the      officer  such as
                     and         to      that          are
             necessary appropriate" assure the subpoenas not issued"forthe
                 of        evidence
            purpose obtaining          to             The       officer
                                 relevanttheproceedings." hearing
                     that        documents
            mustensure anyrelevant             through useof such
                                        obtained     the
                   are       to   respondent a timely
            subpoenas produced each       "on       basis."I7C.F.R
            Section 201.230(g).

  'urther Information:

            Before continuing an investigation
                                             whilethereis related      litigation, if
                                                                 pending         or
               to       to           that           be    and a
 thestaffisgoing recommendtheCommission a civilaction filed that,
      orderbeobtained investigate, staffs~iould discuss the issue with trial
 formal             to          the
 counsel and should revisit the issue
                                             contemplating service investigative
                                      whenever               the
 subpoenas that could be seen as relating pending -litigation.
                                                                 of
                                         to

                    3.1.4.Parallel Investigationsand the State Actor Doctrine
 Basics
           ofthe StateActorDoctrine When Applies
                                  and   It
           The State Actor Doc~-ine
                                                     whenactionby a privateentityis
                                      maybe implicated
      attributablea government The action may be fairly attributable if there is
 fairly         to          entity.
 a sufficiently close nexus between the
                                                            entity,and the challenged
                                          state,or government
 actionofa privateentity.

           The StateActorDoctrineappliesto a wide variety of private actions in which
       isin way       Ithas analyzed a two-prong
governmentsome concerned. been    under       te5t,
     of    can    in        of
either which result a finding stateaction:
                       tt~e action" private engage           when
                    Under 'Ijoint prong, entities instateaction                                            lb
                        participants
           theyarewillfUl         injointactionwithstateofficials.

                        the      compulsion" coercive
                    Under "govemment      prong,            or
                                                    influence                                              :f
          significant               by
                        encouragement the state can convertprivateconduct into state
          action.


               witness the Amendment during
          After.g asserts Fifth  privilege investigative
        and      to      to
testimbny declines respond pbtentially          questions, issuemay
                                    incriminating        the
                                       to
arise if the samewitnessis then summoned testify about the same or related conduct                         ~
          entity.When
bya private         providing
                            testimony
                                  to a privateentity,the right to assert the .
Fifth hmendmentmay not be availableto the witnessas a practicalmatter,or its




                                                                                 MADOFF   EXHIBITS-04542
      may in            other
                            than ability an  inference
assertion resultconsequences the todraw adverse
at trial.


Basic Guidelines:

                staff   that      entity        conduct
             When isaware a private isinvestigating thatisthesame
       tothe  involved staff       staff
                                       should the
orrelated conduct inthe s investigation, keep
following guidelines in mind:

                         Tn fact and appearance                      entity'sinvestigations
                                                  the SECandtheprivate
                                                       jointly. Staff shouldmake
             shouldbe paralleland shouldnot be conducted
                         decisionsindependent
             investigative                                 investigation is being
                                              of anyparallel             that
             conducted by a private entity.

             ·        not any         step
                  Do take investigative           for
                                                    the    of private
                                         principally benefitthe
                   investigation investigativetotheprivate
             entity's       orsuggest       steps       entity.
             ·       In SEC investigations in which a witness has asserted or indicated an
                                                                   do
             intention to assert the Fifth Amendment intestimony, notsuggest Line  any of
             questioning to       theprivate  conducting investigation, not
                                         entity          a parallel               and do
                                             or     evidence usein
                                    anydocument other
              provideto the privateentity                  ti~r
                                     than      to          access
              questioning a witnessotherpursuant an approved    request.

 Further Information:

                   consult OCC concerning questions totheState
              Please    with staff     any       relating
 Actor       Doctrine.

              3.2 Documents and Other Materials

                          3.2~1Privileges and Privacy Acts

                                                               you   comply
          In connection with any request for document production, must    with
  the Privacy Act of 1974 ("Privacy            Right          Privacy of
                                    Ad"),the toFinancial Act 197&
                             Privacy of 19X6
                                   Act         and
  ~RFPPL"), the ElectronicCommunications ~ECPA") the
         and
                             of        contacting
  rules regarding the assertionprivileges,           counsel,
                                               wi~ess's    parallel
                                                     are       in      4;
  proceedings, ongoinglitigation.Thoserulesandstatutes discussed Section
             and

                          3.2.2   Bluesheets


   Basics:


                   istheprocessbywhich theSEC
        Bluesheeting                               and      trading fi~om
                                             requests obtains     data
        the broker/dealer coinmunity.               finnsare required provide
                                               Member               to      ~ading
               pursuant    17(a) Exchange Rule
        information toSection ofthe     and 17a-25
                                      Act




                                                                                      MADOFF   EXHIBITS-04543
                Althoughprocessnow
        fhereunder.    the     is
        Bluesheet       th,name        electronically the
                                  handled
               application, derives              through SEC's
        makesuch requests.                   the that paper once to
                                           ~Om fact blue was used
                  providesinformation
        Bluesheetdata
                        whether transaction the
                                              account for specitic were
        executed indicates the identifying holder
              and                                       whom trades
             The
       elements. also
              or
       domestic foreign
                                  abuyor
                            proprietary and orshort, other
                                      customer
                                              long     alllong
                 data identifies Wasandasell tradesexecutedon all data
       introducing         mark~ets,
                        and all          cross"    transactionsfor
                                "in-housetransactions, cleared
                 brokers, primebrokertransactions.
           be
    ~ tfmay appropriate       and
                       toobtain
                                       Bluesheet inavariety
      '"Vesti~ations, istypically review
                 but;it        obtained      data        of
              manipulation
       O'market          violations.             involving insider
                                           inmatters possible trading
   Cansiderations and M~hanics:
                  - ----------~



         to        bluesheet the
      Prior requesting data, assigned must     which
                                   staff identify securities
         have interest
      they an              (equities,
                   inreviewing
      the
        period              they Iike etc.). must determine
              ofrcviewwhich would Options, Staff also
                     in
      made, assigned
          the       staffshould          data. these    are
                                   toobtain Once decisions
             Clwrcd Bluesheet broker/dealers
                  Rel~orts whichobtain Cleared
                   the
                       identify to ~aded
        ~:~ePP'ionUSe to application Equity
     sR~~                                the
          and     Cleared
     Equity Options
         that   the
     firm reported trades,        Reports and oftransactions
                                           essential
                                      provide information the
                                  volume ~rm~ number
                                      ateach
                                                     such clearing
                                                        as
                                                            on.
         or       period. information
     daily specified The
          the to                             on       basis
                       determine Mnbesorted a volume which
     allows staff quicklj·     the
                                       participants marketplace.
                                  largest       inthe
             o~nvolume.atakeoversituation,
                           organizm~ according
                     co"sider       data
                                  the      tobuy
            O Ifthereissuspicious
                                trading bad suchapoor
                                     beforedatanews, as
              'eporf it maybeappropriateEo by sell volume. earnings
                                      sort the
 FurtherInformation:
       ------



 ·. Questions regarding
   OfMarketSurveillance.  theBluesheeting to Division.s
                                      be
                                    may      the
                                 processdirected Office                              5~
              .3.23
                             Document
                      Voluntary    Requests                                           P

Basics:                                                                             i.&

        , informalB,,,,,,,, invmigation,
                ,,                staff
      During inquj· informal ~h, muy
request voluntary
         the      production                                                         i
                   suchasofdqcumentsmay inquiry
creation ofdocuments,                    staff           the
                        chronoiogies The Inalso request voluntary
                                  ofe~vents~ an informal
           th,staffcan
investigation,       also                                  or
                                             agree voluntary
                                                 to      interviews
                                                                and                ;i'

                                      46




                                                                 MADOFF   EXHIBITS-04544
testimony. It cannot issue subpoenas prior to the Commission's issuance ofa Formal
Order of Investigation.

            When the staff begins an informal inquiry, voluntary document requests are a
principal means of gathering documents, data, and other information. Often~the~uits of
these requests will help the staff assess the merits of an investigation at its earliest stages
before the staff opens an informal investigation or requests that the Commission. issue a
formal order of investigation.

Considerations:


·    Many issuers, individuals, and other third parties are willing to provide significant
     materials to the staff voluntarily, without the provision of a subpoena. And, as
     discussed in Section 3.2.4 below, regulated entities are required to produce certain
     records without a subpoena.
·    Staff can consider, on a case by case basis, whether and how a voluntary document
     request as opposed to a subpoena may affect a witness's diligence in his or her search
     for documents      and the witness's           responsiveness.
·    Staff should also keep in mind that a subpoena is required in some situations, such as
     when seeking certain information covered by the Electronic Communications Privacy
     Act.


                             3.2.3.1      Forms      1661 and    1662


        When requesting documents or information other than pursuant to a subpoen~~the
staff provides all regulated persons i~rentities with a copy of Form SEC 1661 (entitled
"Supplementary Information for Regulated Entities Directed to Supply Information Other
Than Pursuant to a Commission Subpoena").

            When requesting documents or information (including informal interviews,
voluntary or subpoenaed document productions, and testimony) ~-omany witness, the
staff provides the witness with a copy of Form SEC 1662 (entitled "Supplemental
Information for Persons Requested to Supply Information Voluntarily or Directed to
Supply Information Pursuant to a Commission Subpoena").

            The Supplemental Information Forms provide information on the following
topics:

                   - False   Statements       and    Documents
                   - Fifth   Amendment
                   - Right to Counsel
                   - Going Off the Record
                   - Consulting        with Cou~sel
                   - Transcript Availability
                   - Perjury
                   - Wells     Procedures




                                                            47




                                                                                      MADOFF      EXHIBITS-04545
                         - Confidential Treatment Pursuant to the Freedom of Information Act
                         - Privacy Act Notices:
                                                                         is
                                    - AuthorityPursuantto WhichInformation Being Solicited
                                    - Effect of Not Supplying Information
                                    - Principal Uses of Information
                                    - Routine Uses of Information

                        3.2.4 Document Requests to·Regulated Entities
    Basics:



    · Thestaffmayrequest           from
                        information regulated        such
                                              entities, asregistered
      investment      and              Pursuant Sections. and@)ofthe
                advisers broker-dealers.      to        17(a)
                Act         204             Act
      Exchange andSection oftheAdvisers andtherules                regulated
                                                          thereunder,
             must
      entities provide       informationthestaff withoutsubpoena.
                       certain         to       even       a
              from
    · Records regulate~          especially
                         entities-                    transfer
                                          broker-dealers, agents; and
        investment       -                 cornerstones an investigation.
                  advisers areoftenessential         of                 Because
                entities
        regulated      mustproduce certain      without subpoena, staffcanoften
                                          records      a          the
             documents, asbrokerage
        obtain      such               statementsaccount
                                 account       or      opening
                 whichmightotherwiserequirea subpoenato obtainfroman individual..
        documents,
    Considerations:


    ·              of        and
        Forreasons efficiency strategy,       what              to
                                       consider typesof records obtainfroma
                entity.Forexample, addition customer
        regulated                 in      to       account           a
                                                          statements, Groker-
                               such            orderconfirmations,
        dealerwillhavedocuments as ordertickets,                       blotters
                                                                 trading
        and transfer     records.

           regulated
        Some              have
                   entities specific
                                   policies
                                          regarding     land,       to
                                                  whether if so,when)
                                                                      relatedto their
        notifl a clientor customerthat the staff has requesteddocuments
                           is
        account.Evenif-there noformal                          or
                                     policyin place,thecustomer clientmightbe
               someinformal
        provided                            on
                            notice.Depending theconduct,           for
                                                           potential investor
            or    circumstances,
        harm, other                requesting firm disclose request
                             consider       thata not     the
                   at
        fordocuments, leastfora certain      period
                                       limited     oftime.
FurtherInformation:                                           ·                                                 :1B
·       Please see Sections 2.2.2.1 and 4.7 of the Manual for information
        Secrecy Act ri~aterials.
                                                                            relatingfo""k                       :-f

·                                                      be        tiom
        For additional information on documents that may requested broker-dealers,                              T
        and what information such documents can         contact Division's of
                                                 provide,    the        Office                                  ;1
        Market    Surveillance.




                                                       48




                                                                                      MADOFF   EXHIBITS-04546
                   3.2.5 Documentrequeststo           theNewsMedia
Basics:



      The "Policy statement of the Securities andExchange   Commission    concerning
subpoenas membersof the newsmedia"can
         to                                   be found in Title 17, Section 202.10 of the
Code of Federal Regulations.

Text ofthe Policy Statement:

                                                    tothe mission theSecurities
          Freedom of the press is of vital importance           of            and
                  EffectiCejoumalism
ExchangeCommission.                      the          effoits to
                               complements Cdmmission's
                  receive fullandfairdisclosure thelawrequires, that
ensurethatinvestors     the                   that            and
they deserve. Diligent reporting is an essential means of bringing securities law violations
       and         helps
to light ultimately todeter         conduct. thisPolicy
                              illegal     In                 the
                                                      Sfatement
Cbmmission         guidelinesfor agency's
           setsforth          the                  sta%fto that
                                        proji·ssional ensure
      enforcement federal
vigorous      ofthe            laws        completely
                       securities isconducted     consistently
with the principles of the First Punendment'sguarantee of freedom of the press, and
                                   of          to           of
specifically to avoid the issuance subpoenas members themedia might     that
    the   gathering reporting
impair news      and              These       shall     to
                           functions. guidelines beadhered
by all members of the staff in all cases:

             whether   a       toa    of      media,
(a)Indetermining toissue subpoena memberthenews   the
approach in every        case mustbe to strikethe properbalancebetweenthe public'sinterest
in the free dissemination                              and
                               of ideasand information the public'sinterestin effective
enforcement       of the federal securities   laws.

       the investigating determinesamember news
 (b)Whell staff     amatter     that    ofthe media
                  relevant
 mayhaveinformation                        the
                         tothe investigation, staffshould:
                    whether information beobtainable alternative
          (1)Determine   the        might         ~om         non-
          media    sources.


          (2) Make all reasonable efforts to obtain that information from those alternative
                                      effortshavebeenmadewilldependon the
          sources.Whetherall reasonable
                  circumstances mvestigation,
          particular        o~the                whether isan
                                          including   there
          immediate need to preserve assets or protect Investors from an ongoing fraud.

                   whether information
          (3)Determine the                 tosuccessful
                                   isessential             ofthe
                                                    completion
          investigation.

                                      be
                      cannotreasohably obtainedfiom alternative sources and·the
 (c) If the information
          is       to               then        after   approval
 informationessential theinvestig~tion, thestaff, seeking     from
 the responsible                                             Director,should
                                                  or FLssociate
                RegionalDirector,DistrictAdministrator,
 contact legal counsel for the member of the news media. Staff should contact a member
                                                                 by
 of the news media directly only if the member is notrepresented Legal   counsel. The




                                                                                     MADOFF    EXHIBITS-04547
  purpose of this contact is to
                      and
                                         whether member have
                                   explore     the                 essential
                                                      may information
  to the investigation, to determinethe interests themedia
               if                               of                  to
                                                          withrespect the
  information, the natureof the investigation thestaffshould
  needs are as well as its
                                            permits,            makeclearwhatits
                                    to        to      problems themedia.
                           willingnessrespond particular
  staffshould consult with the Commission's Office of
                                                             of        Tile
                                                    Public
                                                        Affairs,as appropriate.
  (d) The staff shouldnegotiatewithnews
  withthisPolicy         to              members their
                                 the media information counsel,, channels,
                Statement, obtain essential      or
                                                     through
                                                                consistently
                                                            informal                                         '-T
          the        ofa         if
  avoiding Issuance subpoena, theresponsible Regional Directoi, District
               or
  Administrator, AssociateDirectordetermines such negotiations
                                           that              wouldnot
           impair        of
 substantially theintegritytheinvestigation.
                                         Depending on the circumstances of
               informal     may
 theinvestigation, channels include production,
                                     voluntary           informal                                            5
            or
  interviews, writtensummaries.

     If          arenot
 (e) negotiationssuccessfUl aresolution
                                inachieving     accommodates
                                             that           the                                              r-
 subpoena, the interest information
 Commission's the   in           the interests issuing
                              and media's without a                                                          j
              staffinvestigatingshould consider
 issuanceofa subpoenafor the
                             thematter  then         to
                                               whether seekthe
            of     a        to
                                            The        principles guide
                                   information. following      should the
 determinationwhethersubpoena a member of the news media should be issued:
        (1)There should be reasonable
       essential                     to      that          sought
                               grounds believe theinformation is
                   to successfUl
                                 of             The       should
                       completiontheinvestigation. subpoena    not
             to    peripheral nonessential
       beused obtain       or           information.
       (2) The staffshould
       the information from    have allreasonable
                                 exhausted             means
                                              alternative ofobtaining
                             non-media  sources.Whetherall reasonable   effortshave
       been madeto obtainthe information   ~-om  alternative
       particular circumstances ofthe investigation,
                                                                    will
                                                            sources depend the   on
                                                    including whether there is an
       immediate   need to preserveassetsor protectinvestorsfiom an ongoing~-aud.

                        grounds believe
(f) if therearereasonable     to
investigation, reasonable
               all                        the           sou~ht
                            alternativemeans informationisessential    tothe                           :i
all effortsat negotiation                             it
                                           of obtaining havebeenexhausted,
                         have faile4 thestaffinvestigating matter         and
                                    then                  the     shallseek
              for            from
authorization thesubpoena theDirector DivisionofEnforcement.
                                     ofthe                  No                                         ':F
         shall           unless
subpoena beissued theL)lrector,               with       Counsel,
                                  inconsultation theGeneral                                            i.l
has authorized its issuance.

                         of
(g) In theeventtheDirector theDivision Enforcemenf consultation the
                                     of          after        with
GeneralCounsel,authorizesthe-
       to                    ofa      notice immediately
                   of Issuance subpoena, shall
provided theChairman theCommission.                   be

      (or member newsmedia,if notrepresented counsel) -be
O)Counselthe ofthe                         by       shall
              and
givenreasonable timely           determination
                      noticeof dhe  of the Director of the
        toauthorize Subpoena theDirector's to issueit.Dlvnlon of
Enforcement      the      and         intention                                                    .H
                                                                                                       ·-e




                                                                            MADOFF    EXHIBITS-04548
            should negotiated counselfor the memberof the newsmediato
(i) Subpoenas     be        with information. negotiations
                                              In           withcounsel,
narrowlytailorthe requestfor duly esseotial
                                          the    of            in
the staff should attempt to accommodate interests the Commission the
information   with the interestsof the media.

(1)Subpoenas
          should,     possible, directed at material informationregarding a
                wherever     be
     subject should areasonably period and avoid
limited matter, cover      limited oftune, should
                             volume unpublished They
requiring production ofa large    of                        give
                                             material. should
         and
reasonable timely      of         for
                 notice theirdemand documents.

(k) I" fheabsence special
                of                          to      of
                                    subpoenas members thenewsmedia
                        circumstances,
                                          information to
should be limited to the verificationofpublished and surrounding
           relating        ofpublished
·circumstances totheaccuracy         information.
                                 statementtoprotect
(1)Becausethe intentof this policy        is             of        news
                                                   freedom thepress,
gatheringfunctions,and news  media        this   statement notapply
                                   sources, policy       does        to
                                    information
                         or financial
demands for purely commercial                         to
                                              unrelated thenewsgathering
function.

                              may       groundsappropriate
(m) Failureto followthis policy. constitute  for      disciplinary
                                                are         to     or
action. The principles set forth in thisstatement notintended create recognize
                     rightsin any person.
any legallyenforceable
                        3.2.6 Subpoenas for Documents

 Basics:



        The Commission, or the staff it designates as officers in aformal order of
                                                   or
               may issue subpoenas fordocumentswitnesses,
 inves~tigation,                                                           to
                                                                  pursuant Section 19(c)
                                                   Acf     209(b) theAdvisers
 of the Securities Act, Section 21(b) of theExchange Section    of
 Acf and Section 42(b) of theInvestment           Act.            or
                                           Company TheCommission its
 designated                               of         deemed
           officersmay requirethe productionanyrecords          or
                                                          relevant
 material      to the        and require productionany intile
                        inquiry may their      ~om place United
 States.


  ·                                   the       be     as
                         fordocuments, staffmust named anofficer
       To issue a subpoena                                         for
                                               formal
                                intheCommission's
       purposesofan i~vestigation                                       Once
                                                    orderof investigation.
       the CommiSsion has issued a             ordei          the named officers
                                          formal ofinvestigatibn,staff as
           in the ordermay issuesubpoensis.
      documents beobtained issuing
 · Some     cannot                        arrecords
                        without asubpoenq\such
           ~om telephdri~companiesor financial institutions.
  ;- A subpoena documents
              for                       bya
                                accompanied Form
                        should,pe                     a Form
                                                1682(and 1661
           if issued to a regulated entity).
  ·                                                         provides anyperson
           Rule7~a)of the SEC'sRulesRelatingto Investigations       that          who
                                                   or testimonyin a formalinvestigation
           iscompelledor requiredto furnishdocuments


                                                  51




                                                                               MADOFF      EXHIBITS-04549
      shall, uponrequesf be shown
      also obtaina copy of the     formal ofinvestigation. person
                                 the    order             a
                                                       Such    may
      Directorsupeivisingthe      order       a written to Assistant
                              formal bysubmitting requestthe
     Asubpoena                              S,, 17   Section
                                  investigation. C.F.R. 201.7(a).
          requested should
           for
     documents (generally an
             docementscategory
                       include
                             attachment
                      by             the
                                   to subpoenathe
                                           listing
                                                      ortypeoPdocumen~.
 Further Information.

 · Subpoenasto          institutionsBuchas
                 financial                         and issuers
                                                     credit   subject
                                                 banks card are to                                                   --i
            to
   theRight Financial         Act.
                       Privacy Formore          onthis please
                                        information Act,    see
   'Section4.5 ofthe Manual.
 ·   For
           procedures~n~:h~op~~~S order, 2.4.3
                 granting forcopy
                            a   the     Section
                U" arequest of formal see                                                                            -I
· Formore         about
         information Fonns1661 1662, Section
                             and   see           of
                                           3.2.3.1 theManual.
                 3.2.6.1SeniceofSubpoenas                                                                            Ii
          Rule
      Under 8 of theSEC's Rules
                              Relating            (17
                                    toInvestigations 6.F.R.Section
      service subpoenas
203.8),     of        issuedin
          prescribed Rule
inthemanner        by            investigative
                            formal                   shall
                                           proceedings beeffected
Section201.232(c)).Rule       of       Rules         (1
                        232(c) theSEC's ofPractice7C.F.R.
the
                 232(c), states service be pllrsuant
                  through Of that Rules Practice     to
   provisions 150(b) inturn, theSEC's shall madeC.F.R.
          ofRule        (d)
Sections201.150(b)through (d))~        of      (17

          150    that ofsubpoenas effected:
       Rule providesservice     be
                              may
        !b) Upona person
                                 by    Whenever isrequiredbe
                      'epresentedcounsel.
       madeupona person represented         service     to
                                       by   who filed    of
      pursuant to Sec. 20Z.102, service counsel has anoticeappearance                                                i
      section           unless
             uponcounsel,                     be   pursuantparagraph. this
                                          shall made     to       (c)of
      Commissionthehearing serviceupon representedordered the
              or         officer. theperson     is      by
      (C)Howmade. Service
      means:                        be by        acopy filing.
                                 shall madedelivering ofthe Delivery                                            :1

                                                                                                                'r
             Personal
           (1)              a Copy
                  servic~-handingtotheperson      to        or
                                           required beserved;
        leaving a copy at the personls office with a
                                                     clerk or other person in charge
                or~        is       in
        thereof ifthere noone charge, itina conspicuous therein,
                                            leaving          place
        O~if the officeis closedoi
        the person's dwe(ling      the     to       has     leaving
                                      personbeserved nooffice, Itat
                                 houseor usualplace
       suitable age and discretion residing
                                 then     theiein; ofabodewithsomepersonof
                                                                      I,I
                 the
       (2) Mailing papers
                        throu~hthe U.S. Postal          Service by first class,
       or certified   mail or                                                   registered,
                                Express delivery
                                     Mail     addressed person;
                                                     tothe                                                  ;g


                                                                                                            :I
                                                                                                           ,4
                                                                                       MADOFF   EXHIBI-TS-04550
                    the    through commercial
           (3)Sending papers     a               service express
                                           courier     or      delivery
           service; or

                         the    by        transmission
           (4)Transmitting papers facsimile              the
                                                     where following
           conditions        are   met:


                                so     each                the
                   (i)Thepersons serving otherhaveprovided Commission  and
                            with    of           machine
                   theparties notice the facsimile             number be
                                                       telephone    to
                   used and the hours of facsimile machine operation,

                                     is                                  during
                   (ii)Thetransmission madeat sucha timethatit is received     the
                   Commission's business hours as defined in Sec. 201.104; and

                      The   of transmission has been
                  (iii) sender the                        in
                                       previouslynot served
                   accordance with Sec. 201.150 with a written notice from the recipient of
                   the transmission declining service by facsimile transmission.

          (d) When      is        Personal
                  service complete.             service U.S.PostalService
                                         service,      by
                Mail         by
          Express or service a commercial         or
                                           courier express       service
                                                          delivery      is
                 upon
          complete delivery.        by               upon
                             Service mailis complete mailing.   Serviceby
                                                           by
          facsimileis completeuponconfirmationoftransmission deliveryof a
          manually signed receipt.

                   3.2.6.2         Form   ofProduction


Basics:


             guidelines production
· Thefollowing        for              be                 or
                                 should setoutinthesubpoena in the
     cover letter accompanying the subpoena.

           all      described theattachment thesubpoena
· Generally, documents      in           to           shouldbe
            by            on          The       should
     produced thedatelisted thesubpoena. documents alsobeproduced
     to the particular staff member identified in the subpoena.

              entityor individual required produce subpoenaed that
· Thesubpoenaed                 is       to      all        items
                      cus~ody control. includes under subpoenaed
     areinitspossession,    or       This      items    the
          or          conb~olcustody, thatarenotinitsimmediate
     entity individual's   or        but                    possession.
            encouraged request
· Thestaff.is        to             production electronic
                             document        in         formafin an
     SEC         format, to include text.Electronic
         preferreci   ana         OCR                       is
                                                  productionpreferable,
             large         ~om      becauseit lesscostly, information
     especially productions entities,       is          the
       be     more      itmay the        search      termg
     may stored effiC~iently, allow staCrlo forspecific and
                  the      to            data                 the
      it mayprovide ability tag andreview moreeasily.Requesting
             inan preferred and to include OCR text also reduces
     production SEC      fo~mat                                                      costs.




                                                                                     MADOFF   EXHIBITS-04551
            · Inanelectronic
              originals ofail
                                      thesubpocnaed orindividual mamtain
                              production,          entity            must         the
                              documentsresponsive
                                            to the subpoenain the eventproductionof the
               originaldocumentsis requiredat a laterdate.

            the            entity produces inelectronic the
        · Zf subpoenaedorindividual documents
          subpoenaed entity or
                                                    format,
                                                should  the    as    as      of
                                        individual advise staff, soon possible, the
                  of document
              size the
              medium ofproduction.
                                  production,
                                            software tostore document,the
                                          the     used     the     and
              The staff may allow the subpoenaed                      to
                                                    entityor individual produce  documents in
              hard paper copies. In the event that the subpoenaed entityor individualproduces
                        in
              documents hardpapercopies, subpoenaed
                                        the                              must maintain
                                                       entityor individual
              the originals ofall
                            documentsresponsive in theeventproduction
                                                to thesubpoena                      of
                        documents required a laterdate.
              theoriginal       is        at
        ·     If copies ofa document differ in
                                               any way,they are to be treatedas separate
              documentsand the subpoenaed          or           must          each
                                             entity individual produce copy.For
              example, ifthe subpoenaed entityor       has        of      letter,
                                               individual twocopies thesame     but
              only one of them is marked
                                          with           notes,
                                              handwritten thesubpoenaed or
              individual must send both the clean
                                                                              entity
                                                copy and the copy with notes.

    ·         The subpoenaed                  shouldproduce hard copy and electronic
                            entityor individual
              documents   in a unitized
              the document boundaries.
                                               e.g.,       with    or    clips
                                          manner, delineated staples paper to identify

    ·        Thesubpoenaedentityor individual   enclose listbriefly
                                           should     a                    each
                                                                  describing item
             it has sent. The list should
                                                  the         inthe     attachment
                                            include paragraph(s) subpoena        to
             whicheach item responds.

·            The subpoenaedentityor individual     also   a                  whether
                                             should include coverlettersta~ii~g
                       it
             it believes hasmetitsobligations   the      by        carefully
                                            under subpoena searching       and
                                        or
             thoroughlyfor all documents materialsrequired
             all of the requireddocuments materials.
                                        and
                                                                   and
                                                     by thesubpoena, by producing

·            The term "document" in the context ofa
                                                    productionresponsiveto a subpoena
             includes, but is not limited
             custody or control ofthe
                                                        printed, typed
                                            to,anywritten     or          in
                                                                     matter diepossession,
                                                   entity       including, notlimited.to
                                          subpoenaed or individual      but            all
                and     bearing    ormarks found original, and
            drafts copies notations not inthe          letters                                                   :I
                       interoffice       slips,
                                             tickets, worksheets,
            correspondence, communications, records,
                   records,
            financial            documentS
                         accounting              documents,
                                        bookkeeping              reports,.
                                                         memoranda,
                telephonetelegrams, messages~ofany
            manuals, logs,      facsimiles,     telephone
                                             type,                                                               :D
                  voice      recordings, instructions, summaries,
            messages, mails~tape     notices,      minutes,   notes                                              :11
                     file    markings, anyotherorganizational purchase
            ofmeetings, folder      and                   indicia,   orders,
            informationrecorded by photograpliicprocess,
                                                                 microfilm microfiche,
                                                         including        and
            "Omputer spreadsheets, informationorstoredcomputers
                 printouts,  andother     filed      in     on                                               Ij
                 or      media,    tapes        orothenvise, can
            magneticoptical onback-up orrecordings,      which be
                     obtained,;manipulated,translated.
            retrieved,                  or




                                                                                       MADOFF   EXHIBITS-04552
·      The subpoenaed entity or              must     all           described the
                                     individual produce ofthematerials      in
       subpoena.                        the       entity        does
                       If,foranyreason, subpoenaed orindividual notproduce
       something                             the         entity
                       required bythesubpoena, subpoenaed or individualshould
            a                                           describe item
       submit listof whatit is notproducing.Thelistshould      each
                 noting:its author(s); date; its.subject matter; the name of the person
       separately,                   its
               item                      to               of
       whohas~he now,or thelastpersonknown haveit; thenames everyone
          ever         or      of           of     who
       who hadtheitem a copy if andthenames everyone wastoldthe
            contents; thereason subpoenaed orindividual notproduce
       item's      and        the       entity       did
       the    item.


·      Ifthe subpoenaedentity or individual withholds an item based on a claim of
              the of        items specify privilege
       privilege,list withheld should the              If
                                                 claimed.the
                         or
       subpoenaed entity individual           anything thebasisofa
                                       withholds     on           claimof
                                          work
       attorneyclient privilege or attorney         protection; subpoenaed or
                                              product        the          entity
                 shouldidentifythe attorneyand clientinvolved.
        individual

·       Ifany documents responsive                 no     exist   they
                                     to the subpoena longer because havebeen
                                                               oilindi?ri~uEtl·s~ouId
                                                          entity
        lost, disearded, or otherwise destroyed, thesubpoenaed
              such     andgive date which were discarded
        identify documents   the on     they loaf     or
        destroyed.

     larger   firms     and their        electronically.
· Many accounting maintain create workpapcrs
                workpapers often richsource metadata may easier
        Electronic      are    a          of      and be      to
        navigate than hard copies. Firms may raise concerns about producing electronic
               and
                 other documents, tointellectual rights what
        workpapers audit     citing          property in
        they view as proprietary programs. The staff does not necessarily agree with the
              but                  may                 approaches as
        Concerns as an accommodation, Co"ideralternative        such
               production production a dedicated computer.
        Web-based      and        on           laptop   These
             may         ona          basis       whether
        requests beevaluated case-by-case todetermine analternative
        approachis appropriatein your investigation.

    Further     information.


           refer       about     of       to       Unit.
    · Please anyquestions theform productiontheTrial
            infdrmation privilege seeSection
    · Formore        on         logs,             of
                                           3.2.6.2.4 theManual.
                  on         for       production, Section
    · Forinformation theformat electronic       see              of
                                                         3.2.6.2.3 the
         Manual.


                 oncertifications
    · Forinformation                     ofproduction,Section
                              ofcompleteness       see      3.2.6.2.6
         of the Manual.


            information when howtorequest
    · Formore        about and                 workpapers,
                                       electronic      please
         contact the Chief Accountant, Division of Enforcement.




                                                                                      MADOFF   EXHIBITS-04553
                                Accenting ofCopies
                          3.2.6.2.1 Production
       Basics:


                   staff allow
                 The may asubpoenaed
   theoriginal
             documents by
                      required           or       toproduce    o~
                                    entity individual photocopies
                        these asubpoena
   documentsshould folloW guidelines:            productions
                                        Acceptable of     photocopied
                         must
                 Thecopies beidentical                                                                                i$
                                                           including faint
                                               fotheoriginals,    even marks print.
                                                                           or
                        entity
          ·· Thesubpoenaed or
                     of document
                 page each                  should
                                    indicate itwas an        notation
                                  toindividual put identifying on
                                          that                      each
                            and     the
                 orindividual, number                   bythe
                                                 produced subpoenaedentity                                            d
                        ifbne sends
                 example, Doe documents           documents
                                           oTall staff,
                                       pages tothe she submitted.
                                               the               (For
                        JD-3, ina blank
                 i, JD-2,   etc.,                                                  the
                                                                          may-number pagesJD-                         a
                          entity
                 Subpoenaed or                      of           However,
                                               corner thedocuments).  ifthe
                                      individual
                          entity
                 Subpoenaed or                 the
                                           sends
                                      individualstafforiginal notations.
                                                not any
                                           should add identifying
                                                                 the
                                                          documents,
                    entity
        · Thesubpoenaed prindividual
              "Otconceal writingO'
                       any                      make the   and    do
                                         should sure notation number
                                marking on the document.
                     photocopy
        · Inproducinga      ofan
          "Otation orother
                flag(s)~        original  that    post-it(s),
                           removable documentcontains
                                    contained orattachments may
                           of markings markings
              allora portionthe                         which conceal
              oftheoriginal    both and i"the
                         document with             document,
                                             original      photocopies
              flag(s),removable dr
                    or       markirl~s      the      post-it~s),
                                       without relevant      notation
                                                          should produced.
                                                 attachments    be
Consi_derations:

                      photocopies
             Inproducing      ofthe
individual
                 Shouldbe aware that:                copies, subpoenaedor
                                               original the         entity
           cannot
    · TheSEC    reimbursethe
             except in                             or
                                    subpoenas. entity    copying
                                                       for
                               ofRFPA subpoenaed individual costs,
                         thecase
   ·         The subpoenaed                                                                                     _B
                       orindividual
          documentsc"tity subpoena
               responsive
                      tothe    must the       all
                                inmaintain of copied
                                        originals
          the original documents                        a         in       production
                                     iS required at alatersafeplace theevent
                                                          date.
                                                                                   of

  ~ Ifitappe~s
            thataphotocopyofarl
                                                                                                                Ij
         Odginaldocument               may          the
                          originaldocumentnotrepresent
                              in
                                   its entirety,whether by
         :                         erroneous                 meansofpost-it(s),notationnag(s),
        'equest the originaldocument               or other   the should
                                             copying,any reason, staff
         'epresents                  SO the can that photocopy
                   the origioaldocumei;t fhat staff verify the
                                         'Its
        contained within.                In entirety,including
                                                                         ofthe
                                                                        all markingsr

                                                56




                                                                                            MADOFF   EXHIBITS-04554
Further Information:

            refer questions the
        Please any                    ofphotocopied
                         about production             responsive
                                                documents
        to subpoenas to the Trial Unit.
    more      concerning stampingphotocopied
o For information     bates    of                please
                                         docllments,
        see Section 3.2.6.2.2 of the Manual.

                     3.2.6.2.2   Bates Stamping

Introduction:


     Bates      (also  as  numbering coding) tothe
          stamping knownBgtes    orBates  refers use
          numbers and marks       and     asthey
ofidentifying ordate time onimages documents are
scanned or processed.

       Bates stampingis commonlyusedasan organizational        to
                                                        method labeland
identify documents. Marking each document witha uniquenumberis a usefultool both
at the investigative stage and                  and       an        and
                                     in Litigation provides efficient clearwayto
       documents therecord testimony depoSitions.
identify      on         in        and
Basics:


·       Bates stamping assigns a unique           to page              or
                                          identifiereach producedreceived   during
        the course of an investigation or           Such            may
                                          discovery. numbering besolely    numeric
        or may contain a combination of letters and number (alphanumeric).

 ·      Althoughthere is no standardmethodfor numbering         thebest practiceis
                                                       documents,
         to place an           notation page   documenttoindicate
                       identifying oneach ofeach    (1)        the
         source   of the         and(2)     the of the       submitted.
                           production tonumberpagesall documents
         In cases of multiple    productions
                                        bythesame      a          date
                                                  sourm, production (mm/dd/yy)
         may be stamped             to         used        the     of
                           inaddition theletters to identify source theproduction.
         For several productions                   the         is          the
                                 fromthesamesource, bestpractice to continue
         numbering fi-omthe previous production.

             and    should conceal writing marking
 · Thenotation number    not    any      or           doculrlent.
                                                 on:the

    ·    Manual Bates stamping involves the use ofa self-inking stamp with six or seven
         numbered wheelS that      automaticallyincrement the stampis presseddown
                                                    eachtime
         on a page. Preprinted,           labels can also be used, as well as electronic
                              self-adhesive
               discovery software can
         document      (EDD)                    stamp     stored
                                that electronically documents
                 files         numbers      All
         ascomputer bysuperimpdsing orthem. produced documents
              be     and         sta~npedtheyareimaged.
         should imaged, canbeBat~s     as




                                                                                   MADOFF   EXHIBITS-04555
          O Ifdocumentsare
                                  producedalready therenoneed Bates
            thema secondtime,unlessthe       stamped, is
                                          Bates             to stamp
                                                 Bate    isduplicated other
                                                                    in
              In thatcase,thebestpractice existing stamp with sequence.
                                        is toBates
                                                 stampthem new
                                                                          documents.

                                Format      Production
                         3.2.6.23 forElectronic            tothe
                                                   ofDocuments SEC
         Introduction:

                                      to
                  Thestaffis encouraged request      production electronic
                                              document        in         format.
                 information,
        Documents,          and
        scanned         (2)      or
                                       dataproduced    may           as:
                                            electronically bedelivered (I)
              collections; e-mail; (3) native              for
                                            files.Theformats thesetypesof
               should        toparties to produce
        productions becommunicated wishing            documents,                                                       'i
                anddata
        information, electronically.should accept
                                Staff    not             production
                                                electronic       of
              and         inany
        documents information format thanthese formats
                                  other      three   (including
        databases)withoutpriordiscussions approval
                                    with,and     ~-om~
        Basics:
                                                                     the Division's ITstaff.
                                                                                                                   ii
            Staffshouldrequestthateach
                                            party producingdocumentsand other information
            electronically          each
                          organize submission                Producing
                                                 by'custodian.             should
                                                                     parties     also
            provide a summary of the numberofrecords,
            production so that the
                                                     images,      and          in
                                                            emails, attachments the
            ontotheSEC'scomputer
                                   staffcan thatthecomplete
                                          confirm
                                     system.
                                                                        has-been
                                                               production      loaded

    ·      The SEC
                     currentlYConcordance andOpticon toreview
                           uses        8~2         3.2      electronic
                 collections. electronic
           document       All         productionsbe compatiblewiththese
                                             should
           software systems.

·          Data can be delivered
                                    CD,  or drive. smallest
                                   On DVD, hard
           preferred. Ifthe collection is
                                                 The         of     is
                                                         number media
                                    enough fitontoa harddrive, SEC
                                large    to                  the  can
                 one           party,
           Provide totheproducing if needed.
·         For scanned
                         collections,
                         text each
                               (c)opticalfile contain components:
          file; delimited file; scanned must
              (b)                       character    four           (a)image
          cross-reference ForfUrther
                      file.                             (OCR) (d)opticon
                                               recognition    text;
                                   explanatjon otherinformation therequired                                   :3
                                             and              about                                               if
     components, contact Division's staff.
: four      please    the        IT
          For electronic e-mail
          preferableto
                            productions, are several formats available, it is
                           the
                                       there
                     request producerofthe load
                                                                      but                                         j
                    and
          0' database convert theminto            to them a central
                                             e-mails          into        iepositary
                            allowssearchable that compatible its
                                          format is
         Concordarlce. method aforthestaffto runitsownsearcheswith own
                   This                                      using
                                                                                                              .;1
         search terms on the
                                        ofe-mailsrequested.
                               population
                                              electronicall
              O Thepreferred formatfor receiving
                                                               Y-produced email is delimited
                               and
                  textwithimages nativeattachments.                                                               B




                                                                                       MADOFF   EXHIBI-TS-04556
                   o     The staff may alsoaccept the following formats for electronic production of
                         emails:


                                 ·        PST - a personal storage file native to Microsoft Office Outlook.

                                 ·        NSF - a personal storage file native to Lotus Notes.

                  o     The       staff     should   include   the   data   standards   described   above   in their   document
                        requests to ensure that the format of produced                      e-mails is loadable into
                        Concordance and that. the most relevant data fields are captured; If the
                        producer of the e-mails wishes to negotiate alternative.delivery standards, the
                        staff should contact Division IT staff so that they can participate in the related
                        discussions.


·       Native files should be produced with an ASCII delimited file containing the media
        associated with the files, text extracted fi~omthe native file, and a directory path to the
        native         file.


·       A subpoena or document request should include the standard specific guidelines and
        instructions containing technical criteria to follow for producing documents
        electronically               to the SEC.

Further           Information:


                  For information on any aspect ofe!ectronic production, please consult the
Division's             IT staff.


                                 3.2.6.2.4 Privilege Logs



        With respect to each document that has been withheld from production on the
grounds of any privilege or protection, the staff should request that a detailed privilege
log be produced at the same time as the responsive documents. A failure to provide
sufficient information to support a claim of privilege can result in a waiver of the
privilege..
Considerations:




    Please keep in mind the following considerations when requesting and reviewing
privilege logs:

       ·          Document requests or subpoena attachments should contain the following sample
                  instruction:


              yany reguesred documenl is withheld, please submit a lisCofalI such documents
              fhatprovides_ (a) the identity andposirion of the crearor(s); (b) the creation dare,
              (c) the present or last known custodian; (d) a briefdescripfion, including the




                                                                                                                        MADOFF    EXHIBITS-04557
          subjectmatter; (e) the identityandpositionofallpersons or entitiesknownto
                         the     or                   or        ofirs
          havebeenfumished document a copyofrhedocument, informed
                         the                   is
          substance; Cf) reason the document not beingproducedand (g) the specific
                                                    relates.
          request in the subpoenato whichthe document

      ·   After. the initial production is received, the staff should ask for written
                    that          materials beenproduced thatany
          confumation all requested       have         and
          documentwithheldbaseduponan assertionof any privilegehas beennoted in the
          privilege log.

      ·                           reviewthe privilegelog to determinewhetherthe
          The staff shouldcarefUlly
          privilege has been properly asserted.

      · Thestaffshouldobtain         information
                            additional             entriesin theprivilege
                                               where                    log
          ·are incomplete or do not otherwise provide sufficient information to determine
          whether the privilege has been properly asserted.

      ·   If a documentary                                     the
                           privilegeis assertedduringtestimony, staff shouldstay on
          the record. The staff shouldexercisecare wheninquiringinto potentially
          privilegedmattersby makingclearon the recordthat they are not intendingto
          obtainthe disclosureof confidential communications betweenattorneyand client.
          However,the staff shouldindicateon the recordthat they intendto establish
                                    for
          whetherthe predicateFacts the assertionof the privilegeare present.
                  3.2.6.2.5   Business   Record   Certifications

Basics:



     At the time a companyproducesbusinessrecords(e.g.,telephonerecords,bank
     account statements, brokerage account records), the staff should simultaneously
     obtain ~om a custodianof recordsor otherqualifiedpersona declarationcertifying
     that the documents are records of regularly conducted business activities.
                                                                                                                     j


                                                                                                                   :1
     under Rules 902(11) and 902(12) of the Federal Rules ofEvidence. A certifrcation
      also the for        bythe     inan
    may avoid need testimony custodian administrative
    proceeding.                                                                                                    i.d




                                                                                        MADOFF   EXHIBI-TS-04558
Sample Certification:

IFOR DOMESTIC U.S. RECORDS]


              DECLARATION OF [Inseri Name] CERTIFYING; RECORDS
               OF REGULARI~Y           CONDUCTED        BUSINESS     ACTIVITY

                          [insertname],pursuantto 28 U.S.CI~~
        I, the undersigned,                                 1746,declarethat:

        I.                                 ofcompany]as lin;Ferrposition] by
                I am employedby [inserrna~ne                            and
                reason of my position am authorized and qualified to make this
                declaration. [if possible supply additional information as to how person
                 is qualifiedto makedeclaration,e.g..~am custodianofrecords. ~am
                                          's                      or
                jirmiliarwiththe compa~q, recordkeepingpraclices. Jystems,   etc.]

        2.                       that
                I fUrther~certify the documents [attached hereto or submitted
                herewith] and stamped [insert bates range] are true copies of records that
                werel



                                                            of
                (a) madeat or near the time of the occurrence the mattersset forth
                        therein, by, or from information transmitted by, a person with
                        knowledge of those matters;

                (b) kept in the courseof regularlyconductedbusinessactivity;and

                (c) made by the regularlyconductedbusinessactivityas a regular
                        practicer



                                                     is
    I declareunderpenaltyof perjurythat the foregoing true and correct. Executedon

    [date].




                                                                 [Name]




                                                                                         MADOFF   EXHIBITS-04559
   FOREIGN
FFOR     RECORDS]


                 OF
        DECLARATION [Inse~    CERTJIFYING
                          Name]        RECORDS
                    CONDUCTED
         OF REGULARLY              ACTIVTrY
                            BUSINESS
                   Cinsert
   I, theundersigned,        declare
                        name],      that:

   3.        employed name
          1ant                     aslinserlposition]
                  by[insert ofeompany]          andby
                of        am         and       to
          reason myposition authorized qualified make.this
         declaration.
                                suppIy       information how
                        [il~possible additional                is
                                                     a~to person
         gualiJiedto makedeclaration,e.g., ~am nrstodian ofrecordr, ram
                              ~F
         familiarwiththecompany 'ecO'dReepingpracticessystems,
                                                   or        etc.l
   4.            certify· the documents[atrached hereto or submitted
         I fUrther      that
                and     [inrerr rangel true
         herewith] stamped bates
         were:
                                              of     that
                                     are copies records

         (d) made at or near the time of the occurrence of the matters set forth
                        by,    infonnation
                 therein, or~-om                  by,       with
                                         transmifted a person
                         ofthose matters;
                 knowledge

               in course regularly
         (e)kept the  of              business and
                                conducted activity;
        (f)made the         conducted activitya regular
                   by regularly
           practice.
                                  business as

  5.                that
        1understand a false statementin this declaration could subject me to
        criminal penalty underthe laws of[coun~y declaration signedJ.
                                               where              is
        I declare under penalty
                                  ofperjury under the laws of the United States of
  Americathe           istrue correct.
            that foregoing and
  execution].
                                        on      at    of
                                   Executed[date] [place



                                               INQme3




                                                                            MADOFF   EXHIBITS-04560
                      3.2,6.2.6. Confirming Completeness ofProduction

Introduction:


           When recommending that the Commission accept a settlement offer firoman
       or                        to                             as
-entity individual,it is important obtainan executedCertiftcation to Completeness
of Document Production ~om the settling party. In the Certification, the settling party
acknowledges that the Commission has relied, among other things, upon the
completeness ofhis production.

Basics:


                          must
     A settlingindiv~dual declareunderpenaltyof perjurythat he or she has made a
                                                        custody,or controlthat are
     diligentsearchof all files in his or her possession,
     reasonablylikelyto containresponsivedocumentsandthat thosedocumentshave
     either been produced or identified in a privilege log.

·    The Certification applies to SEC subpoenas, documents requests and requests for
     voluntary production ofdocuments.

·    In the case of an entity,the Certificationshouldcontainsimilarlanguage,but require
                      to
     a representative declarethat he has madea diligentinquiryofali personswho
     reasonably had possession of responsive documents, and that those documents have
     been produced or identified in a privilege log.

                3.2.6.3 Forthwith Subpoenas in Investigations

Basics:


        A forthwithsubpoenamay be issuedwherethere is a reasonablegood faithbasis
                                               or
for believingthat thereis a risk of destruction alterationof the documents.A forthwith
subpoenademandsproduction      "forthwith." For example,a forthwith subpoenamay be
issuedif there is a danger.that                            or
                               documentswillbe misplaced destroyedunlessproduced
immediately.

                                                     in                    staff
           Thougha forthwithsubpoenamay be appropriate certaincircumstances,
should be aware that courts have raised concerns regarding its use. For example, some
courts have not condoned the use of forthwith subpoenas (Consurner Credit Ins. Agency,
inc. v. u.s., 599 F12d770,774 (6" Cir., 1979)),whileothercourtsthat have upheld
                                                        use
forthwithsubpoenashave cautionedagainstindiscriminate (Won~Sunv. U,S., 371 ·
u.s; 471, 83 S. Ct. 407 (1963)).

Considerations:


       Staff shoulduse forthwithsubpoenassparingly,whenthere is a reasonablegood
faithbelief that a subpoenashouldrequireforthwithproduction.A reasonablegood faith




                                                                                MADOFF    EXHIBITS-04561
         basis for issuinga forthwithsituationmayinclude
                                                       seeking           ~orn
                                                              documents an individual
         or custodian(l) that is uncooperative obstructive, thatisa flight and(3)who
                                              or         (2)             risk,
                   alter         falsiflrecords.
         maydestroy, or othercvise
         FurtherInformation:

                if the staff is concerned that thereis a riskofthe destruction alteratiod
                                                                             or         of
        documentsthat the staff intendsto subpoena, staffshould
                   to
        immediately ascertainwhether              the                with
                                                               consult theTrialUnit
        under the circumstances.                   a        subpoena beappro~riate
                                             issuing forthwith     would

               3.2.6.4          Investigative
                      Maintaining          Files
        TheBasicRe~uirement:

               The
        completeness,
                     PrivztcyAct'eqllires maintain '~ithaccuracy,
                                    the
                                 that SEC       records
                      timeliness,and relevanceas is reasonably necessary to assure fairness to
                     in
        the individual the determination."5 U.S.C.Section552a(e)(5).
    Other R easons Maintaining
                 for                     Files:
                             investigative
                                maintain
           Followingprocedures:to
                                                files
                                     investigative helps       that
                                                          ensure anylossofor
                to           offices, or equipment causeminimal
           damage theDivision's     files,           will                    to
                                                                    disruption
           the work ofthe Division.
              in      management
    · Uniformitydocument              helps     information
                              practices facilitate       sharing
          anii limit loss ofinformation associated with staff turnover.
    ·                            files ina systematic increases likelihood success
          Maintai?inginvestigative                 way       the         of
                    Investigativeneed beproperly
          inlitigation.      files to         maintained so they can be shared                                    :r
                               agencies.Rule 30-4~a)(7)of the SEC's Rules of
          withotherlawenforcement
                     delegatesto the Director
          Organization
          grant access requests to the SEC's
                                                                of         authority
                                                    oftheDivision Enforcement      to
                                                        enforcement regulatory
                                               non-public        and         files. An
               grant    provides
          access generally           to      both      information
                              authoritydisclose existing        and
                  in future entities Rule of
                   tile to
                         those     in      the
          ~xf~ma~~P~t~4uired listed 24c-l(b)
The Basics ofMai
                 -                     UV~LIIILC;LIL~:
                        --~-~ h VLlh··I~CL
·        Originaldocum~ts
                              received.bywhether
                                    thestafi;        orthrough
                                              informally     subpoenas,
                  ~om notes,
                    personalcopies e-mails,any
         ~h~uuf~ebn~ss.egregatedafintemal or other
  Original documents   should in      conditionno
· altered for any reason. bekeptpristine              should.be
                                            and documents                                                         c~
    the documents additional (e.g.,they ~om
· In event andrequire
  foreign government are
                                   if
                         protections come a
                                        not supposedto be transmittedpursuantto an access
         'equest), they should be   keptseparate   and well marked.




                                                    64




                                                                                     MADOFF      EXHIBITS-04562
                       Files:
The Basicsof Maintaining
                                               a system handling
· . Whena MUI is opened,the staffshould implement     for      originals
      and hard copies            including, notlimited correspondence,
                        ofdocuments,     but         to,
                                       productions. more
      subpoenas, and third-party document                    regarding
                                                CEor information
      Document         see
               Control, Section          i
                                  3.2.6.4. of theManual.)
·     When a M~n is opened, thestaffshould       Enforcement staffto setup
                                           contact        TT
                                          shared drive for the case. This subdirectory
      specific               on
                sub-directoj Enfor~ment's
      will follow Enforcement's        "template," willhave "toplevel"
                                standard         and            four            or
                                 Actions
      main folders: (1) Commission              final·versions action
                                       (capturing           of
      memoranda, Commission Orders,        etc.);              (3)
                                   Releases, (2)Investigation;Litigation;
                                                             of        Enforcement
       and C4)Colle~tions (which are in orderof theprogression a typical
                                      have           of
      case). Eachof thesefolderswiII a number sub-folders,         including subpoenas,
                                                etc. Staffshouldkeepall electronicfiles
      document production logs, data, contacts,
             by consistent theinvestigation's
       requiredand     with              "tempLate."
Using Shared Drives.
              should
          Staff          work    (e.g.,    internal
                   maintain product subpoenas, memoranda,
                                          in electronic form, and documents
                                    provided
                pleadings),
    chronologies,         transcripts
    produced thestaffinelectronic on shared
           to                   form              drives.


    Maintaining Intemet Documents:
                                                     evidentiary
           During the course of certain investigations,             may
                                                               issues arise
                         ar;d                    documents,
                                  ationof Internet
    concemu~gauthentication preserv                                 pertaining
                                                         particularly
    to pagesfiomtheWorld                                  may,
                                WideWeb.Websitepublishers atanytimeandwithin
    seconds, edit, alter, or even remove
                                                   of
                                         thecontents theirWebsite. Upondiscovering
                                                             take
                                                       should steps'to
    relevant evidence on a website, the staffirnmediate~y                     each
                                                                       preserve
           relevant page. information topreserve site
    individual Web For            onhow       Web evidence,
    see Section 3.2.6.4.2 of the Manual.

            Electronically Information
    Preservine         Stored       ("ESI"):
                                                     investigations.For further
           Stepsshould takento preserve in enforcement
                      be              ESI
               on               ofESI, SeeSection 3.2.6.4.1.2 ofthe Manual.
     information the preservation

          Co         PertainingtheBank
     SDecial .derations      to             Act
                                      Secrecy ("BSAI):
               BAS           such
           ALL information, asSuspicious          Reports
                                            Activity        Currency
                                                       C"SARs");
     TransactionReports~CTRs") and       Transaction byCasinos
                                   Currency       Reports    ~CTRCs");
           of
     Reports Foreign               Interests
                     BankandFinancial               Reports Intenlational
                                            ~FBARs")l     of
                  of       or
     Transportation Currency Monetatiy         ("CMIRs"); Reports Cash
                                      Instruments      and       of
     Payments Over        Received or       is     confidential must
                     $10,000 inTrade Business,highly        and
     be segregated labeledas sensitive. Stepsmustbetakento avoidinadvertent
                  and




                                                                                MADOFF    EXHIBITS-04563
               ofthese
     dissemination documents
             For
     documents. fUrther              disclosure existence
                         orinadvertent ofthe          ofthese
                            see    information,
                                      2.2.2.1 4.7
                               Sections and oftheManual.
                                       Document
                               3.2.6.4.1     Control
     Basics:


                      good
                         document
           InimDlementing managemer~l
    or litigation, ~staff have
                the should a
                                       and
    and keeping            Sbuctured control labeling,
                trackOfdocuments, and
                              should consistentforaninvestigation
                          which indicate:
                                             during storing,
                                           system                                                       ;I
                   respondents,
        · whatciocuments
        ·                             witnesses,     have
               when they P'oduced documents; ordefendantsproduced;
                                the
        ·      in responseto what
        ·;     whetherthe                        or
                                        subpoenainformal       and
                                                         request;
                             response    to the
                                                      or     is
                                                subpoenarequest complete.
        TO
         that following general
   follow: end,     are
                      some          that staffsi~ould
                             guidelines the       st,;ve                          to




            to
      Subject theconsiderations
               either discussed all
                                  hard-copy should
          stamped,by party below,or, produclionsbe
      bates onbates Uie producing ifnot,bythestaff.Formore
      information stamping,   them,
                                                     3.2.6.2.2 theManual.
                                            seeSection       of
                    pro~-duction,
     Ifitisanelectronic    itis
                     iLmpOrtant issues ~ontwith
            parfy, the              labeling up
                             toaddress
     producing before documents
         the                      For
                                  Section ofon
                      a'e produced. more
                      dacume,ds,information the
           electronicof
     ~u~lfor production see 3-2.6.2.3         the
       Track
 I(eepina ofDocuments:
                 index
    Thestaffshould
                    all
                      documents includingreceived
                            affer
    production, transcripts, receipt~ those in
            testimony
    sholild savedon
           be
                          documents
                 theappropriate mvestigatibn'sEachindex
    Enforcement's drive.
              shared
                                 senttooff-site
                          sub-folder
                                  i"the
                                              storage,
                                                    etc.
                                                   folderon
                 maintain
    Thestaffsholild
                      etc., ofsubpocnas
   tile testimony logs~dexes
      sta4~   transcripts, the
                         on            documents to
                                   issued, produced
   theDivision's   drive.
              shared                                          sub-diiectory on
                                                  I"vestigation's       located
                            ofD_ocuments                  ·                                       ,i
      Some "best practices," which
andmaintaining
             documents
                                              helplill follow
                                             be     staff
                                           ~Ould for to when storing
                                  a matter, clearly documents,
                                forgiven include labeling




                                                                             MADOFF    EXHIBITS-04564
          privileged
segregating               from      produced thirdparties,
                   documents documents     by            and
labeling/indexing documents to be stored off-site.

Use of Documents


                     shouldnot be usedfor any reasonexceptas necessaryto present
     Originaldocuments
evidence in court or at a hearing. Therefore:

              documents
     · Original            not              copies."
                     should beusedas "working      Theyshouldnotbe
                                                     (exceptfor batesstamping).
           markedor alteredfromtheiroriginalproduction

     ·     The staff should make a copy ifhe/she needs to work with if mark it up, or
           introduce it as an exhibit in testimony.

     ·              data                                                      a
           Electronic can be printedout or loadedonto the shareddrive,'ivhichTs
                   created
           specially          to    larger
                         queue accept             ofdocuments, whichthe
                                         quantities         with
           staff can work. The staff should keep an original, clearly labeled version of
                              (CD or otherwise) is not used for investigative
           electronicproduction               that
           purposes.


Further     Information


           The staff should also consult with trial counsel regarding any concerns regarding
the fUture use of documents in litigation.

                       3.2.6.4.1.1 Document Imaging in Investigations

Introduction:


                                      withthe SEC's Officeof Information
           The Division,in coordination                                Technology
                    a       to    evidentiary
("01~), hasimplementedprogram image                 in
                                            documents investigations.
The SEC's Electronic Documents ("EDOCS") program consists of two data management
        the        Production
projects: Electronic              and         Lnaging
                            Project theNational     Project.
           TheElectronicProduction              the     of
                                  Projectinvolves Loading evidentiarymaterials
   Division into application Concordance, allows~a;thorized
~-om      cases an        called      which
staff to retrieve and view the documents. The National Imaging Project provides data
back-up and disaster recovery for the program. It provides forthe removalofvoluminous
          documents DivlsionpremisesHeadquarters theregional
evidentiary       from            in          and          offices.
OIT, in consultation with the Division, manages the Electronic Documents program.

Basics:


                                   need
            Whenevidentiary:documents to be imaged,the staff shouldsubmita request
                        Management
            to a Document                  ~DMA"), includingthe following
                                  Specialist




                                                                                     MADOFF    EXHIBITS-04565
                       (l)casename; location documents casenumber;
             information:         (2)      of       (3)         (4)
                     (5)             party,                  or
             priority; source/producing and(6) anyinstructions otherspecifics.
          · TheDMAwill        the
                       confirm information,      any        preparation the
                                           conduct additional          of
                    and            to
            documents, eitherarrange havethedocuments     onsiteor outsource
                                                     imaged
            the imaging to a designated outside contractor.

      ·     The DMA will send email notification to the appropriate staff, which will provide
            the necessary confirmation information;

      ·     The documents will be scanned by the requested date, and will be hand
                    to                 into
            delivered theSECforloading theConcordance         shortly
                                                       database     thereafter.
                              notice
            Thestaffwillreceive                  process beencompleted.
                                    whentheimaging     has
      ·     If the staff requests return of the documents, the imaging processing center will
                                  for                  wheretheywillbe storedin a
            firstretainthedocuments 45 daysafterreceipt,
            secured,limitedaccessarea so that randomqualityassurancecheckscan be done.
                   if               that      return the documents, will
            However, thestaffrequests immediate     of           they
            be returnedafter the scanninghas beencompleted.

            staffdoesn't
      · ISthe              the     ofdocuments, documents beshipped
                      request return        the        will
            to the Iron Mountain                                                     and
                                storagefacilityafterthe 45 day period,aridconfirmation
            tracking-information will be sent to the staff.


Further Information:


           Please contact the Division's fT staffer OIT for fUrtherinformation on document
imaging.

                       3.2.6.4.1.2   Electronic   Files

Introduction:


      Theprocedures          below
                    discussed provide            and            on the
                                          guidance suggestions how
       staff
Division should           files
                  maintain andrecords produced in electronic formats during the
course       investig~itiods,
      ofttleir                           strive        and
                          Thestaffshould tomaintain preserve        all
         files       ~om
electronic received outside     parties anorderly
                                      in         manner        the
                                                        during course     of~
                  and      not             media files.
theii investigations should altertheoriginal   and
BaSics:


                            production information formoPCDs,
           Thestaffmayreceive        of          in.the     DVDs,
         audiotapes, other
videotapes,       and    electronic
                                 media,
                                      duringthe    of
                                              couise itsinvestigations.                                          .i
        are           to
Following bestpractices follow          of                   media:
                              uponreceipt anytypeof electronic




                                                                                       MADOFF   EXHIBITS-04566
          have       made           technician. staff
   · First, a duplicate bya qualified                 consult
                                             The should
         with the Division'sIT staff to determinewhichtechnicianshouldduplicatea
         particular medium.

              the of          contained theelectronic
   · Nexfverify type information      on                in
                                                   medium order
         to determine the best way to work with the files.

             o    TextFiles: information theformoftext thestaff :
                          Iftl~e     isin           files,    will
                        an          Data       Form"            the
                  complete "Electronic Submittal andwillsubmit form,
                      with
                  along theduplicate      to            teclmicianOTT
                                    medium, theappropriate      in at
                         Office, willloadthecontents theduplicate
                  the Home     who                 of           medium
                                     server. Boththe originaland duplicatewill-
                  onto the Home'Office                                        be
                         to                        produced theelectronicfile
                  returned the staff. Theinformation      as                will
                              to'the staffvia Concordance on the duplicatemedium.
                  be ac6essible                         and

              o Audioand VideoFiles: If the electronicmediumcontainsaudio or video
                       the may a
                  files, staff have transcript        of
                                               prepared each        recording.
                                                            duplicate
                              should
                  Thetranscript           the     of           (e.g.,
                                   identifjr source therecording meeting,
                                        each      the
                             newsvideo), speaker, speaker's
                  presentation,                                     and
                                                            location, the
                                         recording made.Thetranscript
                  datesandtimestheoriginal       was                 should
                             the                who     it,
                  alsoidentify nameof theperson prepared thedatethe
                          was       and            sufficient describe
                  transcript prepared, anyinformation      to        the
                  specificmedium(e.g., disc,tape)transcribed.The original and duplicate
                  will be returned to the staff.

    ·    Maintain all original files in a secure central location within each branch and the
              chief    to              should          custodian
         branch assigned theinvestigation bethedesignated      of
         the originalfiles. Originalfilesshouldnot be useduntil necessary at trial or
         similar proceeding.

     ·   Create and maintain a log for each              file.
                                                   original      In the event an original file is to
                  from             location, staffmember
         be removed itssecurecentral       the                the
                                                       removing file
         shouldsign the log and indicatethe date and time the file was removed, as·well
         as the date and time the file was returned to its secure location.

         staff access electronic ontheduplicate itself may
    · The may       the       files          copy and also
               to   a     of         recording thecase onthemaster
          choose load copy theduplicate      onto     file
              of         computer
          drive itsoffice's              The shou~d theduplicate or:
                                  system. staff     use         ftles
                   and       original ortranscripts, theinvestigation
          transcripts, notlthe     files         during           and
          discovery phase oflitigation.

Considerations:


           staff keepmind original
         The should in ihat filesmayultimatelybe avoid at trial or
                                                 used
                                                        any
      a      litigation
during similar                  Thus,thestaffshould stepsto
                      proceeding.                 take




                                                                                           MADOFF      EXHIBITS-04567
                                                                   ~,I, ^-^___~_
      possible alteration to original electmnir. filps ~lrh;rh..~;II           ,I       ..
   of its investigations.                                        1,1 t~lt;~t;rvt: Integrityot all
                                           ----- --t--l ····~vll*r ~l~lr      Lne

  Fult~L~fo~L~:
  · Pleasereferanyquestionsabout
                                      receiving, storing, disposing electronic
          filesto Enforcement's stafferOIT. using,
                             IT                        and        of,

  ·       For
                fUrtherinformation~ntu~ner 3.2.6.4.3.1
                          regarding   please Section
                   'nIormatlon audiotapes, see       ofthe
  · .For further information on the format for el~Trtmnir  nrr\rl·l,~:,,, ^I^^__ _ n -.·
     3.2.6.2.3 of the Manual.            - --- ------u···- r~vuu~uulla,;         see
                                                                          ~t~lt~ast: 3ecI1on



                              ComplyiogFederalRule Procedure
                        3.2.6.4.1.3 with       Civil
                                              of         26(a)                                           j
                                            and         Evidence Anticipation
                                   Requirements Yreserving    in
                                   oflitigation
 Basics:



                Fed.RCiv.P.26(a)(l) requires SEC make
                                           the  to        disclosurestheonset
                                                    certain        at       of
          Additionally,SEC requiredconducta reasonablesearch, documents
 litigation.       the is        to                         of
                    custody, control order respond discovery
 withinits possession,     or       in    to     to        requests
 pursuant to Fed.R.Civ. P~ 34. Failure
                                         documents
                                to produce            discovery result
                                                 during       can
        including
               order the
                       SEC using documents
 $is~l~ns, an precltrding~om ttlose   as
       Ways      Compliance:
 S--~ple to Ensure
            Creating and
theinvestigative
                                  anaccurate lisr d~cumenr will
                           maintaining contacfand
                 staffeffectively a complex
                              manage
                                                       index help
SEC's trial attorneyswhen                             and     assistthe
                                          investigation greatly
                                 initial     pursuantRule
                         compiling disclosures       to          and
                                                          26(a)(l) in
        to        discovery
respondingsubsequent     requests.
      list         list
Contacr - Thecontact shouldincludename,addressand
                                the                     number
                                                telephone    of
            likely  discoverable
eachindividual tohave         information.
Documentindex- The document
                                             include
                                    listshould               electronically
                                                   alldocuments,        stored
          arid      things
 information, tangible ~documents'3 obtains its
                                   that staff
·investigationprovide least following: the
           and      at    the                 during                                                'I
                                                                                                    i.j
                   of           bycategory;
      · A description thedocuments
      ·           of
           Location thedocuments;                                                                   i$




                                                                                          EXHIBITS-45
                                                                                      MADOFF
     ·    Identity of the party that produced the documents;

     ·    Identification of the request/subpoenaand correspondence relating to the
          documents;            and

     ·    Bates numbers, ifpossible.

Considerations:


         Since the investigative staff may receive electronic production or scan a paper
                           database,once the documents uploadedinto
productioninto a Concordance                         are
          it              important keepan accurate
Concordance is particularly      to                     index
                                                  document in orderto
satisfy the initial disclosure requirement in a timely manner~

Duty to Preserve Evidence

                                        storedinformation
         A duty to preserveelectronically               ("ESI")and paperrecords
        arises
generally                 is         anticipated foreseeable, wellas when
             whenlitigation reasonably         or          as
litigationis pending. Failureto preserveESI and paperrecordscan resultin Court
sanctions.      When there is a duty to preserve,                 Enforcement   staffshould   make reasonable
                                                                             or
aridgood faitheffortsto preserveESIand paperre~ordsrelevantto an investigation
          including
litigation,             a         hold     to             working the
                  issuing Litigation notice thoseindividuals    for
                                                 directingthemto preserverelevant
SEC who are most likelyto have relevantinformation
ESI and paper records.

         ESI is a broad term that includes word processing files, spreadsheets, databases,
e-mail, and voicemail.

                               3.2.6.4.1.4      Iron   Mountain


                                                              mustbe organizedin
         Documentsreceivedby the staff in MUIsor investigations
boxes for transfei to Iron Mountain                    for storage:

     ·   The boxes should include a detailed description of all contents to facilitate storage
          and     retrieval.


     ·   The staff should maintain tracking Logsto include the date and location when
         boxes are sent to or received from Iron Mountain, and when boxes are destroyed
          orsent       to Records            Management.

     ·    Each office should use a database to standardize the tracking process.




                                                                  71




                                                                                                        MADOFF   EXHIBITS-04569
                      3.2.6.4.2 Preserving Internet Evidence
   Basics:


                          form        evidence a website page. However, website
              Themostcommon of Internet      is
   owners may, at any time and within
                                           seconds, alter, edit or even remove contents ofa
   website. Thus,upon
                        discovering evidenceawebsite, staff
   should seek to preserve that relevant  on      the immediately
                                 evidence captureinformation it existed the
                           website      to                 as          at
                        the
   timethestaffdiscovered information.
  Conside_rations:


  evidence:     following generally be
              The                            when      Intemet
                      procedures shouldfollowed preserving                                                          :1

             staff     ensure
      · The should thafafter           a     page, file    the
                                  savingwebsite each contains                                                        1
               URL website anelech-onic ofthe and that
                   of
        correctsaved. the
        page was
                              and        stamp date time each

      ·      The staffshouldalso printthese documents affix identifying
                                        saved     and an             mark
             on each page, such
             URL of the website
                                  as a Batesstampnumber.Theprintedpageshould      the
                                                                            include
                                  and the date and time ofprinting.
     ·       The staff should maintain
                               the;b~at~nl.l several inasafe
                          tnamtainoriginal
                      Snoula tile             and
                                        documents copies
                these
     · Beaware~that procedures capture text and graphic Oltml)data on a
                            only
                but           audioor videodata.
          website donot include
 Further information.


            staff direct questions preserving evidence
          The should any
Enforcement's TTstaff.
                                abollt    Intemet   to


                   3.2.6.4.3 Preserving Physical Evidence

         two widespread    of
                            physical in    SEC
     Tht: ri~ost forms evidenceinvestigations
audiotapes and -electronic                              are                                                     ,I
                      hardware, ascomputer drives.
                  media     such        hard           the
                                                 Usually,
    will   copies this ~omthe
staff obtain    of data
formaf ascassette foranalog produci"g commonly
     such       tapes      audio        in
                                    party a        accessiMe                                                    1
recording,                                   ona hard for
                                      recordings, files electronic ;
              andTIForPDF forelectronic stored WAVdrive.
                         -files      data                      audio
                there be          when
                                     the may to       the
          Iiowever, nlay circumstances staff need obtain                                                        t
         media or acopy fUlly all   data the  media
original assourceobtain that captur~s on original
source, such an image of an
                                         hard                consider
                                   elltire drive.Theseaffshould     obtaining




                                                                                      MADOFF   EXHIBITS-04570
       when is        that original source bedestroyed
 originals there a risk the      media may          orwhere
 the       party be        upon      all   data       source.
    producing cannot relied toproducerelevant ona media
 The original hardware also contains residual data, which can include deleted files.

               the obtains
          Whether staff         or
                         originals copies, staff
                                        the           should
                                               generally        the
                                                           follow
 procedures in Sections 3.2.6.4.3.1 and 3.2.6.4.3.2 of the Manual so that this physical
                     to
 evidenceis preserved ensureits authenticity.
                         3.2.6.4.3.1. Preserving Audiotapes

          Audiotapesare usuallyproducedin one of two ways. For digital recordings,
 audio recordings are produced as WAV files on CD-roms or DVDs. For analog
 recordings, the recordings areoften       on    cassette
                                    produced audio                  format,
                                                        tapes,meither
 thestaff         be to         the      and
          should able trace receipt custody                 data the
                                                  ofaudiotape from time
 they are received through their use at trialand demonstrate that the audiotapes were
       stored they into staff     The is         the
 securely once came the s possession. goal toensure
           of            by          its         and
 admissibilitytherecording establishingauthenticity therequisite
- preservation ofits condition.
              authenticity, staffshouldfollow
     Tomaintain          the                 theseprocedures:
            obtained,
      · .When              should     with    or      number.
                   audiotapes beaff?xed a Bates control
               of                 should
     · Testimony thetape'scustodian            the      party's
                                       establish producing
          proceduresfor makingand maintainingaudiotapes,
                                                  the procedures used to
                the       tothe and       of          ~if    were
          produce audiotapes SEC thelocationtheoriginalscopies
                 The       should be    to      the and of
          produced). custodian also asked identify date time the
                   and         and        of           such
          recordings, thespeakers thesource therecording, asthe
          telephone numbers associated with the recording. This information is often
          available in digital recordings               data         at
                                            by retrieving filescreated thetimethe
          recordingwas madethat capturethis information.
              are      the should the
      · ifcopies produced,staff              testifies record
                                ensure custodian onthe
                         the         to      the       in       and
          thatheunderstands obligation maintain originals a place manner
          sufficientto preservetheirauthenticity.

      ·   If originalrecordings produced,the staff shouldkeepthe originalsin a safe
                                are
                                                                       A
          location and use copies during the courseof the investigation. log shouldbe
                 and       that      any       that      the       to
           created maintained requires individual retrieves originals
                   the
           docur~ent date and time that the originalswere checkedout an4 in.

                  should transcripts
           Thestaff    have                all       with
                                  prepared-ofaudibtapes etridentiary
           value.




                                                                                       MADOFF   EXHIBITS-04571
                              3.2.6.4.3~ Preserving Electronic Media
  Basics:


             Electronic media hardware that
                                     maybe usefUl        an            includes
                                                   ~during investigation
  computerhard disk drives,CDsor DVDs,backup         USE
                                               tapes,· flash         personal
                                                              ~drives,       data
  assistants~PDAs"), and cellularphones. Thestaffshould        the
                                                       establish authenticityof
  the hardware
                               against alteration destructioninformationfollows:
                      andprevent    any         or         of         as
               obtained,
            When              media    should affLued a Bates
                      electronic hardware   be     with
            number.



              staffshouid
            The                hardware location,only ofthe
                      storeoriginal inasafe
                                        and
                                              use copies
            data duringthe investigation, createa log to document all circumstances
            when the originals are removed ~om their,storageiocation.                                        :i

            Throughthe testimonyof the ownerof the hardware custodian charged
                                                             or the
            with maintaininghardware,the staff shouldseekto establish the authenticity of
            the original hardware, including         regarding procedures
                                           information       the        utilizedfor
                                      data
            storingdata and maintaining on the hardware
 Considerations:

        The staff may also obtain an imageof all datalocatedon the hardwareinsteadof
 the original. Imagingis a copying        that          an
                                   process produces exactdigital             of
                                                                       replica the
         data the
             on      and        the      and      ofthe The
original confer hardware preservesstructure integrity data.
staff should
                                       IT     to     proper
                         withEnforcement'sstaff ensure          ofdata.Tobe
                                                          imaging
    reliable,imaging
deemed the                 media      must industry
                  ofelectronic informationmeet
standardsfor qualityand reliability,mustensurethat no data is alteredduringthe
      process, must tamper The
imaging     and be                     ITstaff
                        proof. Enforcement hasestablished
      proceduresguidelines
specific     and         imaging The
                       for                 also   that
                              data shffshould ensure the
producing party has stored the
                                      in              including
                               originals a safelocation,               details
                                                               confirming of
such storage through the testimony a custodianor ownerof the hardware.
                                   of
Further Information:

   Please refer any
                         questions;)~S~'or~:~:;~1I~Y~Pf~:uestions
                                 I~reszrving media to
                             abour                     the
                                       electronicevidence                                                    :i
                          of           for
~ . See Section3;2.6.4.1.1 the E~ianual more information imaging.
                                                            on
    See Section3.2.6.4.1.2of the Manualfor more information on electronic files.




                                                                                   MADOFF   EXHIBITS-04572
           3.3 Witness    Interviews   and Testimony

                     3.3.1 Privileges and Privacy Acts

                     with        interviewstestimony, must
           Inconnection anywitness       or                   with
                                                   staff comply
        Act     the to         Privacy of and Electronic
thePrivacy of1974, Right Financial Act 1978, the
           Privacy      and      regarding assertion privileges,
Communications Actof 1986 therules       the       of
       witness's
contacting        parallel    ongoing      and      of
             counsel, proceedings, litigation,Freedom
Information     Act requests;   Thoserulesand statutesare discussedin Section4 of the
Manual.


                     3.3.2 No"Targets" ofInvestigations

                 the
         Unlike grandjury          in    targets aninvestigation often
                             process which     of             are
i~lentified, the SEC            process not
                     investigative does have                 the     is
                                                "targets.Thus, SEC not
      toprovide type target
required      any of                when      subpoenas
                           notification itissues      tothird
     or       for       ordocuments non-public
parties witnessestestimony         Inits                 of
                                               investigations
                  of
possible violations thefederal            laws.
                                 securities TheSupreme    Court,inSECv. O'Brien,
467 U.S~ 735 (1984), noted that "the          of       requirement the SEC
                                     imposition a notice          on
would substantially              the     of      who something hidetoimpede
                          increase ability persons have     to
legitimate investigations by the Commission." ·Citingthe SEC's broad investigatory
responsibility under the federal securities laws, the Court found no statutory, due process,
      standard
orotl~er     regarding
                    judicial
                           enforcementsuch
                                    of   subpoenassupport
                                                to     tile
          that
proposition noticeis required.
                                                          eventuallymay be namedas
           Although some parties involved in investigations
       orrespondents
defendants                litigation, SEC nothave
                 insubsequent      the does          ofirs
                                                targets
inquiries or investigations.

                     3.3.3 Voluntary Telephone Interviews

                                  Privacy Warnings Forms1661 1662
                            3.3.3.1     Act      and       and
 Basics:


               Act     ("Privacy
      ThePrivacy of'1974                    Section requires,
                               Act'?,5 U.S.C.     552a,    among
      otherthings,certaindisclosures individuals~from SEC's staff solicits
                                   to           whom the
      information;


       When the staff contacts a person             a        telephone
                                            to requestvoluntary              before
                                                                     intervie~
           any       questions,staff
      asking substantive             provide summary
                            the should anoral    ofcertain
                contained Form or 1662, appropriate Section
       information      in      166~       as      (see            of
                                                             3.2.3.1
                 including least
       theManual),       at              Privacy
                               the.;required Actinformation.




                                                                                    MADOFF     EXHIBITS-04573
             Privacy requires the provide following
           The    Act      that staff  the       information:
               That  the        purpose requesting
             o determine principal    in                 ~om        is
                                                information thewitnessto
                SEC enforces.
                                    there been     of           and   that
                              whether have violations thestatutes rules the
             O Thatthe informationprouided members public
                                         by                  used
                                               ofthe isroutinely by
                  SEC other     toconduct     enforcemenf
                the and authorities, investigative,
                         and
                licensing, disciplinary          and         otherstatutory
                                       proceedings, to fulfill
                responsibilities.
             O Thatthefederalsecuritieslawsauthorizethe SECto conductinvestigations
                and to request information ~om the witness, but that the witness is not
                required to respond.
                 there no  sanctions nodirect upon witness
            O That are direct     and      effects the  for
                      to                  to
               refUsing provideinformation the staff.
  Considerations:                                         ·

                           the
            Whenappropriate, staff also sends a Form 1661 or 1662(along with a cover
       tothe  after telephone has place.practicable,
  letter) witness the             taken If
                          interview             for
      ifthe         the    and witness todelay interview
 example, staffcontachwitness the   asks     the      toa
     date, staff send Form in ofthe   interview.
 later the may the 1662 advance telephone
                   3.3.3.2 Notetakiog
 Basics:




 notes ofthe
                conducting
            While
              interview.
                                 telepllorle
                         a voluntary             the may written
                                         interview,staff take
 Considerations:

           A minimum oftwo staffmembers are encouraged to be present to conduct a
      interview.
witness              for
               However, 1itigation staffshould
                              reasons,             having one
                                             consider   only
Staffmember take notes.

                  tohaving   oftwo members toconduct
           Advantages a minimum staff  present    a                                                            j
witness interview        having than one personwho can ask'questions later
                   include     more                                and
have recollectionsand
                                of            Moreover, ofthestaffmembers
                       impressionstheinterview.       one
               need to serveas a witnessat trial.
may subsequently

               Voluntary
           33.1!      On-~he-RecordTestimony
Basics:                                                                                              · :·   -..i


            mag.
     Thestaff request  voluntajtranscribed therecord")
                                         ("on           testimony~om
        The          require administeroathsor affirmations
witnesses. staffcannot     and                             withouta formal




                                                                                     MADOFF   EXHIBITS-04574
order of investigation. Nevertheless, the staff can conduct voiuntary interviews with a
court reporter present and a verbatim transcript is produced.

       Ifa witness is voluntarily willing to testify under oath, the staff, after obtaining
the witness's consent, will have the court reporter place the witness under oath. If the
wimess is placed under oath, false testimony may be subject to punishment under federal
perjury Laws. In addition, 18 U.S.C. Section 1001, which prohibits false statements to
government officials, applies even ifa witness is not under oath.

       While conducting voluntary on-the-record testimony, the witness may have
counsel present. Also, at the beginning of the testimony, the staff should consider asking
the witness questions on the record to reflect that the witness understands: (I) that the
witness is present and is testifying voluntarily; (2) that the witness may decline to answer
any questionthat is asked,and (3) that the witnessmay leaveat any time.
Considerations:


           Staff can otherwise conduct the voluntary on-the-record testimony as it would any
other testimony, including providing the witness with the Form 1662 prior to testimony.

                  3.3.5 Testimony Under Subpoena

                         33.5.1   Authority

       The SEC may require a person to provide documents and testimony under oath
upon the issuance of a subpoena; Prior to issuing any subpoenas in a matter, the staff
must obtain authorization from the Commission through the issuance ofa formal order of
investigation. Pursuant to 17 C.F.R. Section 202.5(a), the Commission, may, in its
discretion, issue a formal order of investigation to determine whether any person has
violated, is violating, or is about to violate any provision of the federal securities laws or
the rules of a self-regulatory organization of which the person is a member or participant.

       In authorizing the issuance ofa formal order of investigation, the Commission
delegates broad fact-finding and investigative authority to the staff. Various statutes
provide for the designation of officers of the Commission who can administer oaths,
subpoena witness, take testimony, and compel production ofdocuments. See Sections
                                                                           Act
8(e) and 20(a)of the SecuritiesAct, Sections2 l(a)(l) & (2) of the Exchange~ Section
209(a) of the Advisers Act, and Section 42(a) of the Investment Company Act. These
statutory provisions do not limitthe designation of Commission "officers" to attorneys.
                analysts,and investigatorsalso
Staffaccountants,                                              as
                                              may be designated "officers"and
empowered to take testimony and issue subpoenas.

                                             to
       Rule 7(a) of the SEC's Rules E~lelating Investigations, 17 C.F.R. Section
203.7(a), provides that any person whb is compelled or required to furnish documents or
testimonyin a formalinvestigationshall,upon request,be shownthe formalorder of




                                                                                    MADOFF       EXHIBITS-04575
                 A       also          a
    investigation. witness maysubmit written         to
                                              request theAssistant        of
                                                                   Director
               ofEtlforcement
    the Division                      the           for
                            supervising investigation a copyof the formalorder.
                      3.3.5.2 Basic Procedures for Testimony Under Subpoena
                             3.3.5.2.1 Using a Background   Questionnaire

    Basics:


              The background            is
                            questionnaire a documentthat the SECstaff uses to obtain
    important          information a witness. questionnaire a-variety
              background          from          The         solicits      of
    personal          fiom
             information thewitness,          among things,
                                      including,    other           and
                                                            the-date place
                    and
    of birt~thenames account            for         and       accounts,list
                               numbers all.securities brokerage       a
                   institutions
    ~falleducational                 and
                             attended degrees          and
                                               received, anemploymenthistory.
              solicited thebackground
The information       in                        is        askedforin
                                    questionnaire routinely
    testimony.

Considerations:


           does                with                    to
· Thewitness nothaveto comply the SECstaffs request complete     the
           questionnaire.
  background                    of              is       voluntary the
                       Disclosure the information entirely       on
               part     are
        witness's There nodirect          and
                                  sanctions thusnodirect       for     to
                                                         effects failing
              all                     information,
        provide oranypartoftherequested                it      be
                                                although should explained
                            will
       that this information then be asked for in testimony.
·      If the witnesschoosesto providea background               the
                                                    questionnaire, witnessshouldbe
       examinedabout the document. For example,the witnessshouldbe asked to
                 the       by         the     to          its
       authenticate document, requiring witness testibabout preparation,
       the source of information contained in the document and the accuracy of the
       information.

           provided
· Information           to           questionnaire
                  pursuant a background                to
                                               issubject theSEC's
       routineuses as listedin Form 1662. The witnessalso is liable,underSection1001of
       Title18of the United     Code,if he or sheknowingly
                           States                            any
                                                         makes falsestatements
       in the backgri~undquestionnaire,
·      Background               as       to
                  questionnaires, exhibits testimony           may
                                                    transcripts, become   publicif
       theyareproduced during         in
                             discovery a subsequent          Therefore, orderto
                                                   litigation.         in
       safeguard        personal
                sensitive                  the                 not
                                information, staffmayconsider including   a
               SocialSecurify
       witness's                    in
                             number theBackground   Questionna~u~e.        the
                                                                   Likewise,
           may     not'    a         Social
       staff consider having witness's                be       land
                                          Secuiitynumberrecorded
       therefore incluhed in the testimony transcript). Rather, the staff taking the testimony ·
       can ask the witness
                    the
                             towrite Social numberaseparate
                                  his/her Security on
      Afterpresenting document the-
                             to staff thewitness
                                                        document
                                                          that     :·
                                               shouldverify the ·I---: -
       information contained in it is correct.




                                                                                    MADOFF         EXHIBITS-04576
                        3.3.5.2.2.     Witness Right to Counsel

    Basics:


    ·                                                                         of
         Any person compelled to appear, or who appearsby requestor permission the
                                                             be
                                                         may accompanied,
         SEC, in person at a formal investigativeproc~eding                  represented
                   by
         andadvised counsel        however, allwitnesses besequestered,
                           provided,       that         shall
                 permitteddiediscretion theofficer
         andunless      in            of                 the           no
                                                 conducting investigation
               or         accompanying suchwitness bepermitted be
         witness thecounsel         any          shall       to
          present        the        of       witness. Rule oftheSEC's
                    during examinationanyother      See 7(b)
                      to             17      Section
          RulesRelating Investigations, C.F.R.     203.7@).
               that
    ; Thismeans a testifying      may an
                            witness have attorney       with
                                                   present himorher
           any
      during formal            proceeding, theattorney (L)advise
                    investigative       and          may        the
            before,
      witness          and the            (2)       the
                  during after testimony; question witness        at
                                                            briefly the
                   of           to      any           the     gave
          conclusion thetestimony clarify of theanswers witness during.
                  and      summary during witness's
          testimony; (3)make    notes   the             solely
                                                 testimony forthe
                  use.                                to             17
          witness's SeeRule7(c)of theSEC'sRulesRelating Investigations, C.F.R.
                201.7(c). thewitness accompaniedcounsel, orshemay
          Section      If          is         by      he         consult
          privately.

    ·                                                  a
          "Counsei"is definedas any attorneyrepresenting partyor any otherperson
                    a party  to          of       Rules Practice,
          representing pursuant Rule102(b) theSEC's   of       17
               Section
          C.F.R.             See         ofthe SEC'sRules
                     201.102@). Rule101(a)                        17
                                                        ofPractice,
          C.F.R. Section 201.101(a).

              of             of       statesthatin anyproceedingperson
    · Rule102Cb) theSEC'sRules Practice                        a      may
                    byan      at admittedpractice theSupreme of
          berepresented attorneylaw    to      before     Court
                  States thehighest ofanyState defined Section
          theUnited    or         court        las    in              of
                                                               3(a)(16)
                    Acf
          theExchange 15U.S.C.        78c(a)(16));
                                Section              of
                                               a member a partnershipmay
                                                                       trustor association
          represent the partnership; a bona fide officerofa corporation,                  may
                 the          trusf          and        or      ofa
          represent corporation, orassociation, anofficer employee state
                    or             or     subdivision state represent
          commissionofa departmentpolitical        ofa     may      the
                         or             or                    of
          state commission the department politicalsubdivision the state.

     Considerations'.

                    is             by       the     m~y    the
        · Ifa witness notaccompanied counsel, witness advise SEC ·
                taking       atBny during testimony heorshedesires~
          employee thetestimony point   the      that
:                    represented
          tobeaccompanied, and      by     The       will
                               advisedcounsel. testimonybe
                   to     the     an         to      for
           adjourned afford witness opportunityarrange counsel.
                   may            by      who            other
          Thewitness be represented counsel alsorepresents persons
           involvedin the SEC's investigatio~.For moreinfonnationon Multiple
                           see
           Kepresentations, Section4.1.1.1.of the Manual.




                                                                                   MADOFF       EXHIBITS-04577
                        3.35.2.3 Going off the Record

   Basics:



                TheSEC       taking       controls
                      employee thetestimony               Ifa      desires
                                                 the.record. witness
                 the     must     this      employee the
  togoofftherecord, witness indicate totheSEC     taking
  testimony, who will then determine               to                request.Thereporter
                                             whether grantthewitness's
                      at           or          colinsel's,
  willnotgoofftherecord thewitness's, thewitness                 See
                                                        direction. Form
  SEC1662 Rule oftheSEC's
  203.6.
          and      6         RulesRelating Znvestigations,
                                          to                     Section
                                                         Ij C.F.R.


                       33.5.2.4 Transcript Availability
  Basics:



 theofficial
                       ifany,    investigative
              Tra'nScrip~, offormal                shall       solely
                                           proceedings berecorded by
           reporter, byanyotherpersonor meansdesignated the officer
                  or                                  by
          the            A       who
 conducting investigation.pet-sort hassubmitted  documentary        or
                                                             evidence
        in      investigative
 testimonya formal                shall       upon     requesf
                          proceeding beentitled, written     to
 procure a copy of his documentary evidence or a transcript of his testimony on payment
 of the appropriatefees:Provided,however,that in a nonpublic formal investigative
            the
 proceeding Commission      mayfor good causedeny such request. In any evenf any
       upon identification, the toinspect official
 witness, proper          have right
                      shall            the             of
                                                transcript
              own  testimony. Rule oftheSEC's RelatingInvestigations,
 thewitness's 203.6.
 17 C.F.R. Section
                           See 6           Rules    to

              Ifthe witness wishes
                                              a    of          of
                                     topurchasecopy thetranscript hisorhertestimony,
 the reporter will provide the witnesswitha copyof the appropriateform. Persons
requested to supply                 voluntarily beallowed rights
                           information       will       the           by
                                                               provided this
rule.


Further Information:

             Assigned staff should consult -with his/her supervisor for the procedures to be
followedinorder to make a recommendation that the SECdeny a witness's requestfor a
transcript copy.

             3.3.53   SpecialCases

                      335.3.1   Witness Assurance Letters

introduction.


             In some very limited                 the
                                     circumstances, staff may providea witnesswitha letter
      him that SEC not       to    an        action
assuring orher the does intend bring enforcement against




                                                                                      MADOFF   EXHIBITS-04578
 him or her or an associated entity. In return, the witness agrees to provide testimony and
 documents and information. The provision ofa written assurance letter must be
 specifically authorized by the Commission, and the circumstances under which to
 recommend the Commission provide such an assurance letter are narrow~

 Considerations:


              Some of the considerations in determining whether to recommend that the
 Commission provide a written assurance to a witness include:

                    unable seektestimony thewitness anyotherfashion?
     Is theCommission    to            firom      in
    For example, the Commission cannot compel the testimony due to a lack of
    jurisdiction, the United States and foreign domicile do not have a Memorandum of
    Understanding that allows the Commission to seek or compel testimony, and the
    witness refuses to testifl or provide information voluntarily.

· Will the witness prdvide evidence crucial to an enforcement action against others? Is it
    impracticable to obtain the evidence from other sources?

· Based on current knowledge, should the witness be the subject ofa recommendation
    for an enforcement      action?

Procedures:


          If the staff has determined that a witness assurance letter is both necessary and
appropriate, the staff must prepare an action memorandum to the Commission. The
memo should include name ofa specific designee to sign the written assurance (for
example, recommend "that the Commission authorize [Assistant Director], or his/her
designee, to provide a key witness with a written assurance (attached), that the
Commission does not currently intend to bring an enforcement action against him/her.").

          In addition, because the written assurance refers to "information currently known
                   the
to the Commission," staff shouldpreparea dated inventoryof all files(including
interview                and
         notes),documents, transcriptsobtainedoi preparedpriorto providing   the
written   asSurance;




                                                                                     MADOFF   EXHIBITS-04579
  Sample Witness Assurance Letter:


              Re: In the Matterof rIssuer;Inc.l, rMatterNumberl
  Dear Mr. [Witness]:

                         and      Commission "Commission"),
              TheSecurities Exchange      (the                 and
                                                        [Company],
          [ChiefFinancial
  CCompany's]                         CWitness], bothhispersonal
                       Officer/position],    in                and
 corporate capacities at [Company], agree as follows:

                          agrees makehimself
              i. . IWimessl    to                  to
                                           available testifl in anyactionagainst
                                                                  in
 any personsand/orentitiesarising~om the Commission'sinvestigation the matterof
       me.],      but         to,          action   [Issuer]
 Ilssuer, including, notlimited anyCommission against     and/or
          or
 itscurrent former officers,
                           directors,
                                    employees,
                                             auditors,          counsel
                                                     underwriters,      or
 customers         SEC
          ("llssuer] Litigation"),            upon
                                   ifnecessary, reasonable noticeat a placeto
 be agreed upon.

              2.        Baseduponthe information                               it
                                                currentlyknownto the Commission, does
          to
 notintend filean action      CWimess] [ComnpayyI fi-om investigation
                        against     or         arising its
             of      Inc.].             not        an      or
 in thematter LTssuer, Thislettershould bedeemed exoneration, be
                                  has
 usedto construethat the Commission madea findingthat no violationsof the federal
 securities        laws have   occurred.


      3.            agreement appear a deposition theIIssuer]
            IWimess']       to      at          in          SEC
         does          an        by        or           as
Litigation notconstitute agreement [Witness] ICompany~ to the
               application U.S.securitiesLaw thejurisdictionof the Commission
extraterritorial          of                or                               in
any action involving [Witness] or [Companyl.

    4.            agrees'
          CWitness]               completely truthfUlly the
                        tocooperate         and        with
          He
Commission. willanswer         and·truthfully questions to himand
                      completely           all        put
       all      conduct which hasknowledge. willnotwithhold
disclose relevant     about       he            He          any
           or     to      any       by       false       or
informationattempt protect person providing informationbyfailing
        information. willnotfalsely
to reveal         He                     any       He        will
                                  implicate person. andCCompanyl
          furnish theCommission
voluntarily     to                   or            in
                              documents otherrecords theirpossession
        specified
involving                 with     and    companies [relevant
                transactions CIssuer] other      during    time
period].

           5.                    [Witness'] ECompany's] andtruthfUl
                       Inreturn-for      and        full                   as
                                                                 cooperation,
              the        agrees to useanystatements otherinformation
setforthherein, Commission    not                 or
    by         or        tothe          or.in       before
made CWitness]CCompany] Commission testimony anycourt           or
    tribunal the[Issuer] Litigation(or information
other      in         SEC           any               directly
                                                derived      or
         there~om)
indirectly             eitherofthemin anyproceeding
                 against                                by
                                                  brought the
          after                    except                may
Commission thedateofthisagre$ment, thattheCommission share        the
         with        authorities a prosecution perjury,
information appropriate       in            foi            a
                                                      making false
statement or obstruction ofjustice.




                                                                             MADOFF     EXHIBITS-04580
      6.               or
             If[Witness] [Company]                 false
                                    knowinglyprovides or misleading
         or           or              all      conduct whichhe is aware,
testimony information, failsto disclose relevant     of                or
otherwise       any                    then            shall
         violates termof thisagreement, thisagreement be nullandvoid.
          any         or
Thereafter, testimony otherinformation         by        or
                                        provided [Witness] [Company~ may
be usedagainstthemwithoutlimitationfor any purposein any proceeding.

                 and        counsel]
        If CWi~ess] [Witness'                        accurately
                                   agreethatthisletter               the
                                                              reflects
     agreement
entire            [Witness] theCommission, signintheappropriate
            between      and           please
places below and return the executed copy to me.
                                              Very truly yours,


                                                   [Designee],
                                                   I~itle],
                                                   EOffice]
                                                   U. S. Securities   & Exchange
                                                        Commission




hcknowledged and agreed to:



[Witness],                                            Date
Individually and on behalf of I~Company`J



IWitness' Counsel], Esq.                                Date


                      3.3.5.3.2 Immunity Orders

Airthoritv:

                             Control of 1970,18U.S.C.
Titlei 8 of theOrganizeldldrime    Act                     600
                                                    Sections 1-6004,
       that, certain
provides where            are         approval theAttorney
                   criteria nletandupon     by           General
                                                        may
of the UnitedStatess,the Securitiesand ExchangeCommission esue an order




        Section
528C.F.R.                 that
              0.175provides certain        within Department Justice
                                   officials    the       of
may         the
     exercise authority
                      vested theAttorney
                           in                 under
                                       General 18U.S.C.        6004
                                                         Section
         agency
to approve      immunity
                       orders,
                             including
                                     Assistant Deputy
                                            and            Generals.
                                                    Attorney




                                                                                   MADOFF   EXHIBITS-04581
                                        to                          and
 grantingimmunityfromcriminalprosecution a witnessin an investigation
 compelling his or her testimony and other information.6

 Basics:
                                to
 The issueof grantingim~munity a witnessin SEC investigationsariseswherethe
                                       privilegeagainstself-incrimination
 witnessassertshis or her FifthAmendment                                and,
 accordingly, refuses to answer questions and provide other information.

           Immunity orders are granted in limited circumstances and staff should consult
                 beforerecommending
 their supervisors                       Commission
                                  that~the         issuean immunityorder. If
              that      an     order           step,      should
 thestaffbelieves seeking immunity isanappropriate thestaff
              authority do so in anactionmemorandum.
 seekCommission       to                           The~statutory
            for
 requirements issuingan immunityorderprovidethat the Commissionmust,in its -
        determine (1)thetestimony otherinformation the witness be
judgment,       that:           or               ~om         may
 necessaryto the public interest;and(2) the witnesshas refused,or is likelyto refuse,to
                otherinformation thebasisof hisor herprivilege
testifyor provide              on                                  self
                                                             against
 incrimination.   18 U.S.C. Section 6004.


           The type of immunitypermittedunderthe statuteis 'hse immunity,"which
        the       from              compelled
prohibits government usinga witness's                or
                                            testimony, anyinformation
directly or indirectly obtained ~om that testimony, against the witness in connection with
                   of                                  for
criminalprosecution the witness,except in a prosecution perjury,false statemenf
or failure to comply with the order. Use immunity conferred to a witness in SEC
            will         shieldthatwitness
investigations not,however,                         in
                                         ~omliability civilproceedings.
                                           proceedings
The SECcan still bringcivilor administrative          againstthe witnessbased
upon the immunized  testimony.If the Commissionissuesan orderimmunizing   the
witnessand compelling            the                                     to
                       testimony, witnesscan no longercontinueto refUse testify
either in the investigation or in a related enforcement action.



Considerations:


      The staffdoes not haveauthorityto grant immunityto any witnesses,without
approvalof the AttorneyGeneraland a Commission  order. in this regard, it is advisable
         with           U.S.       officepriorto starting formal
to consult theappropriate Attorney's                    the    process
                                                                of
forobtainingwitnessimmunity.Further,the staff shouldbe cogniz;ant "inadvertent
immunity"       whichmayoccurifa witnes~
          grants,                                 after     the
                                          testifies claiming Fifth                                             I
Amendment          against
           privilege                       The
                         self-incrimination. staffcanseekto prevent claims
            posedaftera witness's
thatquestions                           of
                                assertion- the FifthAmendmentprivilegeconfer
         by       on         that                  to              that
immunity stating therecord it hasno authority conferimmunity, it has
           of
no intention doingso,andthatanyquestions                        the
                                         asked~omthatpointon-in testimony

       v. 465 605       ( the  held         the    of
6SeeU.S. Doe, U.S. (1984); Court thafalthough content
       records notpriviieged, actof producing
business     is            the                    of
                                            records a soleproprietorship
                        and
may be self-incriminating cannotbe compelledwithouta statutorygrant of use
immunity).                                                                                                    :~




                                                                                 MADOFF      EXHIBITS-04582
                                that
    will be withthe understanding the witnessmay declineto answeron the basis that
              may               the              compulsion testify,
    theresponse tendto incriminate witness.Without        to       there
                 that       was           v.       428
    canbe noclaim immunity granted.L~S. Orsinger, F.2d1105,     1114(D.C.
                                                          to
    Cir.),cert. denied,400 U.S.831(1970)(witnesswho refUsed testify under
    Commission        and                    to
              subpoena, whowasnotcompelled testify,       no
                                                   acquired immunity
    ~iom       prosecution). also U.. v.Abrams, F.2d539,549(24Cir.),cert.
        criminal          See                 357
    denied, 384 U.S. L001 (1966).


                          3.353.3    Contacting Employees of Issuers

    ABA Model Rule of ProfessionalConduct:

                      investigations, staffshould
           Inconducting           the                to          set
                                                adhere thestandard forthin
    American Bar Association Model Rule of Professional Conduct 4.2 ("Modei Rule 4.2")
                 and                        that
    and commentary ethicsopinionsinterpreting Rule,whichaddressesattorney
                 with                            and
    communications persons,includingcorporations theiremployees,represented
    by counsel. Model Rule 4.2 provides:

                         a      a
           In representingclient, lawyer                  about         of
                                        shallnotcommunicate thesubject the
                        with        the
           representation a person lawyer          to            by
                                              knows be represented another
                                                                                or
           lawyerin the matter,unlessthe lawyerhas the consentof the other Lawyer is
           authorized to do so by law or a court order.

           The staff should be mindful of this policy, and take it into account when
              whether gothrough
    determining     to                counsel contact
                              corporate     to                 and
                                                    corporations their
    employees during the investigative process.

    Basic Guidelines for Contacting Employees of Issuers:

                  of           reasonto contact individual
       Intheabsence a compelling               an                 staff
                                                          directly, shouldgo
             corporate
       through             (ifsuchcounsel
                     counsel              exists) contact
                                                to      corporate        in
                                                                 employees
       the following categories:

                         who              responsibility behalfof the
               o employees havea managerial            on
                   organization, e.g., senior officers;

                         who        direct, regularly
               o employees supervise,     or              with
                                                    consult thecorporate
                       concerning matter is thesubject the investigation if
                 counsel        the    that           of               or
                                                   orsettle the matter;
                   the personshavepowerto compromise

:                     whose or      may      tothe
               o employeesacts ombsionsbeimputed organization
                   for purposesof civilor~riminalliabilityin the matter;or




                                                                                       MADOFF   EXHIBITS-04583
              o employees whose statements, under applicable rules ofevidence, would
                constitute an admission on the part of the organization or have the effect
                of binding the organization with respect to proofofthe matter.


             counselhas madeno assertionthat he or she representsany particular
 · Tfcorporate
     group of employees that do not fall within the above categories, staff may contact such
     an employee directly, unless staff is aware of an attorney who represents that person in
     its investigation.

· When contacting employees directly, staff should inquire whether the employee is
  represented by counsel, including corporate counsel. According to the ABA'
  Committee on Ethics and Prof~essional Responsibility, Model Rule'4.2 has some
     limits: FormalOpinion95-396notesthat the ModelRule "doesnot contemplate athat
                       the
     lawyerrepresenting Ccorporate]                                       to
                                   'entiiy~at;invokethe rule's prohibition cover all
     employees of the entity, by asserting a blanket representation of ail of them."

· Contacting former employees withoutfirst contacting corporate counsel is generally
  permissible, unless corporate counsel (or, ofcourse, the employee) has affirmatively
  stated that corporate counsel has been retained by that particular former employee.
  Restatement of Law Governing Lawyers, Comment G, provides that, "contact with a
  former employee or agent ordinarily is permitted, even if the person had formerly been
  within a category of those with whom contact is prohibited." However, ~Sectionl02of
  the Restatement provides that "a lawyer communicating with a nonclient...may not
  seek to obtain information that the lawyer reasonably should know the nonclient may
    not revealwithoutviolatinga duty ofconfldentialityto anotherimposedby law."
    Accordingly, staff should be sensitive to potentially privileged corporate
    communications when seeking information from the former employee.


                  3.3.5.3.4.    Communications With Em plovees of Broker-Dealers
Basics:


       While the`ExchangeAct requires brokerage ftrms to produce certain information                             ;j
upon'request ~om the SEC and without an investigative subpoena. the Exchange Act
                       of
doesnot require~employees brokeragefirmsto cooperatewith inquiriesinto the
employee'sindividualconduct.Therefore,an employeeofa brokeragefirm may'ormay
not cooperate voluntarily with the Division's inquiries'into theemployee's individi~al
conduct.


       Whenthe scopeof ad irivestigatioh touchesupon an employee'sdutiesat his or
her currentbrokeragefirm,the staff typicallyshouldcommunicatewith the ·employee
through the firm's general counsel or compliance officer.




                                                                                   MADOFF       EXHIBITS-04584
Ex
Exceptions:

            staff     does       the      firm      counsel
· TheDivision typically notcontact brokerage s general    or
              officerto speakto an employeewhen inquiring about matters outside the
     compliance
                       duties             firm.           the
               employee's athisorhercurrent Forexample, staff
     scope ofthe
                  the
            contacts employee
     typically                      when
                             directly seeking         related
                                             information toan
     employee's        employment theslaCCls
                   prior      orwhen             about   outside
                                          inquiring matters    of
            of           duties.
     thescope theemployee's        practices from,
                               These      stem   among other
                 respect           privacy regard hisorheremployer.
     considerations, foranemployee's     with   to
         also      contacts employee
· Thestaff typically     the             when        is
                                  directly theemployeea
     whistleblower.            in              context
                   Considerationsthewhistleblower           the
                                                     include threat  of
                Assigned should
     retaliation.      staff            with            to       the
                                  consult theirsupervisors discuss
     concerns that may arise in the whistleblower context.

                      3.3.5.3.5 Contacting Witness Residing Overseas

Basics:


          The staff is encouraged to consult with the Office of International Affairs ~OIA")
                         any     connection an investigation.
as soonas thestaffsuspects foreign        to                Because
       have     requirementscontacting
countries varying        for                  Division should
                                     witnesses,      staff
      OLQ    attemptingcontactwitness
contact before        to     a              overseas. canprovide
                                     residing       OLA
      on             of
advice theexistence anyinformation sharing         in          in
                                          mechanism thecountry which
thewitness       the
          resides, usesto which          can
                               information be put,andpractical
             such
considerationaj as likely       time
                         response fortheassistanceneeded     a
                                                        firom particular
       OIA can      requests foreign
country. also prepare     to                andreview by
                                   authorities      drafts
       staff          with            of
Division forcompliance therequirements anyinformationsharing
          that              law                   on
mechanism existsandor foreign andpractice.Depending theneedsof a
particular case, O'LAmay arrange conference calls or other meetingswith the foreign
          sometimes advance sending formal
counterpart,      in      of      a            for
                                         request assistance.
Considerations:


                    matter, Division ableto obtain
           Asa general   the       is                    ~om
                                                 testimony witnesses
residing overseas through a variety ofmechanisms.      These mechanisms include:
         sharing
information             with      counterparts asmemoranda
               arrangements foreign        such         of
understanding; mutual legal~assistance                         ad                and .
                                      treaties; lettersrogatory; hoc arrangements;
       cooperation canadvise Division astowhich these
voluntary        OIA       the      staff     of
          is                       foreignjurisdiction.
 mechanisms availablein a particular

      ·            o_fUnderstandinF~
           Memoranda              ("MOUs?')

           MOUs are                         regarding   sharing
                                    arrangements information and
                      regulator-to-regulatdr~
           cooperation in securities matters. The SEC has entered into over 30such sharing
                    with         counterparts. SEC alsoa signatory the
           arrangements itsforeign         The is                to




                                                                                   MADOFF      EXHIBITS-04585
  ·                    to     such         staff
          In determining accept a production, should       whether
                                                    consider     the
               will to      the                  the    to
      acceptance help advance staffscasebyallowing patty beableto
            the    with
      provide SEC therequested         in
                               productiona moreexpedited.manner.
              acc~pt
                  such      staff
                               should for party the
 · Ifstaf~choosesto aproduction, claritl the that
            willfollow tolook     immediately receipt, that
      staff beginour attheproduction
      staffwill
                                          upon      and assigned
                                    procedures handling
                              regular        for               productions
                                                      inadvertent        of
                  documents.instance, staff their
      privileged has a For
      that Enforcement
                                                       may
                                  assigned and supervisors decide
                                       soundanddefensible forkeeping document
                                 legally                basis      a
         the   later  as         if          staff   inform party
      that party claims privileged,thishappens, should    the
                   believes have basis keeping document.
      thatEnforcement    they a      for     the
              identified the
 · Ifa documentis                as       orpotentially
                     during reviewprivileged        privileged,
      and the party requests itsreturn, should
                                      staff        that     create privilege
                                             request theparty    a
      log.

 Further Information:

             Assignedstaff shouldrefer any questionsabout.thisissueto theirsupervisorsand
 to the Office ofChiefCounsel.

             4.3, Waiver df Privilege
Basics:



           The staff must respect legitimate assertions ofthe attorney-client privilege and
attorney work product protection, unless a party voluntarily chooses to waive privilege.
As a matter of public poiicy, theSECwantsto encourage         corporate
                                                    individuals,      officers
           to      counsel
andemployees consult                  violations thesecurities
                         aboutpotential        of            laws.
           A key objective in the staffs                is                            and
                                           investigations to obtainrelevantinformation,
parties are, in fact, required to providerelevantinformation responseto SEC
                                                            in
       However, entities individualsprovide
subpoenas.  both      and        may             codperation
                                         significant
             byvoluntarily
ininvestigations               relevant
                       disclosing             ?hat
                                     information. voluntary
        of          need        a      of        to            form
disclosure information notinclude waiver privilege beaneffective of
           as                        are
cooperation, longas all relevantfacts: disclosed;

                               privileged
           Thedistinctidn'between                   or       and
                                        communicationsdocumenfs
          facts    demonstrated course corporation's
unprivileged isoften         inthe   ofa         internal
         regardingconductissue the
investigation the       at in staffs           Incorporate
                                    investigation.
      investigations, and witnesses
internal         employeesother           with         are
                                   associated acorporation
    interviewed
often                  ifthe       are       by       certain
             byattorneys.· interviews conductedattorneys,
memoranda or notes generated in connection with the interviewmay be subject,at least
              attorney-client or wok productprivileges. However,the underlyingfactual
in parf to the~
        disclosed witnesses the
information bythe                      isnot
                        during interviews privileged.




                                                                                 MADOFF       EXHIBITS-04586
             Tl~estaffshortld not ask a porty to waive the attorney-client or workproduct
    privileges and ~ directed not to do so. All decisions regarding a potential waiver of
    privilege are to be reviewed with the Assistant supervising the matter and that review
    may involve more senior members of management as deemed necessary. The
    Enforcement Division's central concern is whether the party has disclosedlall relevant
    facts within the party's knowledge that are responsive to the staffs information requests,
                a               to             a          As        below,
    andnotwhether partyhaselected assertor waive privilege. discussed    if
    a party seeks cooperation credit for timely disclosure of relevant facts, the party must
    disclose all such facts within the party's knowledge. On request, and to the extent
    possible, the staff should continue to work with parties-to explore alternative means of
    obtaining factual information when it appears that disclosure of responsive documents or
    other evidence may otherwise result in waiver of applicable privileges.

                     remains todiscloseprtvilegecl
               A party     fi~ee                         ordocumentsthe
                                              communications      if
    party voluntarily chooses to do so. In this regard, -the SEC does nQt view a party's waiver
    of privilege as an end in itself, but only as a means (where necessary) to provide relevant
    and sometimes critical information to the staff. In the event a party voluntarily waives
    privilege, the staff cannot assure the party that, as a legal matter, the information
    provided to the staff during the course of the staffs investigation willnot be subject to
    disclosure pursuant to subpoena or other legal process.

    Considerations:


                      The SEC encourages and rewards cooperation by parties in connection
:                                                            measureof cooperation
                      with staffs investigations.One important                    is
                      whether the party has timely disclosed facts relevant to the investigation.
                      Other measures of cooperation include, for example, voluntary production
                      of relevant factual information the staffdidnat directly request and
                              mightnot
                      otherwise                  requesting corporate
                                     haveuncovered;       that      employees
                      coopeiate with the staff and making all reasonable efforts to secure such
                      cooperation; making witnesses available for interviews when it might
                      otherwise be difficult or impossible for the staff to interview the
                      witnesses; and assisting in the interpretation of complex business records,
                      The SEC's policy with respect to cooperation is set forth in the Seaboard
                      21(a) Report, Sec. Rel~ No. 44969 n3 (Oct. 23, 2001)? which outlines
                      other numerous factors that may be considered in assessing whether to
                      award credit for cooperation.

                      W~iver of-a privilege is riot a pre-requisite to obtaining credit for
                      cooperation. A:party's decision to assert-a legitimateprivilege will not
                      negatively affect their claim-to credit for cooperation. The appropriate
                      inquiry· in this regard is whether, notwithstanding a legitimate claim of
                      privilege, the patty has:disclosed all relevant underlying facts within its
                      knowledge.




                                                                                          MADOFF    EXHIBITS-04587
                   By timely disclosing the relevant underlying facts, a party may
                   demonstrate cooperation for which the staff may give credit, while
                   simultaneously asserting privilege. The timely disclosure of relevant facts
                   is considered along with all other cooperative efforts and circumstances in·
                   determining whether and the extentto which the party should be awarded
                   credit for cooperation. See id ·

Exceptions re Assertion of Privileges:

              ·    In order to rely on advice-of-counsel as a defense, a party must waive the
                   attorney-client privilege and work product protection to the extent
                   necessary   to enable the staff to evaluate   the defense.   Staff at the Assistant
                   Director level or higher should attemptto explore the possibility of an
                   advice-of-counsel defense with a party's counsel at an early stage in the
                   investigation. It is important to obtain all relevant documents and
                   testimony at the earliest possible date.

              ·    Staff should consider whether there may be other circumstances that
                   negate assertions ofprivilege, such as the crime-~aud exception and prior
                   non-privileged disclosure. These and other such circumstances should be
                   considered in analyzing the legitimacy ofa party's assertion ofprivilege.

Further   Information:


              ·                       on                  and
                  For more int;ormation the attorney-client workproductprivileges,
                  and exceptions thereto, please consult Sections 4.1.1 (Attorney-Client
                  Privilege) and 4.2.2(Attorney Work Product Doctrine) of the Manual.

              ·   For information on the inadvertent production of privileged materials,
                  please consult Section 4.2 of the Manual.-

              ·   For information on the production of privileged materials pursuant to a
                  Confidentiality Agreement, please consult SeCtion 4.3.1 of the Manual.


                  4.3.1   Confidentiality    Agreements
Basics:


          A confidentiality agreement is an agreement between the sbffofthe             Division of
Enforcement and, typically, a company subject to investigation pursuant to which the
company agrees to produce materials that it considers to be privileged (such as reports of
          investigations,
an internal                    memor~u;da, investigative;working
                       interview       and                   papers).For
its part, the staff agrees not to assert that the entity has waived any privileges or attorney
work-product protection by producing~thedocuments. The staff also agrees to maintain
                  of                    to
the confidentiality the materials,e~i~ept the extentthat the staffdeterminesthat
disclosure is required by latir or that disclosure would be in fUrtherance of the SEC's
discharge of its duties and responsibilities. The basis for the agreement is the interest of


                                                  100




                                                                                            MADOFF       EXHIBITS-04588
                       whetherviolations the federalsecuritieslawshave occurred,
the staff in determining                of
                                        and          the             and
and the company'sinterestin investigating analyzing circumstances people
involved    in the events    at issue.

Considerations:

·                                                 Agreement
    The Divisiontypicallyusesa ModelConfidentiality       @elow),and the staff
    should not agree to modifications to the Model Confidentiality Agreement without
    firstconsultingwiththe Officeof ChiefCounseland/orthe Headof the Trial Unit.
    The agreement  mustbe signedby a supervisorat or abovethe levelof an Assistant
    Director.


·                         that
    Whileobtainingmaterials are otherwisepotentiallysubjedtto privilegeor the
              of          work-product
    protections theattorney                can             assistance
                                    doctrine beof substantial       in
              an               the
    conducting investigation, staff shouldexercisejudgment  whendeciding
                                        agreement
    whetherto enter intoa confidentiality       with a companyunder investigation.
    Considerations include the f~llowing:
           o Some courts have held that companies that produce otherwise privileged
                materials to the SEC or the U.S. Department ofJustice, even puisuant to a
                confidentiality agreement, waived privilege in doing so.
           o Somecompanies      have importantpertinent operationsin one or more foreign
             jurisdictions, whichmay have data privacyand other lawsthat will restrictthe
             staff s abilityto obtainevidence. The companyitselfmayhave accessto the
             personsin suchjurisdictions             if
                                          (especially they are still employees)and to
                other sources of evidence (such as documents and e-mails). In such instances,
                                                       information the staff by
                the companymaybe able to conveyimportant         to
                producinginterview          and
                                  memoranda throughreportsof fmdingsderivedfrom
                otherwise   restricted   sources.




                                                    101




                                                                                    MADOFF      EXHIBITS-04589
        Confidentiality
  lufodel             A~reement:


                                                         [date]



  [SEC addressl

                      of[investigation andnlimberl
         Re: IntheMatter           name
           [namel:
 DearMr.7/Ms.

          [name]
        The         of~companyl
              Committee           a [revicw        of
                            commenced orinvestigation]
       on
 [issue] or about[dak]. The[name]Committeehas prepareda report,interview
        and           working
 memoranda investigative         in        with         or
                            papers connection this[review
 investigation]. In light of the interestofthe                     and
                                           Staffofthe U.S.Securities Exchange
         (the                whether have any       of
 Commission "staff~indetermining there been violationsthe
 federal
      securitieslaws, [name]
                 andthe               interests investigating
                            Committee's      in            and
        the          and
 analyzingcircumstances people
                             involved events issue, [name]
                                   inthe      at     the       ·
        will     to       copies thereport,
 Committee provide theStaff    of                 memoranda
                                          interview      and
          working I,          to briefingsl
 investigative papersinaddition oral              Materials").
                                         ("Conffdenttaa
             be      that       the        Materials
        Please advised byproducing Confidential         to
                                                  pursuantthis
 agreement, the Iname] Committee does not        to    the        of
                                            intend waive protection theattorney
workproductdoctrine,attorney-client                                       as
                                  privilege,or any otherprivilegeapplicable to
third       The    Committee
     parties. Cnanie]            that          Materials
                          believes theConfidential    are
protected by, at a minim
                                         workproduct
                           um,the attorney                and
                                                   doctrine theattorney-client
        The    Committee
privilege. Cname]            that          Materials
                      believes theConfidential    warrant
protection fi-om disclosure.

         Staff maintainconfidentiality Confidential pursuant
       The will      the         ofthe         Materials
     agreement will disclose toanythird except thee~t~nt
tothis      and not       them        party, to       that
                that       is       required laworwould in
theStaffdetennines disclosureotherwise     by         be
fUrtheranceofthe Commission's dischargeoFitSduties and responsibilities.

         StaRwill thatthe
               assert [namel a waiverof theprotection
                                    production
       The not Commission Committee's of of the.
Confidential Materials to the
                        constitutes
                                                the                                                   i
attorney work product doctrine, theattorney-client       or
                                                privilege, anyotherprivilege
        as                The    agrees productiontheConfidential
applicable toanythird-party. Staff    that      of                                                    B
     provides
            Sta~with
Materials the    no       grounds    testimony,
                   additional tosubpoena                                                             ;e
      orother     materials the[name]
documents privileged    fi-om            although such
                                   Committee, any
grounds that mayexist apart ~-omsuci~productionshall remainunaffectedby this
agreement.                                                                                           1:




                                        102




                                                                           MADOFF   EXHIBITS-04590
                                      to
                   The Staffs agreement the termsof this letteris signifiedby yoursignatureon
         the line provided below.

                                                                  Sincerely,




                                                                  Chair ofthe [name] Committee of
                                                                  [companyl




         AGREED            AND     ACCEPTED:
         United States Securities           and Exchange     Commission




         By:
                                 Division   of Enforcement



1;   -             4.4 Compliancewith the Privacy Act
         Basics:


         ·                                                          requirements the
               The PrivacyAct of 1974,5 U.S.C.Section552a,establishes           for
                          and            by
               solicitation maintenance agenciesof personalinformation  regardingmembers
               ofthe public.

         ·     When         information thepublic, statute
                    obtaining         ~om         the              the
                                                            requires staffto provide
                    with      to          for             and
               notice respect theauthority the solicitation whether           is
                                                                     disclosure
i                    ormandatory;
               voluntary     the
                               principal for
                                     purposes
                                            seekinginformation;
                                                 the      theeffect
               of refusing to, provide the information; and the 'koutin~ uses" of the information. The
                     prohibits disclosure personal
               statute      any        of                unless        is
                                                information thedisclosurewithin
                                             (includingthe exemption "routineuses"). In
               one of the statute's exemptions                      for
                       the     requires agencies
               addition, statute      that                   to     for
                                               havetheability account disclosures.
         Considerations:


                        Notice
               ThePrivacy               is        met            a
                              requirement generally by providing copyof Form
            1:          to         or
         166 or Form1662 the person er;tityfi·om              is
                                                whominformation sought.Theforms
                                                                                disclosures
         containthe list of uses that maybe madeof personalinformation.Generally,
                                          will
         in aidof.the staffs investigations be coveredby one or moreof the routineuses.


                                                                 103




                                                                                                    MADOFF   EXHIBITS-04591
Further    Information:


·    For questions relating to the Privacy Acf please contact the Office ofChiefCounsel.

·    For further information on Forms 1661 and 1662, please see Section 3.2.3.1 of the
     Manual.


·    For fUrther information on how to meet the Privacy Act requirements when
     conducting voluntary telephone interviews, please see 3.3.3.1 of the Manual.

          4.5 Compliance with the Right to Financial Privacy Act ~RFPA")

Basics:     -


·    The Right ~toFinancial Privacy ~Actof 1978 (12 U.S.C. Sections 3401 - 3422)
     provides -individuals with a privacy interest in their banking records held by a
     financial institution. Section 21(h) of the Exchange Act contains additional RFPA
     procedures available only to the SEC.

·    The RFPA applies when staff seeks the financial records of a "customer" tie., an
     individual or partnership of five or fewer individuals) ~om a "financial institution"
     (e.g.,a bank, mortgage lending company or trust company, but not regulated entities,
     such as broker-dealers or investment advisers). Generally, the staff may only obtain
    -customer records fi·om a financial institution pursuant to subpoena, after providing the
     customer with notice of the subpoena and an opportunity to challenge production in
     court. Notice must also be provided when the staff discloses information obtained
     pursuant to the RFPA to another federal agency (absent an exemption, such as that for
     disclosure to the Department ofJustice).                                                                           i-

Considerations:


·    The stiiff should be aware of RFPA restrictions whenever seeking banking records,
     including those of non-customers, fo avoid inadvertent noncompliance. In situations
     where notice to the customer may impede an investigation or result in the movement
          out     ju?sdiction,;staffconsider
     offUnds ofU.S.             may             a    order
                                          seekingcourt under                                                            i
     Section210           of the Exchange qct:to delay notice; the staff may also consider filing
              action    a     order protect
     anemergency toobtain ~eeze   to             funds.
                                          investor
·    The staff should also· be aware of RFPA restrictions whenever disclosinginformation
     obtained ~om a financial institution to another federal agency.                                                 - '1

Further    Informatibn:


            Zu~lrr about
                       t~e   its
                               ryuirementc, the
          Far iolarmaiionRFPAand         cont3ct
                                      please                                                                          ~1
Of~-~ce ofChiefCounsel.




                                                   104




                                                                                        MADOFF      EXHIBITS-04592
           4.6 Compliance with the Electronic Communications Privacy Act (LCECPA")

Basics:


·    The Elec~onic Communications Privacy Act of 1986("ECPA"), 18 U.S.C. Sections
     25 10 - 27 1I, expanded the wiretap laws to protect the contents of electronic
     communications (e.g., e-mail) in the hands of third-party electronic communications
     service providers.

·    A government agency can obtain communications'that have been held by a third-
     party service provider for more than 180 days pursuant to subpoena; the agency must
                     of
     provide~notice the subpoena to the customer; (E-mail service providers rarely
     retain message contents for this length oftime.) The content of communications held
     by a third-party service provider for less than 180 days may only be obtained by
     criminal law enforcement authorities pursuant to warrant; staff should consult with
     the Office of Intemet Enforcement regarding preservation of e-mail content held for
     less than 180 days.

·    The statute also authorizes agencies to obtain telephone records and e-mail records
     (other than content) by subpoena. This information will include the name, address,
     local and long distance telephone connection records, or records of session times and
     durations; length of service (including start date) and types of service utilized;
     telephone or instrument number or other subscriber number or identity, including any
     temporarily assigned network address; and the means and source of payment for such
          (includingcredit orbank
     service     any card            number). customer is
                                account   No        notice
     required when obtaining such records.

Considerations:


·    The staff should be aware of ECPA restrictions whenever seeking information or
     records ~om persons who provide computerized communication services to the
     public. These service providers include online information services, national and
     local entitles that permit customers to gain access to the Internet, and anyother
     person that permits customers to communicate via e-mail or bulletin boards. Access
                      and
     to in~formation records firomany of these entities may be subject to the ECPA.

·    All requests for information ~omservice providers (except telephone companies
                                must be coordinated
     whenseekingtelephonerecords)                                    Officeof
                                                   withthe Division-'s
     Enti~metEnforcement.




· TheECPA      onl;       held           service
         applies to records by third-party             and
                                               providers, hence
     does not.appiy to e-mail held by t~ sender or addressee, or held on the servers ofa
     company that provides internal e-mail services for its own employees.




                                             105




                                                                                 MADOFF      EXHIBITS-04593
      As a result of changes in the language of Section 2703 of the ECPA, and in telephone
      billing practices, service providers have increasingly submitted requests for
      reimbursement for production of transactional records regarding telephone and
      electronic      communication        services.   The staff continues   to believe   that such
      reimbursement was not contemplated at the time the statute was enacted; however,
     reasonable invoices submitted after compliance with staff subpoenas may be -
     considered. Assigned st~iffshquld consult with their supervisors and the Office of
     Internet Enforcement if they receive a request for reimbursement.

FurtherInformation:            .


           For fUrtherinformation on whether.the ECPA may apply and the procedures to
follow when it does, please consult the Office oEIntemet Enforcement and the Officeof
ChiefCounsel.




           4.7 EEandiing-Materials            from FinCEN or Other Sources Involving Bank
                   Secrecy   Act Material

Introduction:


           The Bank Secrecy Act ('LBSA") was enacted in 1970 and amended by the USA
PATRIOT Act. It is designed to prevent financial institutions, including broker-dealers,
~om being used as vehicles to hide the transfer of illegally obtained funds. The BSA is
codified at 31 U.S.C. Section 5311, et seq. The regulations implementing the BSA are
located    at 31 C.F.R       Part   103.


        For the SEC, the primary mechanism for enforcing compliance by brokers and
dealers with the requirements of the BSA is Section 17(a) of the Exchange Act and Rule
17a-8. In the mvestinent company contexf the relevant rule is Rule 38a-I of the ICA;
Basics:                                                                                                                              I


·    The Financial Crimes Enforcement;Network ("FinCEW') has determined that BSA                                                'I
     materials are non-public documents and~thatl absent certain circumstances, these                                           tf
     materials are privileged documents. Absent c~tain circumstances, staff is restricted
     by law ~om disseminating BSA material in litigation or to the public. However, staff
     may use the inform~itionc~ntained in theBSA material as a lead to possible                                                 .j
     underlying documents of value in an investigation. All hardcopyBSA material
        be        and under and or           form,
    should seglegatedkept lock key ifinelec~onic ina secure                                                                          i
            ~le.
    electronic                                                                                                                  :;I
·   BSA material may include, ambng~ther documents, Suspicious Activity Reports
    ~SARs"); Currency Transaction E~eports  ~CTRs") and Currency Transaction
    Reports by Casinos ("CTRCs") (i.e., reports on transactions in excess of$10,000);                                           ,i
     Reports of Foreign Bank and Financial Interests ~"FBARs"); Reports of International



                                                         106




                                                                                                      MADOFF   EXHIBITS-04594
     Transportation of Currency or Monetary Instruments ("CMIRs"); and Reports of
     Cash Payments         Over $10,000 Received in Trade or Business.

Considerations:


     Staff is permitted to share the information contained in BSA material with other SEC
     staff if relevant to an inquiry or invCstigation. Staff should not make copies or
     forward electronic copies ofBSA information, particularly SARs, which are highly'
     sensitive documents. Staff generally should not·disclose BSA information or its
     existence to persons who may be assisting in a matter, suchas an Independent
     Compliance Person, or Receiver because BSA materials are non-public documents.
     BSA materials        canriot be shown to witnesses or marked as exhibits in testimony.

     Please keep in mind that BSA materials may be embedded within a document
     production. Therefore, staff should add the following language to letter requests for '
     documents to regulated entities and to subpoenas to fmancial institutions: ;

     "If the document production contains Bank Secrecy Act materials, please
    segregate      and label those materials          within   the production."

Further   information:


·   Staff should    contact the Office     of Chief Counsel.     for fUrther information   about   how to
    handle BSA      materials  received    ~om FinCENor          other sources.


·   See also    Section   2.2.2.1   of the Man~ial.




                                                        107




                                                                                                   MADOFF   EXHIBITS-04595
              with           and
 5. Cooperation Other Agencies O~anizations
               5.1 DisclosureofIniormation and AccessRequests
 Basics:


                           obtained generate~ SEC during
               Allinformation     or        by   staff             or
                                                       investigations
            shouldbe'presumed confidential and nonpublic unless disclosure has been
 examinations
           authotized. SEC's permit staff, delegated
 specifically       The    rules  the    by                to
                                                   authority, grant
                             to                              authorities,
 accessto nonpublicinformation domesticand foreigngovernmental          self-
         organizations, otherspecified
regulatory           and                               of              to
                                     persons.Disclosures suchinformation
        of
members thegeneral       will        be                 to
                    public nomially madeonlypursuant theFreedom     of
Information        Act.


   2: "Discussion
Rule The     Ru~l:
                 and            with
       Cooperation coordination otherlawenforcement            oftenrequire
                                                        agencies
                in          of
thestaffto engage discussions nonpublic          prior
                                       information to thegrant~ofa  formal
access                                     to             was
      request.Rule2 of theSEC'sRulesRelating Investigations adopted  to
permit          with            who
      discussions thosepersons mayobtain                       information
                                              accessto nonpublic
       the
through SEC's       program.
               access               under 2      be       by
                           Discussions Rule must authorized
       at       the   of       Directpr. 2 extends totheconduct
officials orabove level Assistant     Rule       only        of
          and                  of
discussions not`tothe furnishing nonpublicdocuments.See Rule 2 of the SE'C's
'Rules Relating to Investigations, 17 C.F~R.Section 203.2.

The Access Pro~ram:

                     24(c)        Act      2461authorize SEC grant
               Section oftheExchange andRule           the  to
     to        information enforcement ~Note,
access nonpublic         in         files.        that
                                           however,. workproduct                                     :i
       privileged
andother                 is     disclosed, when
                infonnationrarely       even             are
                                              third-parties granted
accessto the other materialsin nonpublicfiles,·andshouldnot be disclosedwithout
specific supervisory approval.

              24c-1    disclosure following ofrequestors:
           Rule authorizes tothe        classes                                                  'f
                                                        authorities;
           ·· Federal state, localand foreigngovernmental
           ·· self-regulatory and similarorganizations;
                   financial
           · foreign              authorities;
                          regulatoj                                                              ij
           ·     SIP%and SEPCtrustees;
           ·     trustees inbankruptcy;                                                          ·T
                       counsel, similar
           · court-appointeci and         char~ed performing
                                     persons, wi~h
                        arising
                 fUnctions     ~omsecurities
                                           litigation (e.g,, as receivers-or trustees ·qf
                disgorgement funds);
           ·               licensing oversightauthorities(e.g., bar associations created
                professional         or                                                        - .
                by the courts); and
           ·                   or              of
                agents,employees representatives such persons.


                                               108

                                                                                                     j




                                                                                         EXHIBITS-049
                                                                                    MADOFF
Access      Procedures.


        The SEC's rules require that all access requests be in writing and signed by an
official who is in a sufficiently senior or supervisory position to make and enforce
                       Requestors generallyexpectedto use the Division'sform
requiredrepresentations.        are
access     letters.


           An access recommendation form must be signed by a recommending staff
                         at
memberwhois a supervisor or abovethe SK-16Level,The recommendation      form~(and
a copyof the incoming                         to
                     request)is then forwarded- an SECofficialauthorizedto
      the                 of           of         has
approve request.The-Director theDivision Enforcement beendeleg~ited
                         and
authorityto grantrequests, this authorityhas beensub delegatedto certainsenior
staff.


           When an access request has been approved, the appropriate letter is sent to the
                      coveredby the accessgrantmay then be disclosed.
requester,and documents
Further     Lnformation:


           For fUrtherinformation regarding the access program and procedures, please
consult     with the Office     ofChiefCounsel.



           Coaper~.fioowit6Criminll
         5.2            AuthoriGes
                     with                               component the SEC's
           Cooperating criminalauthoritiesis an important       of
enforcement mission. The SEC is an independent federal agency charged by Congress
                the
with upholding federalsecuritieslaws. The SEChas independent        authorityto bring
civil,but not criminal,actionsto enforcethose laws. This authorityis not compromised
when the Department of Justice or Statecriminal authorities conduct a criminal
            and/or
investigation                     to            charges
                 makeadetermination bringcriminal              with
                                                      concurrent the
SEC's investigation and/or civil action. Nonetheless, there are certain unique
             that
considerations arisewhencooperating                        as
                                   with criminalauthorities, discussedin
Sections       5.2.1   and 5.2.2 of the Manual.




                                                  109




                                                                                    MADOFF   EXHIBITS-04597
L·:   ;




                    5.2.1    Parallel Investigations

          Basics:


                Parallel civil and criminal proceedings are not uncommon." In furtherance of the
          SEC's mission and as a matter of public policy, the staff is encouraged to work
          cooperatively with criminal authorities, to shareinformation,             and to coordinate their
          investigations with parallel criminal investigations'when appropriate. There are,
          however, a number of considerations the staff should be mindfiil of when conducting a
          parallel investigation and when determining whether to seek authorization to bring a case
          that involvesa parallelcriminalinvestigation.Becauseeachcase presentsa uniqueset of
                        assigned staff should consult with supervisors whenever they are involved
          circumst~gnces,
          in parallel proceedings.

          Considerations:


                    While every situation is different, the stafftlpically        should keep the following
          considerations in mind when conducting a parallel investigation and when determining
          whether to seek authorization to bring a case that involves a parallel criminal
          investigation:

                            It is important that the civil investigation has its own independent civil
                            investigative purpose and not be initiated to obtain evidence for a criminal
                                       This           the
                            prosecution. doesnotprevent staff~omtakinganactionsimply                                                         1
                            because the action will benefit not only the SEC investigation, but also a
                            criminal investigation. It does mean, however, that staff should not take
                            an SEC civil investigative action for which the sole aim is to benefit the
                            criminal authorities.

                                   should itsownindependent
                            Thestaff    make                      about
                                                           decision what
                                     to    what          testimony take, questions
                            documentsrequest, investigative      to     what                                                            ,I
                            to ask during testimony, the location oftestimony:and similar matters.



                     Court     in           v.Kordel, U.S.1,11(1970) parallel and
          8 TheSupreme recognized(IniredSlales     397             that    civil
                proceedings
          criminal               auh
                        areappropriate
                                    constitutional.Court Appealsthe Circuit it
                                              Asthe of       for D.C. put                                                               'f
              ieading ofSEC Dresser,628
          inthe    case    v.        F~2d.1368, Cir. "effective
                                             1377
                                                @.C. 1980),               ofthe
                                                                  enforcement                                                           i.:
          securities laws require thatthe SEC and Ithe Department of] Justice be able td investigate possible
                  simultaneously." courts issued
          violations          Other     have   opinions thesame
                                                     to       effect. SEC First
                                                                   E.g.. v.                                                             II
                Gro~p    65~9 660,   (,,   1981) simultaoeous ofcivil
          Financinl o/TexaF;F~2d 666-67 Cir. ("Fh~       prosecubion                                                                    ;%
                                                                              v.
          and criminal actions Is generally unobjectionable."); O~nitedSla~es Srringer. ~21 F3d 1189, 1191 (9th
          Cir.· 2008) ~I~here is nothing improper about the government undertaking simultaneous criminal and civil
          investigations...~. Moreover, the federal seci~ritieslaws themselves expressly provide that the SEC can
          share information gathered in a civil investigation with other government agencies and provide information                    :j
          to the Department of Justice for a determination whether to institute criminal proceedings.See Section .
                         Act;    2              Act;                (access nonpublic
          20(b),Secu;ities Section ltd), Exchange 17C.F.R g 240.24c-1     to
          information).
                                                                                                                                         j
                                                              110




                                                                                                           MADOFF      EXHIBITS-04598
                    ·                                        whetherthere is a parallelcriminal
                           If askedby counselor any individual
                           investigation, staff should direct counsel or the individual to the section of
                                  dealing "Routine of Information'," statethat it
                           Form1662     with     Uses             and
                                                               not
                           is the generalpolicyof the Commission to commenton investigations
                           conducted by law enforcement authorities responsible with enforcing
                           criminal laws. Staff should also invite any person who raises such issues
                                    criminal
                           to contact                if                the      of
                                           authorities theywishto pursue question :
                           whether there is a parallel criminal investigation.' Should counsel or the
                           individual ask which criminal authorities they should contacf staff should
                           decline to answer unless authorized by the relevant criminal authorities.

                    ·      Supervisors must be involved in all significant discussions and written      ··
                           communications     with criminal     authorities.


                    ·      Generally, sharing information with criminal prosecutors is permissible,
                           even though the sharing of information is intended to and does in fact
                           assist criminal prosecutors. In addition, in certain circumstances it is
                           appropriate for criminal authorities to ask SEC staff to refi-ain~-omtaking
                           actions that would harm the criminal investigations, and likewise it can -be
                           appropriate for SEC staff to ask criminal authorities not to take action that
                           would harm our investigations. Each case is unique and assigned staff
                           should discuss these and other considerations with their supervisors.

     Further    Information:


     ·    For more information regarding the '~Discussion Rule" and access requests, see
          Section    5.1   ofthe   Manual.


     ·    For more information onjoint proffer sessions, see Section 3.3.5.4 ofthe Manual.

               5.2.2 Grand         Jury Matter

     Basics:   :


                                   not
               ~he SEC is generally privy to sandjury matter. Grandjury matteris subject
i.                     restrictions forthinFederal ofCriminal
     to theconfidentiality       set            Rule              6(e)
                                                           Procedure and


     9 This section of Form 1662 states that'"The Commission often makes its files available
           government
     toother              particularly States
                   agencies,        United         and prosecutors.
                                            Attorneys state
     There is a likelihood that information Suppliedby you will be made available to such
     agencieswhereappropriate.Whethe~brnot the Commission    makesits filesavailableto
     othergovernment                                    matterbetweenthe Commission
                    agenciesis, in general,a confidential
     and such governmental           agencies."



                                                              111




                                                                                               MADOFF        EXHIBITS-04599
            state            procedure. 6(~)provides secrecy all
    analogous rulesof criminal        Rule         for     of
    "matter(s)occurringbeforethe grandjury," subjectto certainexceptions.
    Considerations:


          ·           to             in                 state
              Subject the limitations Rule6(e)andsimilar rules,the staffis allowed
              to receive          from
                        information thecriminal           aboutthe statusof the
                                                authorities
                                  and        investigative
              criminalinvestigation the fUture           plansof the criminal
              authorities.


          ·   Beforereceivinginformation fiom the criminalauthoritiesin an investigation,
              staff shouldinquirewhetherany of the information providedcomesdirectlyor
              indirectly.~om grandjuryproceedings,  includingsubpoenas.

          ·   if assignedstaffcomesintopossessionofgrandjury matter,heorshe should
                       inform or hersupervisor ordertd takeappropriate
              immediately    his             in                      steps.
              5.3 Cooperation with the Food and Drug Administration (cFDA")
 Authority:


· Section33I(i) of the FederalFood,Drugand CosmeticAct prohibitsthe FDA from
                                            agenciessuchas the SEC.
  disclosingtradesecrets,evento other·federal

· 21 C.F.R.Section20.85allowsthe FDA to shareother nonpublicrecordswith other
                                                     the
  federalagencies,but beforedisclosingsuch informafion FDA mustreceivea
                   that               will
  writtenagreement the information not be firther disclosedbythe other
  agencywithoutwrittenpermission  ~om the FDA. -                                                             .;i
·     The FDA will not agree to further disclosure of confidential commercial information
      without the consent of the owner or submitter of the information.

                                    for        disclosure, agencywill
· Beforethe FDA will grantpermission any fUrther         the
                to    potelltially or
                                    othenvice
      ~e~document identify privileged protected
     FDA
r The Commissioner any must  authorize
  employees ~21C.F;R Section 20.l(c)).
                                                      FDA
                                       investigative by
                                               testimooy                                                       i
Basics.



                  may            ~om      in            arising
              Staff seekinformation theFDA, investigations ~omreferrals
                     the        relevant
by theFDA,or in which FDAmay~l;ave                (For     a
                                       information. example,
company'spublicstatements        the                       of
                            -about status for EDPL-approval its productmay cause                              It
                           ~om the FDA about its reviewo'fthe product.) Before
the staffto seek information
makingany requestto the FDA,staffshould reviewthe statutesand regulationsthat


                                              112




                                                                                  MADOFF    EXHIBITS-04600
    the         to      information staff.
govern mA'sabilitydisclose                 staff  also
                               toSEC Assigned should
      with supervisors thescope therequest theappropriate
consult their         about     of        and
        The        Enforcement
addressee. designated              FDA
                            Division liaison     be       of
                                            should informed
requests.

               non-public
        Toobtain                or      staff        written
                       informationrecords, canpreparea     requesf
including:
               ·                  of        of          requested,
                     identification the t~ype information
                        the    is        of        investigation,
               i whether request theresult anongoing
                           for    the         is
               · thepurpose which information requested,
                              that
               · acknowledgementtrade     information bedisclosed,
                                     secret         cannot
                        to'protect confidentiality
               · agreement      the                      information
                                              of non-public
                     received,
               ·     agreement                        disclosethe non-public
                                         not to fUrther                               without
                                                                            inf~rmation
                    · written        consent   f~om the FDA.


                      request
            The written           be       to            FDA      person.
                            should addressed an appropriate contact
                                testimony an FDAemployee, canprepare
            To obtaininvestigative      ~om            staff       a
written request, including:
                                   of           whosetestimonyis sought,
                      identification the employee
                                  of         matter theinvestigation,
                      a description thesubject    of
                ·                                     testimony,
                      the subjectmatterof the requested
                                would
                · howthetestimony    servethepublic       and     the
                                                   interest promote
                      interests        of the FDA.


            The written request should be addressed to the Commissioner of the FDA. Before
       testimpny anFDA
requesting    ~om          staff   contact appropriate
                     employee, should the          FDA
 1avc3ler.

            To request FDA permission to make further disclosure ofnon-public records or
         the has     to staff, can    a       request
informationFDA providedSEC staff preparewritten    and
                        or          it      to        to
 makea set of thedocuments transcripts wishes disclose, attachto the request.
 Considerations.

                    relating FI)Aconsidel-ation
             Documents     to                           for       or
                                            ofapplications newdrugs
 biologics can be extremely                                 millions
                                          iroluminou~-sometimes ofpagis--so staffshould
 consider     the extent        to             are    to             before
                                     which they relevantitsinvestigation making broad
         for           relatingto a product.
 requests, all documents
       ~Yhen        to       a
            preparing litigate caseinwhich              FDA
                                            non-public documents          or
 testimony
         transcriptswillpart th~
                      be of       SEC's initial disclosure, staff should keep in
                                                       it
 mindthat before the FDA consents to fUrther disclosure, willconducta reviewof each
 pageto determine     any                               review take
                                               B~causethis
                                     isprivileged.
                whether of thematerial                       can


                                                               113




                                                                                         MADOFF   EXHIBITS-04601
 a very longtime, staff should allow ample time for that review before filing a case or in
 the litigation discovery schedule.

        If staff expects to charge a defendantwho is not the owner of the information (for
 example, a current or former employee of the company), staff should seek consent from
 the company for the disclosure as early as practical, because the FDA will not agree to
 fUrther disclosure           of confidential    commercial      information   without the consent of the
 owner     or submitter        of the information.


 Further       information.


 · Please refer any questions about FDA matters to the designated Enforcement Division
     liaison      or the Office     of Chief    Counsel.


 i' For more information on the FDA, see Inside the FDA, a manual availableon the
    FDA's public website, www.fda.~-ov.

      5.4 Cooperation withthe Public Company Accounting Oversight Board
           ("PCAOB")

 Basics:


        The SEC and the PCAOB have a mutual interest in ensuring·that investigations
relating to the audit profession are properly coordinated. This will help to promote,
among other things, consistent regulatory approaches as well as efficient and cost
effective investigations and enforcement actions.

CoI~S~                                                                                                                          ·~
·     The SEC and PCAOB generally have condurrentjurisdiction over auditors but there
      may be instances in which it may be preferable for one organization to be principally
      responsible for investigating an auditor's conduct.

     of        the may to          when        investigations
~ Some thefactors staff wish evaluate coordinating                                                                              i1
      with the PCAOB include differences between charges·and remedies, the nature of the
      conduct,       and the standards      involved.

      5.5 InformalReferrals               fromEnforcement             ·                                              ·          ,4

·Introduction:                                             -                                      :                             ; i
                                                                                                                                ~f
        The staff may informally refer a matter to federal or state criminal authorities,
self-regulatory organizations, the Public Company Accounting Oversight Board, or state
agencies.Thedecision makean informal
                   to              referral
                                          should madein theHome
                                                be            Office                                                             j
by officials at or above the level ofAssociate Director. In the Regional Offices, the



                                                           114




                                                                                                      MADOFF   EXHIBITS-04602
 decision to make an informal referral should be made by an official at dr above the level
 of Regional Head of Enforcement.

        The staff may also determine that it is appropriate to refer a matter or information
 concerning potential professional misconduct to state bar associations or other state
             associations.Suchreferrals,however,are considered
; professional                                                         actions
                                                              Commission
 and the staff must follow the procedures described in Section 5.5.5 of the Manual.

 AuthoriDl:

    A number of SEC rules grant the staff the authority to make informal referrals.

    · ` Rule 5(b) of the SEC's Informal and Other Procedures, 17 C.F;R. Section
            202.5(b):

            After investigation or otherwise the Commission may in its discretion take one or
            more of the following actions: Institution of administrative proceedings looking to
                                                       of
            the impositionofremedialsanctions,initiation injunctiveproceedingsinthe ·
            courts, an4 in the case ofa willful violation, reference of the matter tothe
                     of                              The        may
            Department Justicefor criminalprosecution. Commission also,on
            some occasions, refer the matter to, or grant requests for access to its files made
            by, domestic and foreign governmental authorities or foieign securities
                                      organizations
            authorities,self-regulatory                               or
                                                  suchas stockexchanges the National
            Association of Securities Dealers, inc., and other persons or entities.

    ·       Rule 2 of the SEC's Rules Relating to Investigations, 17 C.F.R Section 2032:

            Znformation or documents obtained by the Commission in the course of any
            investigation or examination, unless made a matter of public record, shall be
                                but
            deemednon-public, the Commission       approvesthe practicewherebyofficials
            of the Divisionsof Enforcement,Corporation  Finance,Tradingand Markets,and
            Investment              and
                       Management the Officeof International      Affairsat the levelof
            AssistantDirectoror higher,and officialsin RegionalOfficesat the levelof
                                                               or
            AssistantRegionalDirectoror DistrictAdministrator higher,mayengagein
            and mayauthorizemembersof the Commission's     staffto engagein discussions
            with persons identified in Section 240.24c-l(b) of this chapter concerning
            information obtained in individual investigations or examinations, including
                 investigati~ns
            formal,                 pursuant Commission
                             conducted    to         order~
        ·   Rule 24c-l(b) of the Exchange Act, 17 C.F.R. Section 240.24c-l(b):

              Commissionmay,
            The                      and a       that information
                        initsdiscretion uponshowing such
                                                in              to
            is neened,providenonpublici~formation its possession any of the following
                                         such
            personsif the personrecei~ving nonpublicinformation  providessuch
            assurances of confidentiality as the Commission deems appropriate:



                                                  115




                                                                                       MADOFF     EXHIBITS-04603
                        state,Idealor foreign
           (I) A federal,                           or            subdivision,
                                            goverdment anypolitical
           authority,'agency or instrumentality of such government;
           (2) A self-regulatory organization as defined in'Section 3(a)(26) of the Act, or
           any similar organization empowered with self-regulatory responsibilities under
           the federal securities laws (aS defmed in Section 3(a)(47) of the Act), the
           Commodity Exchange Act (7 U.S.C. Section i, et seq.), or any substantially
           equivalent foreign statute or regulation;
           (3) A foreignfinancialregulatoryauthorityas definedin Section3(a)(S1)of the
           Act;
          (4) The Securities Investor Protection Corporation or any trustee or counsel for a
          turstee appointed pursuant to Section 5(6) of the Securities Investor Protection
          Act of 1970;
          (5) A trustee in bankruptcy;
          (6) A trustee, receiver, master, special counsel or other person that is appointed by
          a court of competent jurisdiction or as a result of an agreement between the
          parties in connection with litigation or an administrative proceeding involving
          allegations of violations of the securities laws las defined in Section 3(a)(47) of
                                Rules         17
          theAct)ortheCommission's of Practice, CFRPart201,or otherwise,
          where such~trustee,receiver, master; special counsel or other person is specifically
          designated to perform particular functions with respect to, or as a result of; the
          litigation or proce~ding or in connection with the administration and enforcement
          by the Commission              of the federal Securities laws or the Commission's   Rules of
          Practice; '
          (7) A bar association, state accountancy board or other federal, state, local or
          foreign licensing or oversight authority, or a professional association or self- .
          regulatory authority to the extent that it performs similar functions; or
          (8) A duly authorized agenf employee or representative of any of the above
          persons~




          5.5.1      InformalReferrals          to Criminal    Authorities

Basics:


                         Investigations revealconduct warrants
          Staffinquiriesor           may            that            referral
                                                             informal                                                     11
to criminallaw euforcement             -
                             authorities includingfederal,state or:foreigncriminallaw
enforcement  authorities.If thkreis a matteror conductthat appearsto warrantan                                               I
informalreferral,staffgenera!lyshouldfollowthe proceduresbelow:                                                              i

                staff   consult their
          Assigned should    with direct
                                       superviSbrsobtain
                                               and     approval
                                                             at                                                             j
                     Direc~torRegional
          theAssociate      or                       level
                                     HeadofEnforcement to inform~ill~i~refer                                              -i 1
          the matter or conduct~·Informal referrals td foreign criminal authorities should
                                                                     so
          also first be discussedwith the~ffice ofFnternationalAffairs that                                                ii
                  isgiven
                       to    and
                               pmccduresforeign
          consideration poli~iks    ofthe authorities.                                                                    ;j


                                                         116

                                                                                                                          i. i




                                                                                               MADOFF    EXHIBITS-04604
      ·    Once Associate or Regional Head of Enforcement approval has been sbtained,
           assigned staff along with their supervisors may notify the appropriate criminal -
           authorities.


      ·    Staff may then invite the criminal authorities to make an access request (see
           Section 5.1 regarding access requests). When the access request has be~n
                                                  ~the
           approve~ staff may share documents fi~om investigative file. Staff may not
           forward documents to the criminal authorities prior to the approval of the access
           request.

     ·     After an informal referral to criminal authorities         is made, staff is encouraged           to
           maintain periodic communication with the criminal authorities concerning the
           status of any criminal investigation. See Section 5.2 of the Manual for
           information relating to parallel investigations,the grandjury secrecy rule, and
           other concerns when cooperating with criminal authorities.

     Considerations:


     · In determining whether to make an informal referral to criminal law enforcement
       authorities, the staff may consider, among other things, the egregiousnessofthe
       conduct, whether recidivism is a factor, and whether the involvement of criminal
       authorities will provide additional meaningfUl protection to investors.

     ·     In determining whether to make an informal referral to federal, state, or foreign
           criminal authorities, the staff may also considerjurisdictional factors, such as
           where the conduct occurred or the domicile of the possible violators.

           5.5.2 Informal Referrals to Self Regulatory Organizations                   (('SROs")

Basics:


           In the course of conducting an inquiry or investigation, the staff may determine
that it would be appropriate to informally refer the matter, or certain conduct, to one or
more self-regulatory organizations ("SROs"); In particular, if an inquiry or investigation
concerns matters over which SROs have-enforcementauthority                       (e.g, fmancial industry
standards, rules and requirements related to securities trading and brokerage), staff should
evaluate     whether      to contact   the SRO about   the matter   and assess    whether   it would    be
appropriate for the SR~ to consider investigating the matter inlieu of, or in addition to,
an SEC Enforcement investigation. Because SROs may impose disciplinary pr remedial
sanctions againsttheir members-or associated individuals, staff generally should make an
                                                                                         -
effortto apprisethe SRO aboutconductthat mayviolatethe.rulesof the SRO- internally,":'·::-
staff generally should consult with the Office of Market Surveillance and the Division of
Trading and Markets in evaluating po~ntial informal referrals to SROs.

           if there is a matter or conduct that appears to warrant an informal referral, staff
generally should follow the procedures below:


                                                       Iia




                                                                                                       MADOFF     EXHIBITS-04605
      ·                                                                      as
             Assignedstaff shouldconsultinitiallywith their directsupervisors, well as the
                  of     Surveillance theDivision Trading Mark~ts,
             Office Market          and         of      and     as
             appropriate.


               staff
      · Assigned mustobtain       at           Director Regional
                           approval theAssociate      or       Headof
                       levelto informallyrefer the matteror conduct.
             Enforcement

                    has
     · Onceapproval beenobtained,          staff                     may
                                    assigned alongwiththeirsupervisors
                          liaison theSROto discuss matter
       notifltheappropriate      at              the    and/orconduct,and
           a possible informal referral.


     ·                     the
          Staffmaytheninvite SROto makean access       (See     5;1
                                                 request Section of the
          Manual         access
                 regarding              When accessrequest beenapproved,
                               requests).   the           has
                                 from            file.
          staffmaysharedocuments the investigative Staffmaynot forward
                    to                       of        request.
          documents the SROpriorto theapproval theaccess
                             to
     · Afteran informalreferral an SROis made,staffshould       periodic
                                                         maintain
                     with                 the
       communication theSROconcerning statusof theSROinquj· or
                      and
          investigation periodicallyassesswhetherany or additionalSEC Enforcement
          measures     should   be taken.

Considerations:


              should mindfUl thefollowing
          Staff    be     of                       when
                                       considerations making~or :1
considering an informal ieferral to an SRO:

    · Intheearly     of        or           staff    consider
                stages aninquiry investigation, should      evaluating
          whether an informal referral is warranted. As the investigation progresses, the
          staff are encouraged to periodically review the record to determine whether a new
          or additionalinformalreferralmaybe appropriate.

            should efforts continue
    · . Staff     make      to                    with staff
                                      communication SRO throughout
        theSRO's       or           toensure SEC andSRO arenot
                 inquiry investigation     that staff      staff                                                i
                   the
        investigating same       and;so       staff    of
                          ~diinduct, thatSEC isaware any
                      by              an            or
          determination SROnotto pursue investigation certain      of
                                                             avenues
          investigation.
                                                                                                               _i
Further information:

       refer       about   an
· Please anyquestions making informal
                                   referral anSRO supervisors
                                          to     to        .                                                   ;1
   and/or the Office of Market Surveillance.

    guidance receiving an SRO,Sectioo uPUr
· For regurding ;karralsfiomsec 2.22.5
   Manual.




                                               118




                                                                                 MADOFF       EXHIBITS-04606
           5.5d Informal Referrals to the Public Company Accounting Oversight Board
           (((PCAOBn)

Basics:


         In certain instances, Enforcement staff may informally refer matters regarding
auditor misconduct to the Public Company Accounting Oversight Board ("PCAOB'~,
which is authorized, under Section 105 of the Sarbanes-Oxley Act, to conduct
investigations, and impose disciplinary or remedial sanctions against public accounting
frrms and their associated persons. if there is a matter that may be appropriate for
referral, assigned staffgenera!ly should follow the procedures below:

     ·     Assigned staff should consult initially with their supervisors.

     ·     Assigned staff should then get approval at or above the Associate Director or
           Regional Head of Enforcement level to refer the matter.

     ·     Assigned    staff should then discuss the matter with the Chief Accountant   of
           Enforcement, and secure his or her approval for making the referral.

     ·     Assigned staff should then, along with their supervisor, or through the office of
           Enforcement's  ChiefAccountant,  call the head ofenforcement,      or another
           designated of~cial, at the PCAOB, and discuss the matter.

     ·     Staff can then invite the PCAOB to make an access request (see Section 5.1).
           Once the access request has been approved, staff can share documents ~-om the
           investigative file. Staff should provide a copy of the access request to the Chief
          Accountant     ofEnforcement.


Considerations:


           Please keep in mind the following considerations when making a referral to the
PCAOB:



     ·    How old is the conduct? PCAOB typically hasjurisdiction ~om October 2003
          forward for U.S; auditfums, and July 2004 for foreign audit firms.

     ·    Staff should consider.evaluating whether to refer a matter as early as the inception
          of an investigation, and in any event, as the investigation progresses.

     ·    Staff should continue communication with PCAOI3 staff throughout the
          PCAOB.'s investigation, so that SEC staff and PCAOB staff are not investigating
          the same conduct, and also so tt;at SEC staff are alerted to any determination by
          the PCAOB notto pursue its investigation.




                                                 119




                                                                                           MADOFF   EXHIBITS-04607
  Further Information:

            refer       about   an      referral thePCAOB the
       Please anyquestions making informal    to        to
       ChiefAccountant ofthe Enforcement Division.

                regarding
      Forguidance               tips  the  see      2.2.2.2 the
                        receiving from PCAOB, Section     of
       Manual.


             5.5.4 InformalReferralsto StateAgencies
  Basics:


             Congress created a-dual securities regulatory system in~which both federal ~ind
 state       serve
      agencies specific,
                      valuable
                             functions protecting
                                    in          investors. thecourse
                                                        In         of
           an
 conductirig informalinquiryor formalinvestigation, staff maydeterminethat it
                                                  the
     be        toinformally the
 would appropriate                 or     conduct, regulators.
                        refer matter,certain   tostate
 It may be appropriate forthestateagency investigate matter lieuof,or in
                                        to         the    in
                             investigation.
 additionto, an SECEnforcement

                  is       or     that    to      an       referral,
            Ifthere a matter conduct appears warrant informal    staff
 generally should follow the procedures below:

                 staff        consult their supervisorsobtain
     · Assigned should with direct                  and          at
                                                           approval
       the            Director        Head         level
           Associate orRegional ofEnforcementtoinformally
       the matter or conduct.
                                                               refer

     · Once            has obtained, staff with supervisors
               approval been             assigned along their                may
       contact the state agency and discuss with themtherelevant      of
                                                               ftndings theinquiry
                        todate explain the isinformally the
       orinvestigation artd
       matter.
                                           why staff              referring

          may invite state
    · Staff then            to   an     request(see 5.1
                   the agency make access        Section
            regaiding access requests). When the access request has been approved, staff may
            share         ~om            lile.    may
                 documents theinvestigative Staff notforward       to
                                                            documents
                         prior
            thestateagency totheapprovaloftheaccessrequest.
_C~-a_t~:                                                                                                             -i
                                                                                                                      ;j
        Assigned staffshould discuss.with t~ieir               whether be
                                                         supervisorsitmay        appropriate
to informally refer a matter or certain conduct to the·state. For example, a state may have
a particularinterest caseor typeofcase,the victims or parties may be conceiztrated in;
                     ins
a particulaigeographiclocation,the conductor amountoflossesmay be limited,though
                                                                                                                      j
significant,or there may be no federaljurisdiction.            of
                                               In theearlystages an inquiry or
investigation, staffshould
investigation       the
                              evaluate
           progresses, sbffis encouragedperiodically therecord
                                      to
                                         whether    an
                                                  review
                                                         informal referral is warranted,
                                                             to
                                                                                           As the                         j
      whether or       informal may           Staf~
determine a new additional referral beappropriate. isalso

                                                   120




                                                                                            MADOFF   EXHIBITS-04608
        to       communication thestate
encouragedcontinue         with            after     referral
                                      agency aninformal
has been       made.

           5.5.5 Informal Referrals·to   Professional Licensing Boards    :

Basics:


                                               may
           From time to time,staffinvestigations revealconductthat warrants.referral
             licensingboards
td professional                  organizations, asa state association,
                         orsimilar          such        bar
          board,
accountancy              association selfregulatory
               professional        or                     that     a
                                                  authority performs
similar    function.


                  for         misconduct considered
           Referrals profe~ssional    are                action.
                                                 Commission The
Office ·oftheEthicsCounsel               Counsel's
                              intheGeneral              has
                                                  Office subdelegated  authority
to refer possible professional         to           lidensing
                               misconduct professional             Accordii~gly,
                                                            boar'ds.
                        the
the staffshouldfollow procedures             below
                                     described     whenrecommending athat
          be        for               Tne       to       that
professional referred possiblemisconduct.decision recommend a
          be        for      misconduct bemade officials orabove
professional referred possible       should      by     at
the level of Associate Director or Regional Head of Enforcement.

Attorney Misconduct:

·     Contact the Ethics Office to discuss the situation.

·     If the EthicsOffice     to                the          typically for
                         agrees refertheattorney, EthicsOffice       asks
      moreinformation,          the
                        including Action             and
                                         Memorandum anypublicfilings ifor
      thereareno existmg            an
                          documents, email          the        conduct.
                                           describing attorney's
·                                                                    and
      The EthicsOfficetypicallywill forwardall relevantpublicdocuments an access
            to          with       letter     the       conduct.
      request thebaralong a referral describing attorney's    If
                                  only the referralletterwill be sent.
      there are no publicdocuments,

                typically periodically
· TheEthicsOffice       will              the
                                    contact StateBarto trackthestatus
      of the    referral.


Accountant         Misconduct:


                  has     not            against accountant, the staff
i If the Commission decided to takeaction~     an         but
      believes the accountant's conduct warrants referral, staff should send its
                   for                                    the
      recommendation referralto the EthicsOffice,following proceduresfor
      attorney referrals.

                   has                a        public
 i If the Commission takenactio~againstcertified              the
                                                     accountant, Officeof
                     ("OCA"),
   the ChiefAccountant            than
                             rather theEthics         will
                                               Office, evaluate whethera
             is          Staff   notify ofanyaction
      referral appropriate. should    OCA               a
                                                  against CPh,evenif .
      his or her conduct did not relate to his or her position as an accountant. If


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                                                                                      MADOFF   EXHIBITS-04609
               OCA          the        State  of         of
     appropriate, willnotify appropriate Board Accountancy the
     actionand forwardthe relevantpublicdocuments.
Considerations:


              a         is          whenthestaffrecommends brings
    · Generally, referral appropriate                   and     an
                   actionagainsta professional.However,in somecaseseven when an
         enforcement
                  actionis notappropriate, staffmaybelieve professional's
         enforcement                    the              the
                warrantsreferral. Assignedstaff shoulddiscusspossiblereferralswith
         coriduct
         their supervisors.

                   typically notrefermatters private
         TheDivision        does           to           that
                                                   bodies perform
                analogous government
         fUnctions       to                           informal
                                   agencies.Forexample,              are
                                                             referrals
         not made to private bar associations, the American Institute of Certified Public
                    or               for       Management Research
         Accountants, the Association Investment        and

           most     concern
    · Though referrals            and        the      Office
                          attorneys accountants, Ethics    may
                                misconduct theappropriate
        alsoreferother:professional     to                     body.
                                                        Licensing




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                                                                                   MADOFF   EXHIBITS-04610