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ARIZONA STATE SENATE
Fifty-Fourth Legislature, First Regular Session
AMENDED
corporation commission; securities; subpoena
Purpose
Prohibits the Arizona Corporation Commission (ACC) from making public any information identified under oath as a trade secret without first redacting the information or notifying the subpoena recipient (recipient). Allows recipients to initiate action to halt a subpoena.
Background
The ACC was established by Article XV of the Arizona Constitution and has the authority to prescribe just and reasonable rates and charges to be collected by public service corporations. Additionally, the ACC makes rules, regulations and orders governing the business transactions of corporations (Ariz. Const. art. 15, § 3). The Securities Division of the ACC manages the securities marketplace through investigative actions and review of potential securities offerings and registers securities, securities dealers and brokers and investment advisers and their representatives.
The ACC, the Director of the Securities Division of the ACC (Director) or other agents designated by the ACC may initiate and conduct investigations to determine if any individual or corporation has violated, or is about to violate, any securities laws enforced by the ACC and may request relevant information through a subpoena during an investigation (A.R.S. §§ 44-1822 and 44-1823).
A trade secret means information, including a formula, pattern, compilation, program, device, method, technique or process, that both: 1) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and 2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy (A.R.S. § 44-401).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
1. Allows, before compliance with a subpoena, the recipient to:
a) object to, claim privilege from or move to quash the subpoena with the ACC; or
b) initiate an action in superior court to object to, claim privilege from or move to quash the subpoena.
2. Allows the recipient to certify under oath that documents responsive to the subpoena are trade secrets and requires the recipient to identify the portion of the document that contains the trade secret and the reason it is a trade secret.
3. Prohibits the ACC from making public any information identified under oath as a trade secret without first:
a) redacting the information from the document; or
b) notifying the recipient at least 14 days before the complete document is made public.
4. Allows a recipient to apply to a superior court for injunctive relief on the basis that disclosure of the trade secrets will cause the recipient irreparable harm.
5. Requires a superior court to exercise its contempt powers if the court finds that a trade secret certification or request for injunctive relief is made in bad faith.
6. Removes the ACC's statutory authority to issue and apply to enforce a subpoena in Arizona at the request of a securities agency or administrator of another state.
7. Removes the ACC's and the Directors' permission to authorize to disclose confidential names, information or documents obtained during any examination or investigation not contrary to the public interest.
8. Makes technical changes.
9. Becomes effective on the general effective date.
Amendments Adopted by Committee
1. Requires trade secrets obtained through a securities subpoena to be redacted before information is publicly released or requires a 14-day notice to be given to recipients before the complete document is released.
2. Removes the ACC's authority to issue and enforce subpoenas in Arizona at the request of a securities agency or administrator of another state.
3. Removes the ACC's and the Directors' permission to authorize to disclose confidential information obtained during an investigation.
Senate Action
COM 1/31/2019 DPA 4-3-1
Prepared by Senate Research
February 1, 2019
MG/AA/gs