Judge Tells SEC To Keep Hands Off Smartphone Passwords

Smart PhoneWall Street Journal reporter Jacob Gershman today wrote that a federal judge in Pennsylvania ruled that the Securities and Exchange Commission (SEC) can’t force two former credit-card company employees accused of insider trading to give up their personal passcodes for their work-issued smartphones.

The SEC needed the passcodes to access the data on the phones. In a ruling issued Wednesday, the judge held that the codes are personal, not corporate records, concluding that the defendants have a constitutional right not to share them with the government. Agreeing with the defendants, U.S. District Judge Mark Kearney said the passcodes were protected because in his view they weren’t corporate records. Only the former employees — and not their employer — knew them, he said.

The judge wrote that the “SEC has no evidence any documents it seeks are actually located on the work-issued smartphones, or that they exist at all. Thus, the foregone conclusion doctrine is not applicable.”

“The SEC is just guessing that there’s something there on the phone. That’s why the court found the ‘foregone conclusion’ doctrine doesn’t apply,” Greg Morvillo, an attorney for the defendants, told Law Blog.

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