## Facts

- A Swiss bank executed a large purchase of St. Joe Minerals call options and a smaller purchase of St. Joe common stock shortly before a public tender-offer announcement.
- The tender offer price substantially exceeded the pre-announcement market price, and the announcement caused a sharp price increase.
- The bank closed out the options position and sold the stock immediately after the announcement, yielding nearly $2 million in rapid profits.
- The SEC investigated and brought a civil enforcement action alleging suspected insider trading under Exchange Act § 10(b) and Rule 10b-5, naming the bank and unknown trading principals.
- The court entered a temporary restraining order freezing the trading proceeds and directing the bank, “insofar as permitted by law,” to disclose the principals’ identities.
- In discovery, the SEC sought the names and identifying information of the bank’s clients who directed the trades.
- The bank refused to identify the clients, asserting Swiss banking secrecy laws and claiming disclosure risked criminal liability for the bank and its personnel in Switzerland.
- After months of unsuccessful efforts to obtain the information, the SEC moved to compel disclosure and requested sanctions for noncompliance; the bank provided only limited partial responses after securing a limited waiver for some accounts.

## Issues

1. Whether a U.S. court may compel a foreign bank that facilitated allegedly unlawful trades on U.S. securities markets to disclose the identities of its clients notwithstanding foreign banking secrecy laws.
2. Whether asserted risk of foreign criminal liability and international comity concerns excuse noncompliance with U.S. discovery obligations or bar contempt sanctions.

## Decision

- The court granted the SEC’s motion to compel discovery.
- The court ordered the bank to disclose the identities of the principals behind the suspicious St. Joe trading.
- The court held that foreign secrecy law did not provide an absolute bar to U.S. discovery where the information was central to enforcing U.S. securities laws concerning U.S. market transactions.
- The court indicated that continued refusal could be met with severe contempt sanctions.

## Legal Principles

- Foreign blocking or secrecy statutes do not automatically defeat U.S. discovery; courts consider them within a broader comity and fairness analysis.
- A party’s good-faith efforts to comply despite foreign-law constraints are a key factor in deciding whether to compel discovery and whether sanctions are appropriate.
- When alleged misconduct involves transactions on U.S. securities markets and requested discovery is central (such as identifying actual traders), U.S. regulatory and adjudicatory interests may outweigh generalized foreign secrecy concerns.
- A foreign intermediary that participates in U.S. markets may be required to meet U.S. discovery obligations and may not use foreign secrecy law as a litigation shield to impede investigation of suspected violations.

## Conclusion

The court compelled disclosure of the client identities behind suspect options trading executed through a Swiss bank on U.S. markets, rejecting Swiss secrecy law as a categorical defense and signaling that noncompliance could result in contempt sanctions.


SEC v. Banca Della Svizzera Italiana, 92 F.R.D. 111 (S.D.N.Y. 1981)