## Facts

- The SEC opened a formal investigation into potential federal securities-law violations involving the offer and sale of pre-IPO shares of Facebook, Inc., including alleged false statements to investors and other fraudulent conduct.
- The SEC asserted that Ventures Trust raised funds to buy pre-IPO Facebook shares and that Paul Tabet was a managing member.
- The SEC represented it had evidence that Tabet and others raised at least $3 million from investors by selling interests in Ventures Trust entities, while representing that the entities owned or would buy pre-IPO Facebook (and other) shares.
- The SEC stated the investigation included whether investor funds were misused for personal purposes.
- To trace funds and identify possible victims and participants, the SEC issued an administrative subpoena to Bank of America seeking three years of records for accounts held by Paul and Jenifer Tabet.
- The SEC provided the notice required by the Right to Financial Privacy Act of 1978 (RFPA), and the Tabets filed an RFPA customer challenge motion to quash the subpoena.

## Issues

1. Whether the SEC complied with the RFPA’s procedural requirements for obtaining customer financial records through an administrative subpoena.
2. Whether there was a demonstrable reason to believe the SEC’s inquiry was legitimate and a reasonable belief that the bank records sought were relevant to that inquiry under 12 U.S.C. § 3410.
3. Whether the subpoena should be quashed as irrelevant, overbroad, or issued in bad faith or as an abuse of process.

## Decision

- The court denied the Tabets’ motion to quash and entered judgment for the SEC.
- The court found the SEC’s investigation was legitimate and within its authority as shown by the formal order and verified submissions describing suspected misconduct.
- The court held the requested bank records were reasonably relevant under the RFPA because they could help trace investor funds, assess potential misuse, and identify victims and additional participants.
- The court rejected overbreadth arguments, concluding that obtaining records for all accounts in the Tabets’ names for three years was reasonable in an investigation focused on the flow and use of investor money.
- The court found no sufficient showing of bad faith or improper purpose.

## Legal Principles

- Under the RFPA customer challenge procedure, a court evaluates whether the agency complied with required procedures and whether there is a demonstrable reason to believe the inquiry is legitimate and the records sought are relevant to it.  
- The customer bears the burden to show the government failed to satisfy RFPA requirements or that the request is improper.
- Administrative-subpoena relevance is broadly construed; it is enough that the requested records “touch” matters under investigation.
- Overbreadth objections fail where the scope and time period are reasonably tied to the suspected misconduct and the investigative need to trace funds.
- Claims of bad faith or abuse of process require a substantial evidentiary showing; generalized allegations do not justify quashing a subpoena issued under a formal investigation and supported by sworn explanations.

## Conclusion

The court enforced the SEC’s subpoena for the Tabets’ Bank of America records because the SEC followed RFPA procedures and demonstrated a legitimate securities-fraud inquiry with a reasonable basis to believe the requested three years of account records were relevant, while the Tabets failed to show legal deficiency, impermissible breadth, or bad faith.


Tabet v. U.S. Sec. & Exch. Comm’n, No. 12cv1596-IEG (DHB), 2012 WL 3205581 (S.D. Cal. Aug. 6, 2012)