In a criminal trial, the federal government has long been obliged to promptly turn over to the defense any evidence that could show that the accused did not commit the offense of which he is accused. The Brady rule (announced in the 1963 Supreme Court case, Brady v. Maryland), prevents one-sided prosecutions in which the defendant is kept in the dark about information that might show that he is innocent.
The government's job as criminal prosecutor is not to obtain convictions, but "to do justice," according to the traditional legal maxim. It should be required to follow the Brady rule in civil trials as well. But the SEC does not, even when it accuses a citizen of fraud. Had the agency complied with this simple rule in its recent insider-trading case against one of us, Mark Cuban, it is unlikely that a lawsuit would even have been filed, let alone go to trial. ...
An agency that has the ability to bring the full force of the federal government against a citizen in a fraud case should play by the same fair rules that have governed federal prosecutors for decades. It should be required to turn over, without awaiting a request, any evidence that could exculpate the defendant. It should announce now that it will follow the mandates of the Brady rule in all pending and future cases.
It is curious that the SEC has not done so. The agency's internal rules effectively compel it to disclose exculpatory evidence to defendants in administrative proceedings where it has a huge "home court" advantage. But no such rule applies to its litigation, and the SEC for years has fought imposition of a Brady obligation.
The Brady rule would not simply mean that civil trials instituted by the federal government would be conducted on the basis of the whole truth. The best result would be that weak cases would not be brought in the first place. Not even the most stubborn or ambitious SEC lawyer would pursue a case when he knew, in advance, that evidence disproving his case must be turned over to the other side.
The agency should embrace the concept that "justice be done" in all of its cases, not just some of them, and hold itself to the same principle of "accountability" that is at the core of the agency's promise to investors.
There was a very good student note in the Minnesota Law Review back in 2011 that argued in much greater detail that the SEC and other administrative agencies should adopt the Brady rule:
Abstract: Due process protections for defendants vary greatly between the numerous federal agencies vested with civil enforcement powers. Many of these agencies fail to provide defendants with basic safeguards, including the protections available in the Federal Rules of Criminal Procedure. As federal administrative agencies continue to increase both the scope of their enforcement authority and the penalties they assess, such due process deficiencies become even more apparent. This state of affairs is surprising considering the U.S. Supreme Court’s ruling in Brady v. Maryland, in which it held that the Fifth Amendment binds government prosecutors with a duty to disclose material, exculpatory evidence to a defendant. This duty derives from the Court’s axiom that a government prosecutor must seek justice, not victory, in the courtroom—an axiom that logically extends to civil enforcement actions.
To rectify this due process deficiency, the Note argues that the Brady precedent should apply to all federal administrative agencies’ formal adjudications. The few federal agencies that have adopted the Brady rule for this purpose have employed it successfully and can serve as a model for other federal agencies. Additionally, defendants facing these agencies receive due process protections that are more comparable with Article III civil and criminal defendants than those defendants before agencies that reject Brady.