USE AND MISUSE OF THE ADVERSE INFERENCE IN SEC CIVIL ENFORCEMENT ACTIONS

A civil defendant's assertion of the Fifth Amendment privilege can lea d to an adverse inference about the defendant's evidence. This article examines the problems raised by the use of this adverse inference in SEC civil enforcement actions. It explains why the remedies that court s have afforded the SEC in these cases are inconsistent with and excee d the scope of the Supreme Court's Baxter decision and the ''due proce ss'' clause and constitute an impermissible punishment for the exercis e of a constitutional right. The authors conclude by offering suggesti ons for protecting the rights and interests of both parties in an SEC civil enforcement action.