updated 2/27/2006 12:09:32 PM ET 2006-02-27T17:09:32

The Securities and Exchange Commission is taking the unusual step of halting pursuit of a subpoena for records from two journalists until the agency considers the matter, SEC Chairman Christopher Cox said Monday.

Underscoring the sensitivity of the issue, Cox said in a statement that neither he nor the SEC’s general counsel or any of the other four SEC commissioners had been informed or consulted regarding “such an extraordinary step” before news reports appeared on it over the weekend.

Normally, SEC enforcement attorneys issue subpoenas in an investigation without specific approval by the commissioners, who approve only the overall investigations.

The issue of subpoenaing journalists will be considered by the five SEC commissioners “before this matter proceeds further,” Cox said.

After issuing a subpoena on Feb. 7 to two financial journalists, the SEC decided last week against compelling them, at least for now, to surrender records as part of an investigation into allegations of stock manipulation.

The subpoena went to columnists Herb Greenberg of MarketWatch and Carol Remond of Dow Jones Newswires, both Dow Jones & Co. online publications. The subpoena sought telephone records, e-mails and other documents related to the online retailer Overstock.com. Greenberg and Remond have written columns about Overstock.

The SEC, an independent regulatory agency with only civil powers, rarely subpoenas journalists or news organizations. Its move comes during at a time of heightened concern over press freedom and government action against journalists.

“The issuance of a subpoena to a journalist which seeks to compel production of his or her notes and records of conversations with sources is highly unusual,” Cox noted in the statement. “The sensitive issues that such a subpoena raises are of sufficient importance that they should, and will be, considered and decided by the commission before this matter proceeds further,” he said.

The SEC is investigating allegations by Overstock that a research firm, Gradient Analytics, issued negative reports on the retailer in exchange for payments from a hedge fund seeking to profit from a drop in its stock price. Overstock has sued Gradient and the hedge fund in question, Rocker Partners; they deny any wrongdoing.

Dow Jones spokeswoman Amy Wolfcale didn’t immediately return a telephone call seeking comment Monday. She said in a statement Friday that the company had been told “that the SEC has decided not to seek production of any documents from Dow Jones at this time,” but added, “The SEC may come back in the future.”

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