Full opinion text
ORDER GRANTING DEFENDANTS’ MOTIONS TO DISMISS FOR LACK OF JURISDICTION [6, 7] STEPHEN V. WILSON, District Judge. I. INTRODUCTION A. BACKGROUND Plaintiffs were investors in Bernard Ma-doffs Ponzi scheme. Plaintiffs are bringing a Federal Tort Claims Act (“FTCA”) action against the Securities and Exchange Commission (“SEC”) and the United States (“Government” or “Defendant”). Plaintiffs assert that the SEC “owes a duty of reasonable due care to all members of the general public including all investors in U.S. financial markets who are foresee-ably endangered by its conduct.” (Compl. ¶ 168.) Plaintiffs also assert that the SEC’s negligent acts and omissions “caused Madoffs scheme to continue, perpetuate, and expand,” and that the SEC “fail[ed] to terminate Madoffs Ponzi scheme despite its multiple opportunities to do so.” (Compl. ¶ 2; see also Compl. ¶ 164.) Plaintiffs further assert that “Plaintiffs here were among those victimized by Madoff. Plaintiffs made their investments in reliance on Madoffs reputation, clean regulatory record, and the SEC’s implied stamp of approval.” (Compl. ¶ 8.) Because of the SEC’s alleged negligence, Plaintiffs seek to recover their losses from their investments with Madoff. Defendants have brought a pair of Motions to Dismiss, arguing that the Court lacks jurisdiction to hear the claims under the FTCA, 28 U.S.C. § 2674 et seq. Under the “discretionary function exception” to the FTCA, federal courts are barred from adjudicating tort actions arising out of federal officers’ discretionary acts. 28 U.S.C. § 2680(a). In brief, officers are only liable if (1) the officers’ actions were prescribed by statute, regulation, or policy, or (2) the officers’ conduct was not susceptible to analysis on social, economic, or political policy grounds. See United States v. Gaubert, 499 U.S. 315, 322, 111 S.Ct. 1267, 113 L.Ed.2d 335 (1991). The Complaint contains over fifty pages of allegations summarizing the SEC’s failure to uncover Madoffs fraud. The Complaint also attaches five exhibits, the most substantial of which is the SEC Office of Inspector General’s 450-page Investigation of Failure of the SEC to Uncover Bernard Madoffs Ponzi Scheme— Public Version [hereinafter “the Report”], which was released in August 2009. (Compl., Ex. A.) Plaintiffs purport to adopt the “factual allegations or determinations made in the report” by “fully incorporating] by reference” the Report as a part of the Complaint. (Compl. fin. 3.) This request is technically impermissible under Fed.R.Civ.P. 10(c), which only permits the incorporation of a legally operable “written instrument” such as a contract, check, letter, or affidavit. See, e.g., Rennie & Laughlin, Inc. v. Chrysler Corp., 242 F.2d 208, 209 & n. 209 (9th Cir.1957); see also Wright & Miller, 5A Federal Practice & Procedure § 1327 n. 1 (3d ed. 2009 update). In contrast, items such as “newspaper articles, commentaries and editorial cartoons” are not properly incorporated into the complaint by reference. Perkins v. Silverstein, 939 F.2d 463, 467 n. 2 (7th Cir.1991); see also Wright & Miller, 5A Federal Practice & Procedure § 1327 n. 2. That said, Defendants have not objected to Plaintiffs’ attempt to incorporate the Report by reference into the Complaint. (See generally Defs.’ Motion; Defs.’ Reply.) Additionally, Fed.R.Civ.P. 8(e) requires the Court to “construe[ ] pleadings so as to do justice.” In order for the Court to comply with Rule 8(e) and give Plaintiffs the benefit of any plausible inferences contained in the Report (as Plaintiffs repeatedly urged.the Court to do, see, e.g. Compl. ¶ 1 n. 3, Sur-reply at 5 n. 1), the Court has reviewed the full Report and treats it as though it were fully included in Plaintiffs’ Complaint. Although this is an unusual procedure, there is clear legal authority permitting the Court to do so: Plaintiffs’ Complaint “reference[s]” the Report “extensively,” and the factual allegations contained in the Report are “integral to [their] claim.” United States v. Ritchie, 342 F.3d 903, 908 (9th Cir.2003) (citations omitted). Thus, it is appropriate in this particular instance to consider the Report as part of Plaintiffs’ allegations for purposes of the present Motion to Dismiss. Although the inclusion of the Report results in an unusually long Complaint, the Ninth Circuit has counseled that an overly detailed complaint is acceptable under Fed.R.Civ.P. 8(a) if, for example, it is “organized, [and is] divided into a description of the parties, a chronological factual background, and a presentation of enumerated legal claims, each of which lists the liable Defendants and legal basis therefor.” Hearns v. San Bernardino Police Dept., 530 F.3d 1124, 1132 (9th Cir.2008). In the present case, both the Complaint and the Report satisfy these criteria. Accordingly, because the Report is both attached to and incorporated-by-referenee into the Complaint, it is properly considered on the Motion to Dismiss. {See also infra Part III.A.) Many of Plaintiffs’ allegations (including the factual averments contained in the Report) identify decisions that, in hindsight, could have and should have been made differently. Other allegations reveal the SEC’s sheer incompetence in regulating Madoffs broker-dealer, market-making, and investment-management operations. What is lacking in the present Complaint, however, is any plausible allegation revealing that the SEC violated its clear, non-discretionary duties, or otherwise undertook a course of action that is not potentially susceptible to policy analysis. B. FACTUAL ALLEGATIONS The facts of the Madoff fraud need little introduction. A thorough summary of Ma-doffs operations can be found in the recent decision In re Bernard, L. Madoff Inv. Secs. LLC, 424 B.R. 122, 127-32 (Bkrtcy. S.D.N.Y.2010) (order affirming trustee’s determination of former investors’ net equity). In the present case, Plaintiffs’ central allegations are largely drawn from the Inspector General’s Report, which Plaintiffs have incorporated by reference into the Complaint. (Compl. ¶ 1 n. 3.) The Complaint alleges the following. The first warning sign of Madoffs fraud came in 1992, when Avellino & Bienes, a firm that invested exclusively through Ma-doffs brokerage, was exposed as a Ponzi scheme. (Compl. ¶¶ 29-40; Ex. A at 42-*61.) Plaintiffs explain that the SEC’s investigators were “woefully inexperienced” in the area of Ponzi schemes (Compl. ¶ 32) and failed to obtain trading records from the Depository Trust Corporation that could have revealed that Madoffs operations were fraudulent. (Compl. ¶¶ 35, 37.) Because the SEC was focused on Avellino & Bienes rather than Madoff, the SEC staff failed to make a number of other “common sense” inquiries into Madoffs operations that “should have” been done. (Compl. ¶¶ 34, 37, 39.) The second warning sign came in May 2000, when industry analyst Harry Markopolos provided an eight-page complaint to the Boston SEC office. (Compl. ¶¶ 42-46; Ex. A at 61-67.) The complaint provided evidence “questioning the legitimacy of Madoffs reported returns.” (Compl. ¶ 42.) Markopolos presented his findings to an unqualified senior staff member (Compl. ¶ 44), and although the staffer stated that he forwarded the matter to the New York office, he did not actually do so. (Compl. ¶ 45.) The third warning sign came in March 2001, when Markopolos submitted a second complaint to the Boston office containing new, simplified information. (Compl. ¶¶ 47-50; Ex. A at 67-74.) This time, the matter was forwarded to New York, but “after just one day” the lead enforcement attorney in New York “rejected it out of hand.” (Compl. ¶ 49.) Although Markopolos’s complaint was more detailed than the average complaint, the attorney wrote a short email stating “I don’t think we should pursue this matter further.” (Compl. ¶¶ 49-50.) The fourth warning sign came in May 2001, when industry publications MAR-Hedge and Barron’s published articles discussing the secrecy of Madoffs operations and the improbability of his consistently strong returns. (Compl. ¶¶ 51-57; Ex. A at 74-77, 80-81, 86.) An SEC staff member in the Boston office asked the New York team reviewing Markopolos’s complaint if they were interested in reading the articles. (Compl. ¶ 55.) The New York team apparently did not read the articles. (Id.) At the same time, the articles piqued a Washington supervisor’s interest. (Compl. ¶ 56.) Although the supervisor wrote a note on the article stating that “[t]his is a great examination] for us!,” no further actions were taken in the Washington office. (Compl. ¶ 56; Ex. A at 86.) The first major investigative event came in May 2003, when a hedge fund manager provided a complaint to the SEC’s Office of Compliance Inspections and Examinations in Washington D.C. (Compl. ¶¶ 58-81; Ex. A at 77-145.) The fund manager’s complaint summarized a number of red flags that suggested that Madoff was running a Ponzi scheme. (Compl. ¶ 59.) The Investment Management team in Washington, which was more qualified to handle an investigation into a Ponzi scheme, referred the matter to the Washington office’s Broker-Dealer team. (Compl. ¶¶ 61-62.) The two teams never conferred on the investigation. (Compl. ¶ 62.) Compounding this failure to confer, the Broker-Dealer team employed a number of inexperienced staff members at that time. (Compl. ¶¶ 63-64.) One team member explained that “[a]t the time ... we were expanding rapidly,” (Compl. ¶ 63, quoting Ex. A, at 90) and various staff members recalled that they received little-to-no formal training. (Compl. ¶¶ 63-64.) Upon receiving the case, the Washington Broker-Dealer team inexplicably failed to begin its investigation for nine months and failed to log its investigation into the SEC’s Super Tracking and Reporting System (STARS), a computer database used to track examinations. (Compl. ¶¶ 65-67; Ex. A at 85 n. 54.) This failure to log the investigation was consistent with the SEC’s regular practice at the time. (Id.) Once the investigation commenced, the team focused its attention on potential front-running' — with which it was more familiar — rather than a Ponzi scheme. (Compl. ¶¶ 65-67.) The team created a written plan, but the plan was “too narrowly focused” (Ex. A at 142) and the team did not follow through by obtaining relevant information from third parties. (Compl. ¶ 70.) At one point, the Broker-Dealer team drafted a letter “to the [National Association of Securities Dealers] to confirm Madoffs trading activity,” but refrained from sending the letter because, according to one staff member, “it would have been too burdensome and time-consuming for the staff to review the documents that the [National Association of Securities Dealers] would have supplied in response.” (Compl. ¶¶ 69-98.) Similarly, “the team failed to consult Exchange,” even though Madoffs purported options trades were being processed through it. (Compl. ¶ 74.) Instead of receiving this information from third parties that “would have assisted in independently verifying [Madoffs] trading activity,” the team “reified] solely on verbal answers” from Madoff, which, according to the Office of the Inspector General’s consultants, “is not an appropriate method of examination.” (Compl. ¶¶ 70, 72, quoting Ex. A at 111 n. 74, 206 n. 143.) The team supervisor admitted that it was “asinine” for the team not to obtain a proper audit trail, which Plaintiffs characterize as a “common-sense procedure” in such an investigation. (Compl. ¶ 77, quoting Ex. A at 109.) The Washington team stopped its investigation in April 2004 because SEC supervisors “determined that a new investigation probing mutual funds was more important than following up on Madoff.” (Compl. ¶ 78.) At the end of the investigation, the team failed to produce a final report, which according to the Report was a “critical error” that later led to unnecessary duplication of efforts. (Compl. ¶ 78, quoting Ex. A at 144.) The second major investigation started in the Northeast Regional (New York) Office in April 2004, just as the Washington investigation was being put on indefinite hold. (Compl. ¶¶ 82-109.) The New York investigation was prompted by the SEC’s discovery of internal emails from a hedge fund that had invested with Madoff through a feeder fund that invested directly in Madoffs funds. Upon conducting due diligence, the hedge fund had decided to withdraw its investments from the Ma-doff feeder fund. (Compl. ¶¶ 82-83.) The emails summarized the investor’s concerns about Madoffs activities, and essentially tracked the issues raised in the Markopolos reports and the articles that had appeared in MARHedge and Barron’s. (Compl. ¶¶ 83-84.) The New York investigation proceeded in a similar manner as the Washington investigation. (Compl. ¶ 86.) The case was transferred from an Investment Management team to an ill-equipped Broker-Dealer team; the Broker-Dealer team was not even assembled for seven months, and did not begin working for yet another three months; and, once the investigation commenced, the Broker-Dealer team never consulted the Investment Management team for guidance and advice. (Compl. ¶¶ 86, 88.) Unlike the team that conducted the Washington investigation, the New York Broker-Dealer team failed to even draft a planning memorandum, let alone follow it. (Compl. ¶ 87.) When conducting the investigation, the team accepted Ma-doffs assertions- at face value, even though they knew or should have known that Ma-doff was lying — -for example, by saying that he was no longer trading options (which was contradicted by readily available records, see Ex. A at 172, 207) and that he was satisfied with foregoing hundreds of millions of dollars in potential management fees and receiving only brokerage commissions instead. (Compl. ¶¶ 90-92.) The team focused its investigation on their own area of expertise (front-running and “cherry-picking”), while ignoring other- potential areas of investigation such as looking for a Ponzi scheme. (Compl. ¶¶ 88-89.) They generally failed to corroborate information with third parties or follow up on red flags such as Madoffs auditor’s conflict of interest and obvious inadequacy to audit a complex operation like Madoffs. (Compl. ¶¶ 94-96.) In spite of these failings, the New York investigation came remarkably close to uncovering Madoffs fraud in June 2005. The team conducted a two-to-three month on-site investigation (see Ex. A at 179) and had a formal interview with Madoff in late May (Ex. A at 193-95). Embarrassingly for the SEC, it was during the May meeting that the New York team first learned — from Madoff himself — about the prior Washington investigation. (Compl. ¶¶ 102-04.) Shortly after the interview, the examiners decided that they should contact Madoffs clients to corroborate his trading activity. (Ex. A at 219-21.) The investigators successfully obtained useful information from one relevant third party (Barclays), but they failed to follow up on it because of a mistaken belief that they could not obtain audit-trail data from Bar-clays’s foreign affiliates. (Compl. ¶ 101.) Another staffer stated that, to his understanding, SEC had a general policy of not contacting third parties to follow up on leads. (Compl. ¶ 100.) The team also planned on requesting written responses to follow-up on their face-to-face meeting with Madoff, but ultimately failed to do so, even though they had drafted such an inquiry letter. (Compl. ¶ 108; Ex. A at 203-04.) When the New York investigators finally suggested conducting on-site visits of Madoffs clients, the team supervisor vetoed the suggestion. (Compl. ¶¶ 97-99.) A Washington investigator had explained that he “was hesitant to make trouble for someone so ‘well connected’ ” (Compl. ¶ 97, quoting Ex. A at 194), and the New York supervisor “expressed a fear that he (and the junior staffers) could be sued as individuals if their inquiries to third parties somehow damaged Madoffs business.” (Compl. ¶ 98.) Within days of the decision not to visit Madoffs clients, the New York investigators began drafting their case-closing memorandum, and the case was closed by September 2005. (Compl. ¶ 107.) Madoff himself believed that had the investigators contacted third-party trading partners, account holders, and/or trade-clearing and -settlement agencies, they would likely have exposed the fraud. (Ex. A at 206-07.) Almost immediately after the New York team closed its investigation, Harry Markopolos provided the Boston office with a third version of his report on Madoffs alleged fraud, sparking off yet another investigation in Madoffs operations. (Compl. ¶¶ 110-146.) Markopolos’s report summarized the many warning signs that Madoff was running a Ponzi scheme, and referred the SEC to a handful of industry insiders who could corroborate Markopolos’s suspicions. (Compl. ¶¶ 111-16.) Markopolos even recommended that the SEC simply compare Madoffs purported over-the-counter options trading to the publicly-reported information regarding exchange-based options trading. (Compl. If 115; see also Ex. C, at 6-7.) Markopolos explained that if Madoff were truly trading in options, his high-volume trades would have a visible effect in the market. (Compl. ¶ 115.). The Boston office referred the matter to the New York office, and emphasized to the New York staff that the report deserved close attention. (Compl. ¶ 117.) The New York office, instead of staffing the matter with experts in Ponzi schemes, placed relatively inexperienced staff members on the case. (Compl. ¶ 118.) The investigators failed to treat the matter as a Ponzi scheme investigation, and generally refused to credit Markopolos’s report because of interpersonal tensions (Compl. ¶¶ 119-20, 122) and a misguided belief that Markopolos was seeking a reward for uncovering the fraud. (Compl. ¶ 121.) The team also relied on the earlier New York team’s incorrect assertion that it had in fact investigated the Ponzi-scheme angle, which deterred the new team from fully following up on Markopolos’s suggestions. (Compl. ¶ 123.) Additionally, because the new team had failed to file a “matter under inquiry” report for two months, a new tip — this time from an anonymous investor who stated that he had invested with Ma-doff but withdrew his money when he began suspecting fraud — was improperly ignored. (Compl. ¶¶ 124-25.) Because the team felt outmatched by the technical aspects of Madoffs operations, they forwarded certain matters to the SEC’s Office of Economic Analysis, but due to miscommunications running in both directions, these efforts failed to produce useful insights. (Compl. ¶¶ 128-80.) The unprepared New York investigations team eventually proceeded with its investigation and interviewed Madoff directly. (Compl. ¶¶ 132-36.) At one point, the interview produced potentially incriminating information — Madoffs account number with the Depository Trust Company — but the investigators failed to properly follow up on the matter. (Compl. ¶¶ 136-37.) When a junior staffer contacted the Depository Trust Company, the staffer failed to recognize the significance of the fact that Madoff held his assets in commingled accounts, and the staffer also failed to ask about the size of the account. (Compl. ¶¶ 138-39; Ex. A at 323-24.) Ma-doff himself has acknowledged that had the investigators simply asked to see the size of the account, they immediately would have discovered that Madoffs trading positions were nowhere near as large as he had claimed. The staff believed, based on Madoffs representations, that the Depository Trust Company account held over $2 billion of securities; in fact, the account held only between $10 and $30 million. (Ex. A at 332-33.) The investigators also failed to recognize the significance of the fact that the National Association of Securities Dealers told them that Madoff had no option positions on a particular date, even though Madoffs purported trading strategy was based on options trades. (Compl. ¶ 140.) Finally, the investigators made, in the Report’s description, an “inexplicable decision” not to send a letter to obtain information from Madoffs purported European counterparties. (Compl. ¶ 141; Ex. A at 371.) The team closed the investigation in June 2006, having overlooked various clear indications of Madoffs fraud. (Compl. ¶¶ 144^47.) The team also failed to follow up on possible charges related to Madoffs various misrepresentations and non-disclosures during the interview and examinations. {See Ex. A at 322-23.) Following that investigation, the SEC received three more tips that might have uncovered the fraud. (Compl. ¶¶ 148-53.) The first was dismissed when Madoffs attorney told the SEC that the tipster was not actually a Madoff client (Compl. ¶ 150); the second was yet another Markopolos warning that was simply ignored because the staff believed that it had fully examined the Ponzi-scheme allegations (Compl. ¶ 151; Ex. A at 354-55); and the third tip (from the former Madoff investor whose earlier complaint had arrived just prior to the opening of the final investigation) was likewise ignored because the investigation was deemed complete. (Compl. ¶¶ 152-53.) More than two years after the closure of the final investigation, Madoffs fraud was exposed. (Compl. ¶¶ 154-55.) The fraud could have been discovered at any number of points in the previous sixteen years had the SEC “performed its everyday, non-discretionary functions with the most basic level of competence.” (Compl. ¶ 158.) At various points, even “a single action, performed diligently and ably, or even with the most minimal competence, would have exposed the scheme.” (Compl. ¶ 159.) II. PRELIMINARY PROCEDURAL ISSUES A. THE SECURITIES AND EXCHANGE COMMISSION IS NOT A PROPER DEFENDANT The three Dichter Plaintiffs (that is, the Dichter-Mad investment partnership, Philip Dichter, and Claudia G. Dichter) voluntarily dismissed the SEC and the Doe Defendants on January 11, 2010. The SEC brings a separate Motion to Dismiss Plaintiff Gordon’s claims against it. [Docket no. 7.] In its one-page motion, the SEC cites clear controlling authority that bars Gordon’s claims. See, e.g., FDIC v. Craft, 157 F.3d 697, 706 (9th Cir.1998) (“The FTCA is the exclusive remedy for tortious conduct by the United States, and it only allows claims against the United States. Although such claims can arise from the acts or omissions of United States agencies (28 U.S.C. § 2671), an agency itself cannot be sued under the FTCA.”); see also Standifer v. SEC, 542 F.Supp.2d 1312, 1317 (N.D.Ga.2008) (“The SEC cannot be sued under the FTCA.”) In Gordon’s Opposition, he does not even attempt to argue that his claims against the SEC are viable. Accordingly, the SEC’s Motion is GRANTED. Gordon’s claims against the SEC are DISMISSED. B. THE DOE DEFENDANTS ARE PERMISSIBLE As for the Doe Defendants, Gordon properly points out that the Government does not necessarily have standing to object to their presence. For purposes of this motion, then, the Doe Defendants’ liability is linked with that of the United States. III. LEGAL STANDARDS A. MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION In order to comply with the notice pleading standards of Fed.R.Civ.P. 8(a), a plaintiffs complaint “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, — U.S. -, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. A complaint that offers mere “labels and conclusions” or “a formulaic recitation of the elements of a cause of action will not do.” Id.; see also Moss v. U.S. Secret Service, 572 F.3d 962, 969 (9th Cir.2009) (citing Iqbal, 129 S.Ct. at 1951). Generally, the Court’s analysis is limited to the contents of the complaint. See Schneider v. Cal. Dept. Of Corrections, 151 F.3d 1194, 1197 n. 1 (9th Cir.1998) (citations omitted). However, “[w]hen a plaintiff has attached various exhibits to the complaint, those exhibits may be considered in determining whether dismissal [i]s proper.” Parks School of Business, Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir.1995) (citation omitted). Likewise, the Court “may ... consider certain materials — documents attached to the complaint, documents incorporated by reference in the complaint, or matters of judicial notice — without converting the motion to dismiss into a motion for summary judgment.” United States v. Ritchie, 342 F.3d 903, 907 (9th Cir.2003). When a motion to dismiss is granted, ordinarily “any dismissal!!,] ... except one for lack of jurisdiction, improper venue, or failure to join a party under Rule 19[,] operates as an adjudication on the merits.” Fed.R.Civ.P. 41(b) (emphasis added). B. FEDERAL TORT CLAIMS ACT The Federal Tort Claims Act (“FTCA”) “gives federal courts jurisdiction over claims against the United States for money damages ‘for injury or loss of property, or personal injury or death caused by the negligent or wrongful act or omission of any employee of the Government while acting within the scope of his office or employment, under circumstances where the United States, if a private person,! would be liable to the claimant in accordance with the law of the place where the act or omission occurred.’ ” Sheridan v. United States, 487 U.S. 392, 398, 108 S.Ct. 2449, 101 L.Ed.2d 352 (1988) (quoting 28 U.S.C. § 1346(b)). The FTCA provides, however, that the government shall not be liable for “[a]ny claim based upon an act or omission of an employee of the Government ... based upon the exercise or performance or the failure to exercise or perform a discretionary function or duty on the part of a federal agency or an employee of the Government, whether or not the discretion involved be abused.” 28 U.S.C. § 2680(a). This statutory provision, known as the “discretionary function exception,” lies at the heart of the present motion. Because the FTCA is jurisdictional, it must be emphasized that the present analysis is focused on jurisdictional considerations rather than the merits of Plaintiffs’ Complaint. C. DISCRETIONARY FUNCTION EXCEPTION The discretionary function exception provides the government with immunity from suit for “[a]ny claim ... based upon the exercise or performance of the failure to exercise or perform a discretionary function or duty on the part of a federal agency or employee of the Government, whether or not the discretion involved be hbused.” 28 U.S.C. § 2680(a). “In this way, the discretionary function exception serves to insulate certain governmental decision-making from ‘judicial second guessing of legislative and administrative decisions grounded in social, economic, and political policy through the medium of an action in tort.’ ” Terbush v. United States, 516 F.3d 1125, 1129 (9th Cir.2008) (quoting United States v. S.A. Empresa de Viacao Aerea Rio Grandense (Varig Airlines), 467 U.S. 797, 104 S.Ct. 2755, 81 L.Ed.2d 660 (1984)); accord Marbury v. Madison, 5 U.S. (1 Cranch) 137, 170, 2 L.Ed. 60 (1803) (“The province of the court is, solely, to decide on the rights of individuals, not to inquire how the executive, or executive officers, perform duties in which they have discretion.”). Whether a given action by a government employee is protected by the discretionary function exception involves a two-part inquiry. First, the court must determine whether the challenged action involves an “element of judgment or choice.” United States v. Gaubert, 499 U.S. 315, 322, 111 S.Ct. 1267, 113 L.Ed.2d 335 (1991). If “a federal statute, regulation, or policy specifically prescribes a course of action for the employee to follow,” then the employee can be held liable for failing to follow the prescribed directive. Id. (emphasis added). Second, “even assuming the challenged conduct involves an element of judgment, it remains to be decided whether that judgment is of the kind that the discretionary function exception was designed to shield.” Id. “Because the purpose of this exception is to prevent judicial second-guessing of legislative and administrative decisions grounded in social, economic, and political policy ..., the exception protects only governmental actions and decisions based on considerations of public policy.” Id. at 323, 111 S.Ct. 1267. In assessing the second step, it is important to keep in mind that “if a regulation allows the employee discretion, the very existence of the regulation creates a strong presumption that a discretionary act authorized by the regulation involves consideration of the same policies which led to the promulgation of the regulations.” Id. at 324, 111 S.Ct. 1267 (emphasis added). Thus, “[wjhen established governmental policy, as expressed or implied by statute, regulation, or agency guidelines, allows a Government agent to exercise discretion, it must be presumed that the agent’s acts are grounded in policy when exercising that discretion.” Id. In contrast, if the applicable statute or regulation does not give the employee discretion, no presumption attaches, and the court must determine whether the decisions were “of the kind” that are “susceptible to policy analysis.” Gaubert, 499 U.S. at 323, 325, 111 S.Ct. 1267. Where there is no statute, regulation, or policy on point (either conferring discretion or limiting discretion), the relevant question is not whether the decision was the result of an actual policy-based decision-making process. As the Ninth Circuit has repeatedly explained, “we do not need actual evidence that policy-weighing was undertaken.” Terbush, 516 F.3d at 1136 n. 5 (citing Gaubert, 499 U.S. at 324-25, 111 S.Ct. 1267). Instead, “[t]he focus of the inquiry is ... on the nature of the actions taken and on whether they are susceptible to policy analysis.” See Gaubert, 499 U.S. at 325, 111 S.Ct. 1267 (emphasis added); see also GATX/Airlog Co., 286 F.3d at 1178 (“[T]he question is not whether policy factors necessary for a finding of immunity were in fact taken into consideration, but merely whether such a decision is susceptible to policy analysis.”); Nurse v. United States, 226 F.3d 996, 1001 (9th Cir.2000) (“the challenged decision need not actually be grounded in policy considerations so long as it is, by its nature, susceptible to a policy analysis.”); Childers v. United States, 40 F.3d 973, 974 n. 1 (9th Cir.1994) (“The application of the exception does not depend, however, on whether federal officials actually took public policy considerations into account. All that is required is that the applicable statute or regulation gave the government agent discretion to take policy goals into account.”); Lesoeur v. United States, 21 F.3d 965, 969 (9th Cir.1994) (“[Appellants] argue that the discretionary function exception cannot apply in the absence of a ‘conscious decision.’ The statute is not so limited.... The language is directed at the nature of the conduct, and does not require an analysis of the decision-making process.”) (quoting In re Consol. United States Atmos. Testing Litig., 820 F.2d 982, 988-89 (9th Cir.1987)). The Ninth Circuit has noted that “the distinction between protected and unprotected decisions can be difficult to apprehend, but this is the result of the nature of government actions — they fall ‘along a spectrum, ranging from those totally divorced from the sphere of policy analysis, such as driving a car, to those fully grounded in regulatory policy, such as the regulation and oversight of a bank.’ ” Soldano v. United States, 453 F.3d 1140, 1145 (9th Cir.2006) (quoting Whisnant v. United States, 400 F.3d 1177, 1181 (9th Cir.2005)). This distinction is drawn in part from the Supreme Court’s discussion in Gaubert, in which the Court explained: There are obviously discretionary acts performed by a Government agent that are within the scope of his employment but not within the discretionary function exception because these acts cannot be said to be based on the purposes that the regulatory regime seeks to accomplish. If one of the officials involved in this case drove an automobile on a mission connected with his official duties and negligently collided with another car, the exception would not apply. Although driving requires the constant exercise of discretion, the official’s decisions in exercising that discretion can hardly be said to be grounded in regulatory policy. Gaubert, 499 U.S. at 325 n. 7, 111 S.Ct. 1267. In addition to these general principles, it should also be noted that the courts have rejected “a rigid dichotomy between ‘planning’ and ‘operational’ decisions and activities.” Terbush, 516 F.3d at 1130 (citing Gaubert, 499 U.S. at 324, 111 S.Ct. 1267). The courts have likewise rejected the argument that the government is per se immune when conducting “uniquely governmental functions,” as such an analysis would “push the courts into the ‘non-governmental’-'governmentar quagmire that has long plagued the law of municipal corporations.” Indian Towing Co. v. United States, 350 U.S. 61, 64, 76 S.Ct. 122, 100 L.Ed. 48 (1955); see also United States v. Olson, 546 U.S. 43, 46, 126 S.Ct. 510, 163 L.Ed.2d 306 (2005) (reaffirming Indian Towing). D. PROCEDURAL CONSIDERATIONS RELATING TO THE DISCRETIONARY FUNCTION EXCEPTION In deciding whether to grant Defendant’s Motion to Dismiss for lack of subject matter jurisdiction, the Court “must accept as true the factual allegations in the complaint.” Terbush v. United States, 516 F.3d 1125, 1128 (9th Cir.2008) (citing GATX/Airlog Co. v. United States, 286 F.3d 1168, 1173 (9th Cir.2002)). “The United States bears the burden of proving the applicability of the discretionary function exception.” Id. (citing Prescott v. United States, 973 F.2d 696, 702 (9th Cir.1992)). The government must prove that each of the allegedly wrongful acts, by each allegedly negligent actor, is covered by the discretionary function exception. GATX/Airlog, 286 F.3d at 1174 (“[W]hen determining whether the discretionary function exception is applicable, ‘the proper question to ask is not whether the Government as a whole had discretion at any point, but whether its allegedly negligent agents did in each instance.’ ”) (citing In re Glacier Bay, 71 F.3d 1447, 1451 (9th Cir.1995)) (alterations omitted). In examining each of the government’s particular acts, “the question of how the government is alleged to have been negligent is critical.” Whisnant v. United States, 400 F.3d 1177, 1185 (9th Cir.2005) (emphasis added) (citing Glacier Bay, 71 F.3d at 1451). The central question is whether, “at this stage of the case” — and under the standard of proof applicable at this stage — “the government has [or has] not established that choices exercised by government officials involved policy judgments.” Prescott, 973 F.2d at 703. These considerations can be summarized succinctly by reference to * the two-step analysis set forth in Gaubert, 499 U.S. at 322-25, 111 S.Ct. 1267. The government can meet its initial burden in one of two ways, and the plaintiffs can respond to each showing in one of two ways. First, the government may show that a statute, regulation or policy confers discretion on the government actor; this gives rise to a “strong presumption” that the alleged harmful act was guided by policy judgment. Id. at 324, 111 S.Ct. 1267. Second, the government may show that the actor’s course of action was “of the kind” that is “susceptible to policy analysis.” Id. at 323, 325, 111 S.Ct. 1267. Either of these showings will satisfy the government’s “burden of proving application of the discretionary function exception.” Blackburn v. United States, 100 F.3d 1426, 1436 (9th Cir.1996). “[0]nce the Government met its burden, ... the party opposing [the application of the discretionary function exception] ha[s] to present sufficient evidence to withstand dismissal” for lack of jurisdiction. Id. Under Gaubert, the plaintiffs may meet their the burden by showing either (1) that there are mandatory rules prescribing the actor’s course of action, or (2) that the actor’s course of action was not “of the kind” that is “susceptible to policy analysis.” Gaubert, 499 U.S. at 323-25, 111 S.Ct 1267. E. ILLUSTRATIVE CASELAW As explained by a leading treatise, “cases under the [Federal Tort Claims] Act can be roughly grouped into there categories: (1) claims based upon [non-regulatory] determinations or decisions or other acts of choice or judgment of government officials and administrators; (2) claims based upon the regulatory activities of regulatory agencies or officials; and (3) claims arising from the design or execution of public works and other authorized governmental programs.” Lester S. Jayson & Robert C. Longstreth, 2 Handling Federal Tort Claims, § 12.05[1] (2009 update). “Whatever else the discretionary function exception may include, ... it plainly was intended ‘to encompass the discretionary acts of the Government acting in its role as regulator of the conduct of private individuals.’ ” Jayson & Longstreth, Federal Tort Claims, § 12.07 (quoting United States v. Varig Airlines, 467 U.S. 797, 813-14, 104 S.Ct. 2755, 81 L.Ed.2d 660 (1984)). That is not to say that regulatory actions enjoy blanket immunity: the “uniquely government functions” approach was rejected by the Supreme Court over half-a-century ago. See Indian Towing, 350 U.S. at 64, 76 S.Ct. 122. But at the very least, it appears from the caselaw and secondary authorities that regulatory actions are more likely to be deemed “discretionary functions” than non-regulatory actions are. A leading case involving government regulators is United States v. Gaubert, 499 U.S. 315, 111 S.Ct. 1267, 113 L.Ed.2d 335 (1991). In that case, the plaintiff alleged that the Federal Home Loan Bank Board and the Federal Home Loan Bank Dallas branch “had been negligent in carrying out their supervisory activities” following their take-over of a failing Texas savings-and-loan. Id. at 318, 111 S.Ct. 1267. The plaintiff, who was the chairman and largest shareholder of the thrift, sought to recover the lost value of his shares and the value of his personal guarantee of the corporation’s debts, amounting to $100 million in total. Id. at 319-20, 111 S.Ct. 1267. In particular, the plaintiff alleged that the Federal Home Loan Bank Dallas branch had pressured the failed thrift’s sitting officers and directors to resign and then recommended their replacements. Id. at 319, 111 S.Ct. 1267. The Dallas branch then became significantly involved in the thrift’s day-today operations. Id. at 319-20, 111 S.Ct. 1267. The plaintiffs allegations centered on the “alleged negligence of federal officials in selecting the new officers and directors and in participating in the day-today management of’ the thrift. Id. at 320, 111 S.Ct. 1267. The Supreme Court, after restating the basic two-part test for the discretionary function exception, held that “[d]ay-to-day management of banking affairs, like the management of other businesses, regularly requires judgment as to which of a range of permissible courses is the wisest.” Id. at 325, 111 S.Ct. 1267. In this regard, the Court rejected the proposed distinction between “policymaking” and “operational” functions. Id. In order to determine whether the alleged acts were discretionary or not, the Court reviewed the complaint’s allegations of the government’s involvement in the thrift’s day-to-day affairs. These allegations focused on the government’s involvement in day-to-day management decisions, hiring and salary decisions, operational matters, financial matters, asset management, and legal affairs. Id. at 327-28, 111 S.Ct. 1267. The government became involved in strategic planning, for example by recommending that the thrift change from being state-chartered to becoming federally-chartered, and by giving advice regarding a potential bankruptcy filing. Id. at 328, 111 S.Ct. 1267. Ultimately, the Court rejected the plaintiffs argument “that the challenged actions fall outside the discretionary function exception because they involved the mere application of technical skills and business expertise.” Id. at 331, 111 S.Ct. 1267. The Court explained that the day-to-day operations of a bank require more than mere “mathematical calculations” that “involve no choice or judgment in carrying-out the calculations.” Id. Importantly, the Court also noted that “neither party has identified formal regulations governing the conduct in question.” Id. at 329, 111 S.Ct. 1267 (emphasis added). The Court identified broad statutory grants of discretion to the Federal Home Loan Bank to engage in formal supervisory actions, and found no prohibition on the agency’s use of less formal supervisory tools. Id. The Court also identified a formal policy statement from the government in which the agency explained its policy “that supervisory actions must be tailored to each case,” ranging from “informal supervisory guidance and oversight,” to implementation of a “supervisory agreement,” and, in the most problematic cases, an immediate “cease-and-desist order.” Id. at 330-31, 111 S.Ct. 1267 (quoting FHLBB Resolution No. 82-381 (May 26,1982)). Notably, the Court approvingly quoted from the lower court’s explanation that the agency undertook its day-to-day role in an effort to further “social, economic, or political policies”: First, they sought to protect the solvency of the savings and loan industry at large, and maintain the public’s confidence in that industry. Second, they sought to preserve the assets of [the thrift] for the benefit of depositors and shareholders, of which [plaintiff] was one. Id. at 332, 111 S.Ct. 1267 (quoting 885 F.2d 1284, 1290 (5th Cir.1989)). In this regard, the Supreme Court highlighted the fact that “[t]here are no allegations that the regulators gave anything other than the kind of advice that was within the purview of the policies behind the statutes.” Id. at 333, 111 S.Ct. 1267. For example, the plaintiff admitted “the regulators replaced [the thrift’s] management in order to protect the [federal savings and loan insurance corporation’s] insurance fund.” Id. at 332, 111 S.Ct. 1267. “In the end,” the Court concluded, “Gaubert’s amended complaint alleges nothing more than negligence on the part of the regulators.” Id. at 334, 111 S.Ct. 1267. The Court explained that even day-to-day regulatory decisions were protected by the discretionary function exception: “If the routine or frequent nature of a decision were sufficient to remove an otherwise discretionary act from the scope of the exception, then countless policy-based decisions by regulators exercising day-to-day supervisory authority would be actionable. This is not the rule of our cases.” Id. Gaubert, then, is a guidepost for two reasons: one, because it is the most recent Supreme Court authority in this area, and two, because it involved a roughly analogous factual scenario — the conduct of financial regulators in their day-to-day regulatory activities. (Additional cases that specifically discuss the SEC are discussed infra.) It is worth noting, then, that Gaubert’s reasoning weighs heavily in favor of Defendant’s position. A pair of other cases are worth discussing at length. These cases set forth principles that have guided the Ninth Circuit’s analysis where cases involve a combination of discretionary and non-discretionary duties. In Glacier Bay, the Ninth Circuit held that hydrographers for the National Oceanic and Atmospheric Administration could be sued for their non-discretionary actions made while preparing nautical charts. 71 F.3d at 1452-54. The government had argued that its supervising hydrographers retained discretion when reviewing and approving the charts, and that this final level of discretion immunized all of the allegedly negligent conduct during the oceanic surveys and drafting of the charts. Id. at 1451. The court explained that the final review was indeed discretionary, because the supervisors had to decide whether the survey was sufficiently accurate and whether the social, economic, and political benefits of conducting further surveys outweighed the costs of doing so. Id. at 1454. However, the court also determined that the discretionary final review could not insulate the surveying staffs negligent acts that violated the surveyors’ mandatory duties. Id. at 1451. Instead, the court explained that the relevant question is whether “each person taking an allegedly negligent action had discretion,” not whether “the Government as a whole had discretion at any point.” Id. The court then engaged in a close analysis of the surveyors’ actions to determine if they violated any non-discretionary duties. Id. at 1452-54. To find these mandatory duties, the court looked to “the Department of Commerce’s ‘Hydrographic Manual’ and [] the 1964 and 1975 Project Instructions specifically drafted for the two surveys [at issue].’ ” Id. at 1452. The court noted that, contrary to the government’s assertion, such internal guidelines were in fact “binding for purposes of the discretionary function inquiry.” Id. at 1452 n. 1. The court found that the Hydro-graphic Manual and Project Instructions established a number of mandatory procedures for conducting oceanic surveys. Id. at 1451-52. Much of the “discretion” available to the surveyors involved purely scientific judgments, not judgments based on “economic, political and social policy” that would be shielded from scrutiny under the FTCA. Id. at 1453. Notably, the court contrasted the 1964 survey instructions with the 1975 survey instructions and found that the former contained mandatory language — “[a]ll indications of shoals shall be thoroughly investigated” — whereas the latter did not contain such language, and instead stated that surveys “should be guided by [27 different] considerations ... and [the surveyor’s] past experience in similar areas.” Id. at 1453 (quoting Hydrographic Manual and 1964 Survey Instructions). Accordingly, the earlier 1964 survey was deemed non-discretionary, whereas the 1975 survey — requiring surveyors to carefully balance 27 different considerations — was discretionary. Id. Three years later, the Ninth Circuit clarified its holding in Glacier Bay, explaining that in some instances, an underlying violation of a mandatory duty will be immune from suit if another government agent’s own exercise of discretion intervened prior to the plaintiffs injury. The court explained that the discretionary function exception applies whenever a “robust exercise of discretion intervenes between an alleged government wrongdoer and the harm suffered by a plaintiff.” General Dynamics Corp. v. United States, 139 F.3d 1280, 1285 (9th Cir.1998). The court proceeded to distinguish the case at hand from Glacier Bay. The plaintiff in General Dynamics alleged that government auditors had negligently performed an audit that led prosecutors to indict the plaintiff for defrauding the United States, a charge which the plaintiff successfully defended. Id. at 1282. The court held that the plaintiff, by attempting to recover for the auditors’ professional negligence rather than the prosecutors’ clearly discretionary decision to prosecute, was improperly attempting to plead around the discretionary function exception. Id. at 1283-84. The court refused to “accord amaranthine obeisance to a plaintiffs designation of targeted employees” when, in sum and substance, the complaint was alleging prosecutorial misconduct. Id. at 1283. The General Dynamics court distinguished Glacier Bay by emphasizing that the central focus is the nature of the allegedly harmful act. Id. at 1284-85. Obviously, “many actions within an agency pass through the hands of somebody with some discretion at some stage”; the mere presence of discretion at one stage in the process does not automatically immunize the non-discretionary negligent conduct that precedes. Id. at 1284. Accordingly, when an oceanic chart is negligently investigated and drafted in violation of mandatory rules, the presence of a discretionary final review does not immunize the negligent investigations and drafting. Id. In this regard, the court noted that Glacier Bay involved a “tight coupling between hydrographers, reviewers, charts, and results.” Id. at 1284. But when an actor with “broad based discretion” such as the prosecutor in General Dynamics undertakes “a totally separate exercise of discretion” that is independent of the underlying negligent act, all of the government’s acts are immunized— including the earlier actions that may have violated mandatory duties. Id. at 1285. The court explained that prosecutors have “access to a great deal of information beyond that submitted by any one agency” such as the negligent auditors. Because “the prosecutors could have had even more information if they had chosen to pursue it,” the prosecutor’s decision to prosecute the plaintiff was a sufficiently “robust exercise of discretion” to trigger application of the discretionary function exception. Id. As a result, all of government’s negligent acts were immunized — even the ones that violated non-discretionary auditing principles. Although they are factually distinguishable from the present case, two out-of-circuit decisions are also worth noting in order to show that the reasoning in General Dynamics has been adopted in other circuits. In Sloan v. United States Dept. of Housing and Urban Development, 236 F.3d 756 (D.C.Cir.2001), a contractor sued the Department of Housing and Urban Development under the FTCA for negligently conducting an audit of his construction site and for suspending him from government contract work based on the erroneous audit. 236 F.3d at 758-59. On appeal from the district court’s dismissal of the complaint for lack of subject matter jurisdiction, the contractor contended that while the suspension of his government contract work was a discretionary function, the audit was not a discretionary function because it was governed by standards of professional practice. Id. at 761. The court rejected that contention, holding that there was “no meaningful way in which the allegedly negligent investigatory acts could be considered apart from the totality of the prosecution.” Id. (quoting Gray v. Bell, 712 F.2d 490, 516 (D.C.Cir.1983)) (internal quotation marks omitted). The court noted that “[t]he complaint does not allege any damages arising from the investigation itself, but only harm caused by the suspension to which it assertedly led.” Id. at 762. In Fisher Bros. Sales, Inc. v. United States, 46 F.3d 279 (3d Cir.1995) (en banc), Chilean fruit growers sued the Food and Drug Administration under the FTCA for banning the importation of Chilean fruit based on a negligently conducted laboratory test concluding that the fruit contained cyanide. 46 F.3d at 282-83. Recognizing that the Commissioner’s decision to ban the fruit was a discretionary function, the fruit growers alleged injury “based upon” the negligence of the laboratory technicians, who were bound by the agency’s Regulatory Procedures Manual. Id. at 286. The Third Circuit rejected this characterization of the claim, reasoning that “[t]he reality here is that the injuries of which the plaintiffs complain were caused by the Commissioner’s decisions and, as a matter of law, their claims are therefore ‘based upon’ those decisions.” Id. The court concluded that “a claim must be ‘based upon’ the exercise of a discretionary function whenever the immediate cause of the plaintiffs injury is a decision which is susceptible of policy analysis and which is made by an official legally authorized to make it.” Id. at 282. F. UNDERLYING POLICIES OF THE DISCRETIONARY FUNCTION EXCEPTION Before analyzing the parties’ specific arguments, it is also helpful to explain the policies that animate the discretionary function exception. As summarized succinctly in Gray v. Bell, 712 F.2d 490 (D.C.Cir.1983), cert. denied, 465 U.S. 1100, 104 S.Ct. 1593, 80 L.Ed.2d 125 (1984): The modern policy basis justifying sovereign immunity from suit has three principal themes. First, and most important, under traditional principles of separation of powers, courts should refrain from reviewing or judging the propriety of the policymaking acts of coordinate branches. Second, consistent with the related doctrine of official immunity, courts should not subject the sovereign to liability where doing so would inhibit vigorous decisionmaking by government policymakers. Third, in the interest of preserving public revenues and property, courts should be wary of creating huge and unpredictable governmental liabilities by exposing the sovereign to damage claims for broad policy decisions that necessarily impact large numbers of people. Framed in different fashions, each of these themes appears again and again, alone or in combination, as a modern justification for retaining a form of immunity, under the general rationale that courts should not “interfere” with government operations and policymaking. Id. at 511 (emphasis added, internal footnotes omitted). Notably absent from this rationale is any mention of “fairness.” As explained in National Un. Fire Ins. v. United States, 115 F.3d 1415 (9th Cir.1997): Private actors generally must pay for the harm they do by carelessness. The government’s power to tax enables it, better than any private actor, to perform its conduct with reasonable care for the safety of persons and property, and to spread the cost over all the beneficiaries if its conduct negligently causes harm. Fairness might seem to suggest that the government should be liable more broadly than private actors. But at its root, the discretionary function exception is about power, not fairness. Id. at 1422. As a result of these underlying policies and principles, Plaintiffs are misguided when they argue that “there is no oversight at all available to the taxpaying citizens, as well as the nation, to insure that the SEC does its job.” (Opp. at 15.) This broad policy argument is unavailing. IV. ANALYSIS AND DISCUSSION A. RELEVANT LEGISLATIVE HISTORY It is often remarked that Congressional intent is particularly relevant to the Federal Tort Claims Act because “no action lies against the United States unless the legislature has authorized it.” E.g., Dalehite v. United States, 346 U.S. 15, 30, 73 S.Ct. 956, 97 L.Ed. 1427 (1953) (collecting cases). As a result, “the basic inquiry concerning the application of the discretionary function exception is whether the challenged acts of a Government employee — whatever his or her rank — are of the nature and quality that Congress intended to shield from tort liability.” United States v. S.A. Empresa de Viacao Aerea Rio Grandense (Varig Airlines), 467 U.S. 797, 813-814, 104 S.Ct. 2755, 81 L.Ed.2d 660 (1984) (emphasis added). It is notable, then, that Congress, when drafting and' debating the Federal Tort Claims Act, repeatedly and explicitly suggested that the discretionary function exception was intended to apply to the SEC. See Dalehite v. United States, 346 U.S. 15, 29 & n. 21, 73 S.Ct. 956, 97 L.Ed. 1427 (1953) (noting that this particular “paragraph [] appears time and again” in the legislative history). Congress explained that the discretionary function exception was: designed to preclude application of the bill to a claim against a regulatory agency, such as the Federal Trade Commission or the Securities and Exchange Commission, based upon an alleged abuse of discretionary authority by an officer or employee, whether or not negligence is alleged to have been involved. To take another example, claims based upon an allegedly negligent exercise by the Treasury Department of the blacklisting or freezing powers are also intended to be excepted. The bill is not intended to authorize a suit for damages to test the validity of or provide a remedy on account of such discretionary acts even though negligently performed and, involving an abuse of discretion. Dalehite, 346 U.S. at 29 n. 21, 73 S.Ct. 956 (quoting H.R.Rep. No. 2245, 77th Cong., 2d Sess., p. 10; S.Rep.No. 1196, 77th Cong., 2d Sess., p. 7; H.R.Rep. No. 1287, 79th Cong., 1st Sess., pp. 5-6; Hearings before H.Com. on Judiciary on H.R. 5373 and H.R. 6463, 77th Cong., 2d Sess., p. 33); see also Defs.’ Mot. at 10 & n. 29 (quoting House Rep. 79-1287, at 5-6). B. THE GOVERNMENT HAS SATISFIED ITS THRESHOLD BURDEN BY IDENTIFYING STATUTES, REGULATIONS, AND CASES DISCUSSING THE SEC’S GENERAL POWERS AND DUTIES In its Motion, the Government sets forth a number of general, broad principles governing the SEC’s duties and functions. These legal assertions establish that the alleged wrongs were done in the course of the SEC’s exercise of its discretion, both in terms of conducting its investigations and deciding whether or not to bring enforcement proceedings. These basic conclusions are supported by statutes, regulations, and caselaw. Defendant has therefore satisfied its threshold burden under Gaubert of establishing that the relevant statutes and regulations “allow[ ] the employee[s] discretion.” Gaubert, 499 U.S. at 323, 111 S.Ct. 1267. Accordingly, there is “a strong presumption” that the alleged acts were “based on considerations of public policy,” and Plaintiffs bear the burden of rebutting this presumption. Id. This section discusses the Government’s threshold showing that its actions were discretionary and are presumed to be susceptible to policy analysis. The following section discusses Plaintiffs’ attempt to rebut this strong presumption. 1. SEC’s Investigative Powers Section 21 of the Securities and Exchange Act of 1934, codified at 15 U.S.C. § 78u, establishes the SEC’s investigatory powers. The statute explicitly provides discretion to the SEC: The Commission may, in its discretion, make such investigations as it deems necessary to determine whether any person has violated, is violating, or is about to violate any provision of this chapter, [or] the rules or regulations thereunder, ... and may require or permit any person to file with it a statement in writing, under oath or otherwise as the Commission shall determine, as to all the facts and circumstances concerning the matter to be investigated. The Commission is authorized in its discretion, ... to investigate any facts, conditions, practices, or matters which it may deem necessary or proper to aid in the enforcement of such provisions.... 15 U.S.C. § 78u(a)(l) (emphasis added). Little discussion is necessary. The statute repeatedly uses permissive language rather than mandatory language. The SEC has discretion to decide both the timing of when it “make[s] such investigations,” and the manner and scope of how to “investigate any facts, conditions, practices, or matters,” whether through “a statement in writing, under oath or otherwise.” Id. (emphasis added). All of these decisions are framed in permissive language (“[t]he Commission may ... ”) and the SEC is permitted to proceed “as it deems necessary.” Id. In other words, the statute is discretionary — the SEC retains discretion over when and how to conduct its investigations. This leads to a strong presumption that the SEC’s actions were discretionary. Gaubert, 499 U.S. at 324, 111 S.Ct. 1267; see also Vickers v. United States, 228 F.3d 944, 951 (9th Cir.2000) (“[T]he discretionary function exception protects agency decisions concerning the scope and manner in which it conducts an investigation so long as the agency does not violate a mandatory directive.”). The SEC’s own regulations are similarly discretionary. As explained in the SEC’s formal policies regarding Enforcement Activities, as summarized in 17 C.F.R. § 202.5: Where, from complaints received from members of the public, communications from Fede